Walmart: Walton, Retailing, and Everyday Low Prices

Founded in 1962 by the legendary Sam Walton, Walmart is a true American success story. Built upon operational efficiency and superb economies of scale, the company revolutionized the retail industry and stands as a great example of how to grow a business. Join us as we discuss Sam Walton's legacy and explain how Walmart has consistently upheld its promise of “Everyday Low Prices”.

• Family business: From its inception, Walmart was built with the entire Walton family deeply involved, which remains the same to this day.

• The initiatives for success: The strategies that fueled Walmart's rapid expansion across the U.S. during the 1970s and 1980s.

• Legendary legacy: Though Sam Walton passed away in 1992, his legacy continues to shape and inspire Walmart's operations to this day.

• Walmart at a glance: The company operates over 10,500 stores across 19 countries, employing more than 2.1 million associates.

Sam Walton was born in Kingfisher, Oklahoma in 1918. From a young age, both Sam and his brother, James “Bud” Walton, were involved in various business ventures. Their early retailing experiences would prepare the two boys for their careers in the trade. After earning a degree in economics from the University of Missouri, Sam worked at J.C. Penney for a few years before serving in the military during World War II.

When the war ended in 1945, Sam was eager to get back into the retail business. With some important financial help from his father-in-law, he opened his first store as a franchise taker of the Ben Franklin retail chain. Following five successful years, he established his own franchise under the Ben Franklin umbrella. Sam's Walton's 5&10 franchise flourished throughout the 1950s, and at the end of the decade, the chain had grown to eight stores across two states – building momentum and belief in what was to come.

The journey of his second enterprise, and the subject of this story, began in 1962 as Sam opened the first Walmart store in Rogers, Arkansas, together with his brother Bud. The small, self-service store offered low-priced everyday goods. Right from the very beginning, Bud and Sam's wife Helen, played a crucial role in building the business. The influence of the Walton family, both then and now, has been central to Walmart's success.

During the 1960s Walmart grew steadily, albeit slowly, expanding with several stores across Arkansas before crossing state lines in 1968 into Oklahoma and Missouri. In 1969, Walmart started integrating technology into its operations by partnering with IBM to develop its computing infrastructure. This gave Sam and the management access to daily sales reports from each store and was an early sign of his strive for operational efficiency and cost savings across the company. It was also a sign of Walmart's willingness to embrace technology.

In 1970, Walmart went public to ramp up its expansion. This allowed the still rather small retail chain to pursue its growth ambitions on a national scale. Targeting national scale-up, Walmart started to open more stores, while also strategically acquiring other chains. Additionally, it expanded its offer within stores, introducing several new divisions. This included adding pharmacies, auto-service centers, and jewelry departments. Growth of the retail chain took off drastically – increasing from 18 stores before its IPO, to 276 stores at the end of the 1970s.

Building on Sam Walton's commitment to “Everyday Low Prices”, Walmart became the fastest company to reach $1 billion in annual U.S. sales in 1979. At this time, new stores were opening across the country on a weekly basis.

Further reading: Sam Walton's Rules for Building a Business

Walmart's remarkable growth and success during these years can be attributed to a combination of strategic factors. Below are some of the key competitive advantages that set Walmart apart:

• Logistics and supply chain management: Walmart centralized its distribution centers with a hub-and-spoke model. Rather than relying on store delivery from suppliers it used regional distribution centers that served clusters of stores. By implementing cross-docking operations to its privately owned truck fleet, Walmart reduced inventory while gaining better control over transportation logistics.

• Strategic store location decisions: While many competitors concentrated on urban centers, Walmart targeted underserved rural and suburban areas. Furthermore, both distribution centers and new stores were deliberately placed in close proximity to one another, reducing transportation time and costs.

• Technology implementations: From the beginning, Sam and Walmart showed a willingness to embrace technology in its network of stores. Following the early success of partnering with IBM, Walmart continued integrating new technologies. In 1977, Walmart integrated a computer network for its orders from suppliers, and by 1983 Walmart installed a private satellite network, allowing real-time communication between stores, distribution centers, and headquarters.

• Scale benefits: As the company grew it leveraged its size to negotiate lower prices from suppliers. Bulk purchasing reduced per-unit costs, enabling Walmart to offer lower prices to customers. Additionally, Walmarts growing experience and the uniformity of the stores led to a streamlined process of opening and integrating new stores across the chain.

Walmart's strong management and corporate culture enabled it to capitalize fully on these factors. By spreading costs across multiple stores, adding new locations reduced marginal costs, showcasing the true benefits of economies of scale. These scalability advantages enabled Walmart to keep prices low, and built the momentum to fuel its U.S. growth.

During the 1980s, Walmart evolved into a nationwide retailer. From its 276 stores in 1979, the company had expanded to 1,528 locations across the U.S. by the end of 1989. At the same time, revenue had increased from $1.24 billion to over $26 billion within the decade. In 1990, Walmart surpassed Costco to become America's top retailer, generating $32.6 billion in revenue. As of 2023, Walmart reported an annual revenue of $640 billion, making it the largest private company in the world, sorted by revenue.

A year later Walmart expanded beyond the U.S. borders by opening its first international store in Mexico City. This marked the beginning of a worldwide expansion which has not stopped since. As of 2024, the company operates more than 10,500 stores in 19 countries. Across its locations Walmart employs approximately 2.1 million associates, making it the largest private employer in the world – a title it has held for over two decades.

In 1988, Sam Walton stepped down as CEO of Walmart and assumed the role of Chairman, a position he held until his passing in 1992. From the first store in Rogers, Arkansas, to the time of his eventual death, Walmart had remained a Walton family business. With guidance from his father-in-law, Sam consolidated the Walmart ownership into a family-run partnership known as ‘Walton Enterprises’, where the family members served as partners.

This structure ensured that individual family members could not sell their shares unless the entire partnership agreed to the decision. According to Sam, this strategic move was the key reason the Walton family maintained majority control of Walmart over the years.

The partnership not only safeguarded the family's financial ownership but also inspired continued involvement in the company. Sam's eldest son Rob Walton took over the role of Chairman after his father's passing in 1992. This was a responsibility he held until 2015 before passing it over to his son-in-law Greg Penner – effectively establishing that the role of Chairman stays within the extended Walton family.

Further reading: The Walton Family: The Dynasty Behind the Walmart Empire

Walmart's extraordinary expansion from the 1970s to the 1990s tells the story of a brilliantly executed strategy and capitalization on opportunity. The success of Walmart is also synonymous with the lifework and legacy of Sam Walton, whose visionary leadership created one of the greatest American business stories.