Sam Walton’s Simplified 5-P’s of Retail

Sam Walton’s Simplified 5-P’s of Retail - Product, Price, Place, Promotion & People

Sam Walton (founder of Wal-Mart) didn’t follow the 5-P’s to the letter but I’m certain he incorporated each of the 5-P’s into the rest of his strategies and tactics. Having said that I’ll try to provide my simplified description of what I think were Sam’s beliefs about the 5-P’s as follows:

Product: Sam used an outside/in approach to product selection. He asked his customers and his own employees for product ideas and he shopped his competitor's stores for ideas. Of course he also asked his supplier network for product ideas and Sam was one of the first to establish true "vendor partnerships."

Price: While everyone else in retail was using a cost/plus pricing model in an attempt to see how much they could get for every item, Sam tried to figure out how little he could get (charge) for every item and still make a razor thin profit. Under Sam Walton’s Discounting Philosophy, he might make half as much profit per item, compared to his competitors, but he'd sold such tremendous product volumes that he'd make a greater profit overall. This was his EDLP strategy which is what discounting is all about: high volume and low margins generating big dollar profits.

Place: In the early days Sam was the first to admit his stores were poorly merchandised when compared to the planogrammed stores of today. In bygone days brands were king receiving the best shelf position, but not anymore. Wal-Mart’s private label products now receive preferential treatment over the national brands when it comes to shelf placement. Wal-Mart is renowned for its distribution/supply chain technologies that help it to keep its shelves stocked iwth products "just in time."

Promotion: Sam’s first stores were merchandised using a “stack it high and let it fly” approach. Using bins, tables and boxes coupled with hand written signage advertising too good to be true prices, Sam would create a buying frenzy with his special buy merchandise. Word traveled fast in the early days and Sam relied on word of mouth advertising. Not any more. Today, Wal-Mart’s focus on improving margins has turned the giant retailer into a marketing driven company.

People: Sam had strong beliefs about the importance of employees, his associates, to the success of Wal-Mart. Six of his ten self-professed rules for his own success had to do with how you treat people. He was a servant leader and he lived by Golden Rule Values. He used to say, “Our people make the difference.” He believed, “If you take care of your people, your people will take care of your customer, and your business will take care of itself.”

Sam Walton must have known what he was doing because he was worth US$100 Billion when he died!

Contributed by Michael Bergdahl, International Speaker