Walmart. I know we are all familiar with it. Not all of us like Walmart, I for one dislike some aspects of Walmart. But, we have to recognize what Sam Walton did. He built a trillion dollar company. Yes, you heard that right. The Waltons are actually the richest family, but the money is divided among the family. He wrote a book on how he became successful on his death bed to leave legacy. Whether you are fan of Sam Walton or not, if you are interested in retailing business; this book is a must-read. So I will tell you what I took away from this book along with some quote I really liked.
1.Sam Walton's Pricing Policy
It's hard to sell something for a cheaper price than you think it deserves because of our greed for money. Therefore, everyone marks up the prices excessively if they are able to receive a good deal from the manufacturer. This is how 90 percent of the businesses operate. However, Sam Walton was different. He knew he needed to beat the competition in the market. Hence, he tried to sell it at the lowest he can possibly get it down to.
"No matter what you pay for it, if we get a great deal, pass it on to the customer."
"We managed to sell our merchandise as low as we possibly could, and kept it up for first ten years- that kept us right-side up for first ten years."
Well then how did he manage to make so much profit?
He states that it didn't matter if he couldn't make not as much profit from an item. Because of the low price, people came and bought a lot more making up the amount that they would have originally have earned.
For example, if they made 10 cents per item, only 20 people would have bought it. Giving Walmart 2 dollar profit.
However, if they made 5 cents per item, but 50 people came. It would have been 2.50 dollar profit for Walmart and an impression that they sell it for the cheapest.
2.How does Walmart work well as a team?
We all know that Walmart is very efficient. Both the warehouse and the employees there are efficient. How is that?
Why are they paying the same minimum wage of $9.20 an hour, but getting different results?
It's quite simple. MOTIVATION
That's the key to Walmart's success.
The managers at Walmart own a percent of the store. Meaning, if they did well, both the manager and Sam Walton would make more money. It's a symbiotic relationship that worked well. Same applies for employees, if there was no theft, the employees would get a raise of certain amount. And it has proven to be working from many stores that Sam Walton experimented it on.
"And here it is: the more you share profits with your associates—whether it's in salaries or incentives or bonuses or stock discounts—the more profit will accrue to the company"
"The biggest single regret in my whole business career is that we didn't include our associates in the initial, managers-only profit- sharing plan"
3. Check your competition
By that, he means check EVERYONE in your competition.
The last thing you want is your store being shut down by a neighboring store due to lack of research.
If they are selling a product cheaper than you, don't start a store expecting to the consumers to come to your store.
Figure out how to lower your cost and which product you can sell to compete.
Competition is not bad, it encourages you to work harder, but don't be swallowed by the competition.
4. Invest for the future
Do you know how organized Walmart's warehousing is?
Assuming you know, think about how big of an advantage they had compared to other stores.
They were extremely efficient. But it didn't take a few days to perfect a system.
The system took a long time and a LOT of money to set up.
They spent over 700 million dollars for satellite computer systems, but we all know it paid off.
This system gave Walmart a huge advantage in the competition.
You have to spend invest money to make money. Don't be afraid to invest back into your business if you know what your investment will bring back.
5. Learn from others
Sam Walton was arrested in a Brazilian jail once. Why? Because he was measuring the aisles to see what they knew more than him.
Sam Walton carries a notepad around people he meets and takes notes from it. Why?
Because he learns something from them. If the billionaire Sam Walton thinks that he needs to improve, what makes us think that we don't need to learn?
So, be open minded, keep out for the chances that it might bring.
As Charlie Munger says, life is a continuous learning experience, so try to learn something new, whether it be investing, marketing, or a new exercise.
These were my favorite parts of this autobiography. I would definitely recommend the book to everyone.
After all, we could see the struggles and success story of Sam Walton, the man who built the Walmart empire, for only 7 dollars!
Talk to you soon!
1.Sam Walton's Pricing Policy
It's hard to sell something for a cheaper price than you think it deserves because of our greed for money. Therefore, everyone marks up the prices excessively if they are able to receive a good deal from the manufacturer. This is how 90 percent of the businesses operate. However, Sam Walton was different. He knew he needed to beat the competition in the market. Hence, he tried to sell it at the lowest he can possibly get it down to.
"No matter what you pay for it, if we get a great deal, pass it on to the customer."
"We managed to sell our merchandise as low as we possibly could, and kept it up for first ten years- that kept us right-side up for first ten years."
Well then how did he manage to make so much profit?
He states that it didn't matter if he couldn't make not as much profit from an item. Because of the low price, people came and bought a lot more making up the amount that they would have originally have earned.
For example, if they made 10 cents per item, only 20 people would have bought it. Giving Walmart 2 dollar profit.
However, if they made 5 cents per item, but 50 people came. It would have been 2.50 dollar profit for Walmart and an impression that they sell it for the cheapest.
2.How does Walmart work well as a team?
We all know that Walmart is very efficient. Both the warehouse and the employees there are efficient. How is that?
Why are they paying the same minimum wage of $9.20 an hour, but getting different results?
It's quite simple. MOTIVATION
That's the key to Walmart's success.
The managers at Walmart own a percent of the store. Meaning, if they did well, both the manager and Sam Walton would make more money. It's a symbiotic relationship that worked well. Same applies for employees, if there was no theft, the employees would get a raise of certain amount. And it has proven to be working from many stores that Sam Walton experimented it on.
"And here it is: the more you share profits with your associates—whether it's in salaries or incentives or bonuses or stock discounts—the more profit will accrue to the company"
"The biggest single regret in my whole business career is that we didn't include our associates in the initial, managers-only profit- sharing plan"
3. Check your competition
By that, he means check EVERYONE in your competition.
The last thing you want is your store being shut down by a neighboring store due to lack of research.
If they are selling a product cheaper than you, don't start a store expecting to the consumers to come to your store.
Figure out how to lower your cost and which product you can sell to compete.
Competition is not bad, it encourages you to work harder, but don't be swallowed by the competition.
4. Invest for the future
Do you know how organized Walmart's warehousing is?
Assuming you know, think about how big of an advantage they had compared to other stores.
They were extremely efficient. But it didn't take a few days to perfect a system.
The system took a long time and a LOT of money to set up.
They spent over 700 million dollars for satellite computer systems, but we all know it paid off.
This system gave Walmart a huge advantage in the competition.
You have to spend invest money to make money. Don't be afraid to invest back into your business if you know what your investment will bring back.
5. Learn from others
Sam Walton was arrested in a Brazilian jail once. Why? Because he was measuring the aisles to see what they knew more than him.
Sam Walton carries a notepad around people he meets and takes notes from it. Why?
Because he learns something from them. If the billionaire Sam Walton thinks that he needs to improve, what makes us think that we don't need to learn?
So, be open minded, keep out for the chances that it might bring.
As Charlie Munger says, life is a continuous learning experience, so try to learn something new, whether it be investing, marketing, or a new exercise.
These were my favorite parts of this autobiography. I would definitely recommend the book to everyone.
After all, we could see the struggles and success story of Sam Walton, the man who built the Walmart empire, for only 7 dollars!
Talk to you soon!