"Sam Walton understands better than anyone else that no business can exist without customers. He livesby his credo, which is to make the customer the centerpiece of all his efforts. And in the process ofserving Wal-Mart's customers to perfection (not quite perfection, he would say), he also servesWal-Mart's associates, its share owners, its communities, and the rest of its stakeholders in anextraordinary fashionalmost without parallel in American business."----ROBERTO C. GOIZUETA,chairman and CEO, the Coca-Cola CompanyFor my whole career in retail, I have stuck by one guiding principle. It's a simple one, and I haverepeated it over and over and over in this book until I'm sure you're sick to death of it. But I'm going tosay it again anyway: the secret of successful retailing is to give your customers what they want. Andreally, if you think about it from your point of view as a customer, you want everything: a wide assortmentof good quality merchandise; the lowest possible prices; guaranteed satisfaction with what you buy;friendly, knowledgeable service; convenient hours; free parking; a pleasant shopping experience. Youlove it when you visit a store that somehow exceeds your expectations, and you hate it when a storeinconveniences you, or gives you a hard time, or just pretends you're invisible.

I learned this lesson as a merchant in small towns, which is where I've spent my whole life. For those ofyou who've been around as long as I have, and who spent your early days in small towns too, it's nothard to remember how different small-town life was in the first half of this century. Newport was a prettyprosperous little town with a fairly competitive retail environment, but it's still a good example of howthings worked back then. It was a cotton town, which meant that a lot of the folks who shopped therereally lived outside of town on farms. Most of the men worked long hours in the fields, and most of thewomen worked at home. Very few women held jobs in those days, although a lot of them had workedduring the war, and they were beginning to think about going back to work when they got their familiespretty well underway.

The town itself had several small department stores, including, as I mentioned earlier, a Penney's and fora while that little Eagle Store I opened up. It also had a couple of good variety storesmine and JohnDunham's Sterling Store. There were drugstores, hardware stores, tire and auto storeslike Firestone andWestern Autoand little family grocery stores. In lots of little towns, you didn't even have many one-stopgroceries. You might have one shop that specialized in butchering meat, another that carried good freshvegetables, and maybe another that would wring a chicken's neck and dress it for you right there behindthe counter while you waited.

Folks back then weren't accustomed to all the variety and abundance of goods and services that wehave available today. During the Depression, few of us had enough money to shop very often, and duringWorld War II, everythingmeat, butter, tires, shoes, gasoline, sugarwas rationed. But by the time Istarted out, the shortages were pretty much over, and the economy was growing. Compared to theDepression we had been used to, boom times had arrived.

In a farm-to-market town like Newport, the big shopping day was always Saturday. That's when thewhole family would drive to town and spend a few hoursmaybe the whole daywalking around lookingfor what they needed in all the stores. Something had to attract them to a particular store, maybe acombination of things: the storekeeper's personality, the freshness of the goods, the pricesan ice creammachine. We thrived in that competitive environment.

When we arrived in the much smaller town of Bentonville in 1950, we found almost no spirit ofcompetition. A few retailers were scattered around the square, but each of them had sort of carved outtheir niche, and that was that. If a store didn't have something the customer wanted, he or she would justhave to drive to Rogers, or Springdale, or very possibly on into Fayetteville. Using some of the things wehad learned in Newport, I'd have to say we changed that way of thinking right off and generally sparkedup the atmosphere around town.

ALICE WALTON:

"Saturdays around the Bentonville square were really something special. Dad always had somethinggoing on out on the sidewalks or even in the streets, and there was always a crowd. That's where SantaClaus would come, and that's where we had all the parades. To me, as a kid, it seemed like we had acircus or a carnival going on almost every weekend. I loved Saturdays. I had my popcorn machine outon the sidewalk, and I was covered up in business. Everybody wanted some of that popcorn, and ofcourse a lot of my customers would go on into the store. It was a great way to grow up."As you recall, Fayetteville was where we opened our second store after Bentonville. And it was alsowhere we encountered our first discounter competition Gibson's. We knew from then on that the retailbusiness was going to be changing in major ways for years to come, and we wanted to be part of it. Weknew early on that variety stores weren't going to be as big a factor in the future as they had been in thepast, and we were heavily invested in them. The important thing to recognize, though, is that none of thiswas taking place in a vacuum. In the fifties and sixties, everything about America was changing rapidly.

