The Bully of Bentonville

by Anthony Bianco

  Even as the new store in St. Robert was opening Walton’s eyes to the magnitude of business to be done in rural America, he arrived at a second prophetic insight: the old five-and-dime variety store was history. The fact that all sixteen of the stores Walton owned were variety establishments might have doomed him, too, had he not figured out that discounting was destined to be the next big thing in retailing. Walton flew to Chicago in 1962 to try to persuade Butler Brothers to partner with him in starting a discount chain aimed at rural America. “I was used to franchising, and I liked the mind-set,” he recalled. 30 In a presentation to a group of senior Butler Brother executives, the forty-four-year-old Walton radiated enthusiasm, offering the booming start of the new store in St. Robert as evidence of the sales potential of the sort of small towns that Kmart and most other discounters were ignoring. Butler Brothers would have to cut its usual 20 to 25 percent markup of merchandise in half, but he assured the executives that they would more than make up in increased volume what was lost in profit margin. It was a good pitch, but Butler’s brain trust turned him down flat.

  Next, Walton flew to Dallas to call unannounced on Herbert Gibson, the gruff, self-important founder of Gibson Discount Stores. Gibson was an Ozarker—“a barber from over at Berryville,” in Walton’s description—who had moved to Dallas in 1935 and made it big as a wholesale distributor of health and beauty aids. Gibson, who was nearly twenty years older than Walton, beat his fellow Ozarker to the punch in recognizing the potential of discounting. In the late 1950s, he launched a regional chain of franchised discount stores under the motto “buy it low, stack it high, sell it cheap.” Like Walton, Gibson had defined his retail business as “a country operation” and zeroed in on budget-conscious shoppers in towns of 20,000 to 50,000. In two such cities in Arkansas—Fayetteville and Fort Smith—Gibson had opened discount stores that were taking business from Walton’s 5c & 10c’s. “We knew we had to act…” Walton recalled. “I was probably one of the few out here who understood what he was up to.” 31

  Walton, who went to Dallas hoping to buy a discount-store franchise or two, spent five hours fidgeting in a waiting room before he was finally summoned into Gibson’s presence. “Do you have one hundred thousand dollars?” Gibson demanded. Walton confessed that he didn’t. “Well, we buy in carload lots. Takes a lot of money to do that,” Gibson said. “You’re not fixed to do business with us. Goodbye.” 32

  Walton screwed up his courage and decided to go it alone into discounting. He and Helen pledged their house in Bentonville and everything else they owned as collateral for a bank loan that Sam used to build a 16,000-square-foot store in Rogers, a slightly larger town next to Bentonville. Wal-Mart Discount City opened on July 2, 1962. Racks of clothes hung from metal pipes; most of the other merchandise was stacked on tables. There were three checkout stands, one of which was labeled “Express.” The store had twenty-five employees, mostly women, earning just 50 cents to 60 cents an hour. Walton ran newspaper ads promising “Every Day Low Prices in all departments,” amounting to as much as 50 percent off the manufacturer’s suggested retail price. Much of the merchandise was not first quality, but it all was priced to move. A bottle of Geritol, regularly $1.19, was marked down to 97 cents; a Wilson baseball mitt, listed at $10.80, went for $5.97; a Sunbeam iron, available elsewhere at $17.95, was $11.88.

  Wal-Mart No. 1 did well, but not as well as that Walton Family Center in St. Robert. Hedging his bet on discounting, Walton next opened two more family centers, one in Bentonville and another in Berryville (no doubt intended as a stick in the eye of local favorite son Herb Gibson). In 1964, Walton added a second Wal-Mart, putting it in Harrison, a little mountain town eighty miles east of Bentonville, not far from the future site of the ill-fated Dogpatch U.S.A. amusement park. The Harrison store survived an opening day straight out of “L’il Abner.” Walton put a donkey ride in the parking lot and a huge stack of bargain-priced watermelons on the sidewalk. The watermelons popped in the heat and the juice flowed into the parking lot, where it intermingled with donkey excrement to form a foul mixture that shoppers tracked all over Walton’s floor. “It was the worst retail store I had ever seen,” recalled David Glass, an ambitious young discount-drugstore executive who was weighing a job offer from Walton and had driven down from Springfield to check him out. “He was a nice fellow, but I wrote him off.” 33

