There is a saying in financial markets that “if everyone is the same way around (i.e. thinking the same way and making the same assumptions), then you should turn the other way”.
It was a given in American retailing in the late 1950s and early 1960s that you could not open a decent-sized discount store in a town of fewer than 10,000 people. The then biggest discounter, Kmart, would not look at anywhere under 50,000. The principle was that your stores had to be in large population centres because people would not travel to buy goods cheaply.
In 1962, after 15 years as a franchisee operating general stores in the Mid-West, Sam Walton went against the flow and opened the first Walmart in the town of Rogers, Arkansas (population 5,700 in 1960). Walmart then proceeded to open stores in small towns at breakneck speed. They ignored cities but would come to encircle them with stores in small nearby towns and wait for the cities to grow out to them. And all the while Walmart innovated, experimented, tested and learned, always going against the perceived wisdom.
They would buy huge quantities of a product and “dramatise” it – an approach that set the company apart and made them difficult to compete with. For example, at a new store in Hot Springs, Arkansas, they worked up a detergent promotion that turned into the world’s biggest display of Tide soap powder – 3,500 cases of the giant-sized box, selling it at $1.99 a box instead of the normal $3.97. The display was a pyramid twelve to eighteen cases high, 100 ft long and 12ft wide. It was so big that it made the news and became a tourist attraction, and the whole lot sold in a week.
By 1985 Sam Walton was America’s richest person and the combined Walton family wealth ($215 billion) continues to exceed that of the current world’s richest person (Bernard Arnault, founder of luxury goods business LVMH who at $186.3bn recently overtook Jeff Bezos of Amazon).
Last month Walmart topped the Fortune Global 500 list of companies – a ranking by sales – for the eighth consecutive year and the 16th time since 1995.
Assumptions always contain risks for those making them, but they can also present opportunities for those willing to go against the flow.
Data Sources: Made in America – my story by Sam Walton with John Huey; fortune.com, prnewswire.com; wikipedia; investopedia; barrons.com; forbes.com