All the kids who had grown up on farms and in small towns had come home from World War II orKorea and moved to the cities where all the jobs were. Except they weren't really moving to the cities;they were moving to the suburbs and commuting into the cities to work. It seemed like every family hadat least one carand many had twoand the country had started building its interstate highway system, allof which changed a lot of the traditional ways Americans were accustomed to doing business.

The downtowns of big cities started to lose population and business to the suburbs, and the bigdowntown department stores had to follow their customers and build branch stores out in the suburbanmalls. Traditional diners and cafes suffered because of the new car-oriented chains like McDonald's andBurger King, and the old city variety stores like Woolworth's and McCrory's just got smashed by Kmartand some of the other big discounters. The oil companies stuck service stations on practically every othercorner, and pretty soon something called convenience stores7-Elevens and suchcame along andstarted filling up the other corners. It was when all this began that Bud and I had opened that BenFranklin in the shopping center at Ruskin Heights, that big new subdivision community outside KansasCity.

For the most part up where we werein the small towns of northwest Arkansas, Missouri, Oklahoma,and Kansasyou didn't see much of the mall construction and fast food neon that you saw everywhereelse. McDonald's didn't go into the small towns, and neither did Kmart. You saw the small-towncommercial centers start to sort of shrivel up. A lot of our customer base had moved on, and the oneswho remained behind weren't stupid consumers. If they had something big to buysay a ridinglawnmowerthey wouldn't hesitate to drive fifty miles to get it if they thought they could save $100. Notonly that, but with the introduction of TV and new postwar car models, being modern had become a bigthing. Everybody wanted to feel up-to-date, and if they knew Kroger or somebody had a big newgrocery store in Tulsa or somewhere they'd drive in there to shop it. When they saw that the prices werelower and the selection was better, they would go back again and again, until somebody brought asupermarket to their town.

It was this kind of strong customer demand in the small towns that made it possible for Wal-Mart to getstarted in the first place, that enabled our stores to thrive immediately, and that eventually made itpossible to spread the idea pretty much all over the country. For many years, we lived entirely off theprinciple that customers in the country and in small towns are, just like their relatives who left the farmand moved to the city: they want a good deal as much as anybody. When we arrived in these little townsoffering low prices every day, satisfaction guaranteed, and hours that were realistic for the way peoplewanted to shop, we passed right by that old variety store competition, with its 45 percent markups,limited selection, and limited hours.

Wal-Mart No. 18 is as good an example as there is of how it worked. That store opened in 1969, and itmarked our return to Newport, Arkansas, nineteen years after we had basically been run out of town. Bythen, I was long over what had happened to us down there, and I didn't have revenge in mind. It was alogical town for us to expand into, and I admit that it did feel mighty good to be back in business downthere. I knew it was a town where we would do well. As it happened, we did extraordinarily well withour Newport Wal-Mart, and it wasn't too long before the old Ben Franklin store I had run on FrontStreet had to close its doors. You can't say we ran that guythe landlord's sonout of business. Hiscustomers were the ones who shut him down. They voted with their feet.

Quite a few smaller stores have gone out of business during the time of Wal-Mart's growth. Somepeople have tried to turn it into this big controversy, sort of a "Save the Small-Town Merchants" deal,like they were whales or whooping cranes or something that has the right to be protected.

Of all the notions I've heard about Wal-Mart, none has ever baffled me more than this idea that we aresomehow the enemy of small-town America. Nothing could be further from the truth: Wal-Mart hasactually kept quite a number of small towns from becoming practically extinct by offering low prices andsaving literally billions of dollars for the people who live there, as well as by creating hundreds ofthousands of jobs in our stores.

I don't have any trouble understanding why some merchant who's having a hard time competing with uswouldn't be too happy about our being there. What I haven't been able to figure at all is these peoplewho have decided we're somehow responsible for the decline of the small town. My guess is that a lot ofthese critics are folks who grew up in small towns and then deserted them for the big cities decades ago.