  The Harrison opening-day fiasco did no long-term damage to the store’s prospects or to Walton’s relationship with Glass, a future Wal-Mart CEO. Furthermore, it illustrated one of Walton’s great strengths as a merchant: a flair for down-home retail showmanship that offered Ozarkers relief from drudgery along with bargain buys. “We tried literally to create a carnival atmosphere in our stores,” he recalled. “We’d have bands and little circuses in our parking lots to get folks to those sales. We’d have plate drops, where we’d write the names of prizes on paper plates and sail them off the roof of the stores…. At store openings, we’d stand on the service counters and give away boxes of candy to the customers who had traveled the farthest to get there. As long as it was fun, we’d try it.” 34

  Although Walton added a few more variety stores in the coming years, he decisively shifted his focus to discounting in the mid-1960s. He opened another Wal-Mart store in 1965, four more in 1966–67, and five apiece in 1968 and 1969. The next year, Walton combined his variety and discount stores into a publicly traded company called Wal-Mart Stores, which started with eighteen discount stores and fourteen variety stores. Over the next five years, he phased out the variety operation entirely, closing down some stores and converting others into Wal-Marts. Meanwhile, Ben Franklin and other variety chains failed to follow suit, sealing their doom.

  CHEERLEADER-IN-CHIEF

  The sun was still an hour from rising in Bentonville when Sam Walton lifted his twin-prop Cessna off the runway and headed east. About 7:00 he was in Memphis, Tennessee, peering through the front window of Wal-Mart store No. 950, which was not set to open for another hour. Walton took his microcassette recorder from the breast pocket of his plaid blazer and rapped gently on the store’s front window. He was wearing the standard Wal-Mart badge, with his first name in capital letters, and his ever-present Wal-Mart mesh ball cap. The employee who looked up and saw Walton through the plate glass recognized him instantly and rushed to unlock the door.

  “Good mornin’, Mr. Sam, welcome to Memphis.”

  “Good mornin’, Doug, great to be here,” Walton replied. “I want to walk around a little bit, and then we’ll get everybody up front. But I’d like to get all your department heads and assistant managers up here in the snack bar, and I’d like to see your P&L and your merchandising statements, and I want to see your thirty-, sixty-, and ninety-day plans, all right?”

  As Doug rushed off to do the boss’s bidding, Walton started strolling through the store, eventually arriving at the pharmacy. “Hello, Georgie,” he said. “I like this Equate Baby Oil here for $1.54. I think that’s a real winner.”

  “That’s my VPI,” Georgie replied. (VPI stands for volume-producing item, a gimmick Walton had devised years before to boost sales and help inculcate his merchandising philosophy in employees. The idea is that every store is filled with scores of obscure items that will fly off the shelves if shrewdly and energetically promoted. Each department manager picks a VPI, and whoever generates the biggest sales wins a bit of cash.)

  Walton took out his tape recorder. “I’m here in Memphis at store 950, and Georgie has done a real fine thing with this end-cap display of Equate Baby Oil. I’d like to try this everywhere,” he said, causing Georgie to blush a deep pink.

  A manager rushed up with an employee in tow. “Mr. Walton, I want you to meet Renee,” he said. “She runs one of the top pet departments in the country.”

  “Well, Renee, bless your heart,” Walton said. “What percentage of the store [total sales] are you doing?”

  “Last year it was 3.1 percent,” Renee said. “But this year I’m trying for
3.3 percent.”

  “Well, Renee, that’s amazing. You know, our average pet department only does about 2.4 percent. Keep up the great work.”

  Walton strode over to a cashier’s stand and picked up a speakerphone and, without bothering to identify himself, summoned everyone to the front of the store. Within minutes, the entire staff had coalesced around him. Walton invited them to sit while he dropped to one knee, like a football coach in chalk-talk mode.

  “I thank you,” Walton said. “The company is so proud of you, we can’t hardly stand it. On top of everything else, you went through the trauma of remodeling and still came through with 0.8 percent shrinkage.” (Shrinkage refers to loss of inventory due to customer or employee theft. Wal-Mart pays a bonus to stores that keep shrinkage below a certain threshold. Each of these associates recently had received a check for several hundred dollars.)

