For example, Walton noticed that
a store had an ice cream dispenser that attracted a lot of kids. This resulted
in the parents wanting to specifically shop at their store as their children
would be preoccupied and would make their work easier. He observed that a few
stores applied a technique called the loss leader principle, wherein they sold
basic commodities at an extremely low margin so that they could attract
shoppers into making a visit.
For example, if the price of
toothpaste was $1, some stores sold it at 50 cents/ $0.50. This gave them two
benefits that very few people actually understood. Firstly, by looking at the
low cost of the toothpaste, customers assumed that the store had the best
prices for the rest of the products also. And secondly, since they made a visit
to the store, customers would buy other products like cereals, clothes or DVDs
which were all high margin products. The store might have lost 50 cents on the
toothpaste, but on the rest of the bill, it made $10-$20.
Sam Walton carefully observed
every one of these elements from the stores he visited and tried to incorporate
them in his store. Some ideas worked and some did not, but the one sure thing
was that Sam Walton knew about every single retail idea floating around in the
market. He would often meet with the heads of the other discount chains and
introduce himself as a small retailer looking for advice on the retail
business. The heads of these retail stores answered more questions than they
were supposed to as they did not view Walton as a threat. And with each passing
conversation, Sam Walton walked away with a better understanding of the market.
This impeccable market research always kept Walmart at the forefront of the
retail revolution. Due to this Walmart was always able to find the best
sellers, the cheapest products,and the best technology. Most importantly with
each new store, they knew exactly which products would work and which wouldn’t
and knew what their competitors’ strengths and weaknesses were.
3. TEAM MANAGEMENT
Considering the rapid growth of
Walmart, wherein they were opening hundreds of stores every single year, how
did Sam Walton manage to keep track of the market? This is where the third
aspect of his success comes into place, that is Sam Walton’s team management.
Walton followed three very powerful principles that helped him in nurturing the
managers of Walmart into extraordinary leaders. These three principles were:
SAFETY
COLLABORATION
First of all, all managers of
Walmart owned a percentage of their retail store which gave them a sense of
belonging and inspired them to work harder to turn their store into the best
one in town.
Secondly, Walton created a
culture wherein the entire team would gather every Saturday morning to talk
about the issues they faced or a problem that needed to be solved in that
particular store. And no matter how small or big the problem was, Walton, insisted
on solving the problem together as a team.
Last and most importantly, most
retailers had strict rules about the implementation of ideas by a store manager
and what they can or cannot do. Whereas, Sam Walton gave his store managers the
freedom to experiment with different products and marketing strategies so that
they can maintain a continued understanding of the market. Even failed ideas
were not reprimanded and the managers were encouraged to implement new ideas
after introspection. Sam Walton implemented this as he believed that rigid
protocol would stifle innovation. And in order to keep pace with the
fast-developing retail industry, it was important that everybody kept
experimenting
to acquire a deeper understanding
of the market. This resulted in the store managers coming up with game-changing
ideas for new store designs and better seller suggestions.
One such manager, Phil Green was
so inspired to experiment that he bought the largest ever display of Tide, and
bought 3500 giant boxes of Tide to compete with another retail giant called
Kmart. The stock that he purchased was so large in the quantity that it
occupied an entire section even after being stacked all the way up to the roof.
Now, most people would get fired for making such a big and risky purchase
decision, but this was not the case at Walmart. Phil sold out all those boxes
within a week and Walmart became the new favourite
in town as compared to Kmart.
This was the revolutionary
culture that Sam Walton cultivated in Walmart that turned his Managers into Ambassadors of the business and risk-taking owners. This eventually turned
Walmart into one of the most powerful companies in the US with 2.2 million employees
and a revenue of $559 billion today.
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