Charles Fishman

Charles Fishman is the author of the book, The Wal-Mart Effect. Here he tells the story of the world’s largest company:

Charles Fishman (Standard American accent)

Walmart is the creation of a single man in some ways, a man named Sam Walton, who settled in Arkansas with his wife and was interested in stores, in retailing, from a very young age himself. And it’s kind of remarkable to sort of leap all the way forward from the moment Sam Walton founded the company in 1962 – so Walmart is about to celebrate its 50th year in business – that... that a single guy could create a company with such incredible impact and force and power. Sam Walton was an incredibly hard worker and he had, in the American business landscape, he actually had really just one or two important insights that really have driven everything that Walmart does. The first was: Walmart was founded... the stores were opened on the idea that he was going to sell the things that people use every day, like toothpaste, dog food, laundry detergent, the things you buy and then, two or three weeks or a month later, they’re gone and you have to buy them again! He was going to sell those everyday necessities at the lowest possible price all the time, a single price.

NO PROMOTIONS!

So he focused on stocking things like shampoo and soap and laundry detergent and dog food and stuff like that, and he didn’t do what lots of American stores did when he opened, and which many American stores still do, which is that there was a, you know, there was a price for two litres of Coca-Cola and it was $1.49 and every three weeks it would go on special for 99 cents. And so, if you were smart, you knew that the things you bought like Tide laundry detergent or whatever... every three or four weeks, they went on sale and you would wait and you would buy it all at the sale times. And he... that sort of creates a rollercoaster effect in business. You’re teaching people... you’re teaching your customers that there are really two different prices for things. If you can sell the Coca-Cola for 99 cents for two litres sometimes, why can’t you sell it at that price all the time? He said, “We’re going to... we’re going to figure out the lowest possible price. We’re not going to change the price. We’re not going to raise it and lower it and we’re going to stock things people really need.” So that was... insight one was: no promotions! Let’s just find the lowest price and sell it at that price all the time. And let’s come in under the prices that people... that other stores price at, even if only a few cents.

THE NUMBERS GAME

The United States is one of these consumer markets where everything is... ends in 99 cents. It’s $1.99 or $3.99 or $5.99 or, if you buy a big screen TV, it’s $1,199.99! Sam Walton purposefully ends all... ended all Walmart prices in a 7, so that, even if you didn’t know the price of the yoghurt or the blue jeans, or the big flat screen TV, at least you knew it was at least two cents cheaper than the competitors! That’s why the prices at Walmart end in a seven. And the second thing he did... so that was... that was literally all one thing – “Let’s stock stuff and sell it at the lowest possible price and keep it under the price of the nearby competitors.”

MANIA

And the second thing he did was he focused on the costs of his own stores and his own company, in an effort to keep them as inexpensive as possible. And this effort to keep his own costs low, the costs of Walmart as low as possible became almost a mania. The first stores he opened he bought used retail fixtures from stores that had gone out of business! So he didn’t even have to buy new shelving. Many Walmart stores in America have a... a very kind of basic warehouse-y feel. The floors are very simple concrete or... or wood. They’re... they’re just huge warehouses, literally, with shelves in them. There’s nothing particularly decorative. But even until very, very recently, Walmart world headquarters was as basic as it could be. The... the headquarters building, about a third of this space now is the original warehouse for storing products. And when the company outgrew that very first warehouse, it had to build another one and... and more distribution centres around the country, Sam said, “Well, it’s a big old building and we need space, we’re just going to put people at desks in it, that works fine!” And... and until... they recently remodelled Walmart headquarters, literally within the last two years. But until very recently, you could look around inside the headquarters of the largest company in sales and employees in the history of the world, and say, “Wow, they’re... they’re running the whole company out of like an old warehouse. Is that right?” Yes, it is!

THE SEARS SYNDROME

And so, you know, one of the great comparisons is to Sears. Sears is a famous US retailer that never did much business outside of the US, but... but legendary; it’s still... still in business. And when Sears was at the height of its power, it built a building in Chicago called the Sears Tower, 110 stories tall, the largest and tallest building in the world! Sears actually wasn’t a very well-managed company and they only... managed to hold on to this spectacular headquarters building that they built for only about eight years! Sam Walton never did anything like that, you know. He... he was incredibly frugal, tight-fisted and that focus on keeping his own costs low allowed him to... to pass on all of that savings to his customers. Even if he saved only a few pennies here and a few pennies there, his goal was to make sure that the toothpaste you were buying was a nickel or seven cents cheaper, if not 20 cents cheaper, than wherever you were normally buying it. And the best way to do that was for him not to spend money he didn’t need to spend. You didn’t come to his store because it was pretty, you came because you knew that he had made a promise to you that he was going to sell this stuff as inexpensively as he could and you could look around and tell that he was. And that culture – Sam Walton died in 1992 – that culture, however, continues to this day. We’re... we’re almost 20 years since his death and the... the company is still incredibly frugal. The stores still look very, very basic. Headquarters is still very, very simple. And so... so the idea of Walmart came from Sam’s brain, in this way: “Let’s provide basics. That way they’ll... people will have to keep coming back. They’ll never have enough laundry detergent until they pass away, right? They just have to keep buying it. And let’s kind of make a promise...” He literally made this a covenant with his employees and his customers, that we’re going to do... that we’re going to sell it to you cheaper than anybody else, even if only a... a... a few pennies.

A WORKAHOLIC

And I guess the third thing that Sam himself brought to the table, besides real insight about how to do those two things, how to provide what people needed every day and how to keep his own costs low, he worked incredibly hard. He... he was tireless... with himself. So, for many decades, from... for... until literally two or three years ago, everybody at headquarters worked Monday through Friday, and then they worked from 5.30 or 6 in the morning until 1 on Saturday. People still come to work at Walmart at 6.30 in the morning, which is kind of amazing in American business. It’s not unusual for people to get to work at 8 or 8.30, but coming to work at 6.30 is pretty early! And there was a meeting every Saturday, until very recently, of all the senior managers in the company, to talk about the week, what they’d done well, what they needed to do better on. And in the early days, a computer technician would work overnight, Friday night into Saturday morning, to have the week’s sales all tabulated on the old-fashioned computer paper with the holes on the sides and the green and white stripes. And I actually interviewed the first guy who had that job of tabulating those sales! And he said Sam delighted in scaring him to death by walking in on him in the middle of the night! And so Sam Walton would start getting ready for his Saturday morning meeting at 1.30 or 2.30 or 3.30 in the morning, Friday night, Saturday morning. He was just... it was just the computer technician and Sam Walton walking around the company. So he... he worked himself incredibly hard and... and he stayed focused on keeping his own costs low and delivering low prices and that’s really what the company still does.

(Charles Fishman was talking to Talitha Linehan)

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