  “But you know, that confounded Kmart is getting better, and so is Target. So what’s our challenge? Customer service, that’s right. Are you thinking about doing those extra little things? Are you lookin’ the customer in the eye and offering to help? You know, you’re the real reason for Wal-Mart’s success. If you don’t care about your store and your customers, it won’t work. They like the quality and they like the attitude here.”

  Walton asked, “How many of you own Wal-Mart stock?” Most everyone put a hand up. “Well, I hope you realize we’re just getting started,” he said. “But we’ve got to continue to improve. You’re up over 8 percent [in sales for the year] at this store. I wonder if you can continue. We’d like to see 10 percent.”

  Walton scrambled to his feet and closed by leading the group in the call-and-response company cheer. “Give me a W,” he shouted. “W,” came the thunderous response. “Give me an A.” And so on through T. He called the hyphen “a squiggly” and crouched low and twisted his hips back and forth as he called it out.

  Walton followed the spelling drill by shouting, “Whose Wal-Mart is it?”

  The response came fast and loud: “It’s my Wal-Mart.”

  Next followed a question beloved by high school and college coaches everywhere: “Who’s number one?”

  “The customer! Always! Umph!” 1

  CHAPTER THREE

  ROCKEFELLER OF THE OZARKS

  When Bentonville staged a Sam and Helen Walton Appreciation Day in 1983, Ozarkers from miles around gathered in the town square to celebrate one of their own, a man who may have piled up hundreds of millions of dollars in the bank but still drove an old Chevy with canine teeth marks on its padded steering wheel and ordered the barbecued chicken every Friday night at Fred’s Hickory Inn. “There’s an expression in Arkansas that I had never heard before: ‘Common as anybody,’” recalled Fran Pickens, a longtime friend of the Waltons who’d moved to Arkansas from Texas. “That’s what they all said about Sam, and that’s the greatest compliment the country folks can pay you.” 1 Toward the end of the hometown celebration in his honor, Walton returned the compliment from a reviewing stand set up in Bentonville’s town square across from the 5¢ & 10¢ store he’d opened in 1950. “Y’all are real good,” he somewhat abashedly told the crowd. “We couldn’t have done it without your support and without your buying a little merchandise from that old five-and-dime.” 2

  Sam Walton may have been as unpretentious and down home a man as ever kissed a pig, but he was hardly common as a businessman. Fascinated by the minutiae of in-store merchandising, he knew in the most fine-grained way what made one product sell and not another. A prime example of what is known in the retail trade as an “item man,” Walton loved to recount his triumphs with ladies’ panties (“two-barred, tricot satin panties with an elastic waist,” to be precise), Moon Pies, Bedmate mattress pads, and the like. Walton was just as attentive to the demand side of the equation: the customer. “He’d always talk to us about how important it was to talk to the customers about their chickens, their pigs, their cows, their kids,” said Charlie Cate, one of Walton’s first clerks. 3 Walton was a consummate merchant who knew his customers’ wants and needs as well as he knew his own and was utterly devoted to satisfying them.

  However, the creative flair that Walton displayed as a merchandiser did not extend to corporate strategy and management. Wal-Mart did not pioneer self-service, deep-discount pricing, warehouse club stores, big-box superstores, or any of the other retailing concepts that it came to dominate and epitomize. Even the name Wal-Mart was somebody else’s contribution. 4 The one big, seminal idea that Walton could call his own—that there was a whole lot more business to be done, at a price, in rural America than anybody thought—was not a thesis he set about proving but a realization that had dawned gradually, after years of grinding effort to make the most of Wal-Mart’s humble founding circumstances.

  Walton may not have been a particularly creative thinker, but he was a relentlessly diligent student of the retailing scene in America. He read the trade press voraciously and walked the aisles of hundreds of variety stores in the 1940s and 1950s, interrupting many a family road trip to check out a Newberry, Woolworth, Kress, or T.G. & Y glimpsed from the driver’s seat. When Walton read about two Ben Franklin stores that had eliminated most of their clerk positions to experiment with something called self-service, he jumped on an overnight bus to Minnesota to investigate in person. He insisted that his managers be as familiar with the offerings of competing stores as with their own, even if it meant rummaging in garbage bins after hours to find price tags and invoices.

