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Walmart came from an entirely different place.
Sam Walton was born in 1918 in Oklahoma.
He grew up on a farm.
And after he graduated from college in 1940,
he went to go work as a salesman for JC Penney.
Walton loved to sell, but he hated the inventory paperwork,
a hate that would come later to define Walmart's success.
After he served in the Army and through the 1950s,
he opened a series of discount stores called the Ben Franklin
stores that were franchises from Chicago.
Now he envisioned something very different,
very much at odds with how other discounters thought about themselves.
Most discounters saw themselves as something coming out of urban areas.
But Walton saw that he was meeting the needs of a rural constituency.
He wanted to sell at greater volumes and lower prices
to his rural customers in Arkansas.
He was refused by these big chains from the cities.
They said it wasn't possible, and they refused to cut him deals.
And he began to think of an alternative, of striking out on his own
with his own discount store.
The first Walmart opened in 1962 in Rogers, Arkansas.
And unlike other discounters, which often
bought factory seconds or slightly mangled merchandise,
he only bought high-quality goods.
And so his phrases "we sell for less" and "satisfaction guaranteed"
that still define Walmart today were there at the very beginning.
These low-priced goods were possible because he went out of his way,
he busted his hump to get those really cheap goods from manufactures.
It was very difficult, but somehow Sam Walton was able to pull it off,
especially because the stuff he sold was in far-flung places in rural America,
well away from the big stores of the city,
places where the factory owners didn't feel like their prices and profits
were threatened.
The stores were homey and simple.
They had concrete floors, and the clothes and other kinds of goods
were arrayed on tables in neat stacks but not on racks
so that people could look at them, interact with them,
but it was nothing fancy.
It was an appeal to simple, folksy values with American flags everywhere.
And this kind of interaction was something
that rural America had never seen before, city prices and rural ways.
Like the Sears catalog, this was a way to connect rural customers
with urban production.
And it was also a way to capture that market that's
now made possible by the automobile.
Just as the car was essential to suburban consumption,
so the car too was essential to rural consumption.
Farmers didn't have to take a horse to the county seat
to where the Walmart was to buy their things.
They could drive their car.
And in doing so, he captured a wide amount of market, a huge space.
And while stores like Kmart and other kinds of urban retailers
fought off competition, Walmart grew steadily,
grew quietly throughout the 1960s, expanding in the South
as the preeminent rural chain.
These low prices are made possible in two ways,
by cheap labor and efficient supply chains.
Sam Walton realized that the minimum wage laws only
applied to a corporation that made above $1 million a year.
And so what he did was divide up each of his stores into a separate corporation,
keeping the total sales under $1 million.
And in doing this, he did not have to pay them minimum wage,
so he could keep his labor prices very, very low.
And in rural areas, this was a big difference.
While the frontline staff was paid very little,
the managers were paid relatively well.
They weren't paid to pick products or to set prices.
They were paid to keep those labor costs down.
If they kept the labor prices down below 10% of the gross sales of the store,
they actually got bonuses.
While cheap labor was essential to Walmart's success,
so too was the efficient management of its supply.
As one Walmart executive said to a group of Wall Street analysts,
"people think we're in the retail business,
but we're actually in the distribution business."
The first Walmart distribution center was built in 1969,
and it defined the difference between Walmart and every other discounter.
Merchants ran Kmart.
Logistics managers ran Walmart.
And what they did was basically similar to how
containerization had reshaped the ports.
Walmart reshaped how stores received supplies.
Nearly every other kind of retailer in America,
like Kmart, would receive goods from each individual manufacturer, which
would take a lot of time breaking them down, placing them, coordinating
all those kinds of supplies.
There'd be overstock here, understock there.
But at Walmart, with these centralized distribution centers,
the goods would come to a centralized distribution center
and then be shipped out as needed in one truck to every store every day.
It kept inventory minimal, it kept stockouts low,
and it meant that they could more efficiently buy from their suppliers
and make sure that their customers got what they needed.
And as always, low inventory meant lower prices.
This focus on logistics allows Walmart to be in spaces and places
that no other retailer could be.
They are able to expand throughout rural America in places that other kinds
of stores cannot get supplied.
Their distribution centers expand with them.
In 1969, they lease a System/360 computer
from IBM, which allows them to computerize their inventory management.
And through the 1970s, they're one of the leaders
in the adoption of new technologies, like point of sale and UPC codes.
It allows them to keep track of their inventory much better
than any other kind of discounter.
They had about one fifth the cost of distribution of Sears
in the same period.
So you can see in this moment the rise of two different kinds of retailers,
Kmart, which is certainly the great success
story from the '60s to the '80s, and Walmart, which is the great success
story from the '80s until today.
They are both discounters, but they focus
in very different strategies with very different outcomes.
But the outcome for Americans is that over this entire period
goods are steadily becoming cheaper.