Now when they come home for a visit, it makes them sad that the old town square isn't exactly like it waswhen they left it back in 1954. It's almost like they want their hometown to be stuck in time, anold-fashioned place filled with old-fashioned people doing business the old-fashioned way. Somehow,small-town populations weren't supposed to move out into their own suburbs, and they weren't supposedto go out to the intersections of highways and build malls with lots of free parking. That's just not the waysome of these people remember their old towns. But folks who grew up in big cities feel the same wayabout what's happened to their cities over the last forty or fifty years. A lot of the stores and the movietheaters and the restaurants that they remember loving as kids have boarded up and either gone out ofbusiness or moved to the suburbs too.

I think what happened to Wal-Mart in all this is that we got to be a certain size and became so wellknown as the small-town merchants that we became an easy target. Certain folks figured they couldcreate a niche for themselves, a platform from which to express their views about small-town America,by zeroing in on us. The whole thing taught me a lesson about the way the national media seems to think.

When you start out as an unknown quantity with just a dream and a commitment, you couldn't buy amention of your company in one of these publications. When you become moderately successful, theystill ignore you unless something bad happens to you. Then, the more successful you become, the moresuspicious they become of you. And if you ever become a large-scale success, it's Katie bar the door.

Suddenly, you make a very convenient villain because everybody seems to love shooting at who's on top.

As an old-time small-town merchant, I can tell you that nobody has more love for the heyday of thesmalltown retailing era than I do. That's one of the reasons we chose to put our little Wal-Mart museumon the square in Bentonville. It's in the old Walton's Five and Dime building, and it tries to capture a littlebit of the old dime store feel.

But I can also tell you this: if we had gotten smug about our early success, and said, "Well, we're thebest merchant in town," and just kept doing everything exactly the way we were doing it, somebody elsewould have come along and given our customers what they wanted, and we would be out of businesstoday. I don't know who it would have been. Maybe Gibson's or TG&Y would have pulled it off. But Isuspect it would have been a combination of Kmart and Target, which, like McDonald's, would haverolled out into the small towns once they began to saturate their big-city markets.

What happened was absolutely a necessary and inevitable evolution in retailing, as inevitable as thereplacement of the buggy by the car and the disappearance of the buggy whip makers. The small storeswere just destined to disappear, at least in the numbers they once existed, because the whole thing isdriven by the customers, who are free to choose where to shop.

Don soderquist:

"We've never been very sympathetic to this whole small-town argument. What's happened to thesmall-town merchant isn't any different from what happened when supermarkets first appeared in thefifties. The whole point of retailing is to serve the customer. If you're a merchant with no competition, youcan charge high prices, open late, close early, and shut down on Wednesday and Saturday afternoons.

You can do exactly what you've always done and probably be just fine. But when competition comesalong, don't expect your customers to stick with you for old times' sake. There are plenty of ways tocompete successfully with Wal-Mart or any other big retailer. The principle behind all those ways ispretty basic: you have to focus on something the customer wants, and then deliver it."I don't want to be too critical of small-town merchants, but the truth is that a lot of these folks justweren't doing a very good job of taking care of their customers before we, or somebody else, came inand offered something new. And they didn't do a very good job of reacting to our arrival either. Youknow, there have been articles, and even one little book, written on how to compete with us. And I'vegot a few suggestions of my own.

Unless small merchants are already doing a great job, they'll probably have to rethink theirmerchandising and advertising and promotional programs once a discounter arrives on the scene. Theyneed to avoid coming at us head-on, and do their own thing better than we do ours. It doesn't make anysense to try to underprice Wal-Mart on something like toothpaste. That's not what the customer islooking to a small store for anyway. Most independents are best off, I think, doing what I prided myselfon doing for so many years as a storekeeper: getting out on the floor and meeting every one of thecustomers. Let them know how much you appreciate them, and ring that cash register yourself. That littlepersonal touch is so important for an independent merchant because no matter how hard Wal-Mart triesto duplicate itand we try awfully hard we can't really do it.

I think in the case of variety stores, they have to completely reposition themselves, something like theway Don Soderquist did when he was president of Ben Franklin. He saw that there just wasn't any futurein competing with Wal-Mart and Kmart so he started converting a lot of their variety stores into craftstores. They offered a much bigger assortment of craft merchandise than any Wal-Mart could, and theyheld classes in things like pottery and flower arranging, services we could never think about providing. Itworked. They stayed in business in the small towns and have been quite............