  Sam Walton adopted the innovations of other merchants so quickly and so emphatically that he effectively made them his own—and usually improved them in the process. He saw no shame in his voracious “borrowing”; he happily gave credit wherever credit was due. “If [a competitor] had something good, we copied it,” he acknowledged. 5 Walton’s object was not to win prizes for originality, but to attract business to his stores—often by taking it away from those very competitors whose ideas large and small he had so shamelessly lifted.

  Walton did not attract much national attention outside the retail trade until 1982, when his name popped up at number seventeen on Forbes magazine’s first list of the 400 richest Americans. “I could kick your butt for ever running that list!” Walton complained to Forbes, which only added to his mortification by publishing his rejoinder. By 1985, Wal-Mart’s soaring stock value had elevated Bentonville’s hometown hero past oil heir Gordon Getty and into the number-one ranking on the Forbes list, with a fortune estimated at $2.8 billion. Walton bristled at what he took to be the condescending tone of much of the coverage of his achievement, complaining that “the media usually portrayed me as a really cheap, eccentric recluse, sort of a hillbilly who more or less slept with his dogs in spite of having billions of dollars stashed away in a cave.” 6

  In fact, most billionaires would have killed for Walton’s press clips. He came across not as a bumpkin weirdo but as a plainspoken man so deeply rooted in the verities and virtues of a bygone America that he seemed not only admirable but also mysterious. In a country obsessed by getting and spending, how was it that the richest American showed so little interest in the luxury and status that money buys? If anything, the news media did Walton a favor. In wearing out the thesaurus in search of synonyms for “folksy” and “unpretentious,” the press skipped lightly over the issue of how he’d made all that money, leaving Walton free to credibly present himself as a homespun embodiment of the American dream. “Ours is a story about the kinds of traditional principles that made America great in the first place…” he wrote in his foreword to Made in America. “More than anything it proves there’s absolutely no limit to what plain, ordinary working people can accomplish if they’re given the opportunity and the encouragement and the incentive to do their best.” 7

  People have compared Wal-Mart’s founder to all sorts of archetypal Americans, from Horatio Alger and P. T. Barnum to James Cash Penney and football coach Tom Landry. One writer even likened him to Benjamin Franklin, with whom he was said
to share “the common touch to an uncommon degree,” among other traits. 8 Above all, though, Walton was an implacably driven business-builder. Wal-Mart was not the happy accident of virtue colliding with opportunity, but a product of vaulting ambition and Herculean effort. In the ruthlessness with which Walton sought and exploited competitive advantage and in the boundlessness of his ambition to dominate an industry, Walton is best compared to John D. Rockefeller, the founder of Standard Oil Co. Like Rockefeller, Walton built a company that defined its era and changed the way business was done in America as much through sheer bullying force as through the inspirational power of its example.

  Walton and Rockefeller also were personally alike to a surprising degree. Each man was the product of a rural upbringing shadowed by chronic money worries; each had an almost pathological frugality seared into his soul as a result. Like Walton, Rockefeller lived far below his means while shunning high society and ostentation in all its forms. His wife frequently had to remind him to buy a new suit when his current one got too shiny; Walton’s business attire (and everything else he wore) came off the rack at Wal-Mart. Walton and Rockefeller both were early-rising, abstemious teetotalers who married once and for life, affirming Flaubert’s famous line about a character in Madame Bovary: “To be fiercely revolutionary in business, he needed to be utterly conventional at home.”

  In some ways, though, Walton suffered by comparison to Rockefeller. The Standard Oil chief was a pious and committed Baptist “drawn to the church, not as some nagging duty but as something deeply refreshing to the soul,” according to biographer Ron Chernow. 9 Walton, too, was reared a Christian, but he was not a true believer. Walton was a Methodist until he and his wife moved to Newport, where, for purely circumstantial reasons, he joined the Presbyterian congregation. For Walton, religious practice was a vehicle of secular advancement; he attended church every Sunday for the same basic reason he went to Chamber of Commerce meetings every Wednesday. “Church is an important part of society, especially in small towns,” he philosophized. “Whether it’s the contacts and associations you make, or the contributions you might make toward helping other folks, it all sort of ties in together.” 10