Today: Valuable business lessons from the career of Sol Price, one of the world’s greatest retailers.
Sol Price was best known for Price Club, which he started with his son Robert when he was 60 year old in 1976. It was so successful, that at its merger with Costco in 1993 it had 94 stores in the U.S., Canada and Mexico and $7.5 billion in annual sales.
But our story today is how Sol, a San Diego lawyer, built his first successful discount store chain Fedmart, and some valuable lessons it taught him, and will teach us, for without this knowledge, Price Club never could have become so successful.
It was 1954 and Sol inherited a grimy old warehouse. While looking for a tenant, two of his clients who were in the wholesale jewelry business, told him of a Los Angeles non-profit, member owned retail store called Fedco, which bought watches from them
Fedco sold discounted merchandise, which was rare then. Instead, shoppers went to stores like Sears, nice and clean and convenient, with fine service and a wide variety of heavily advertised merchandise, and it could be delivered to one’s door. But everything was at full price.
Sol was fascinated as his clients’ described Fedco, and asked them to take him there. He was so excited by what he saw; they immediately went to his San Diego warehouse to discuss business possibilities. What made Fedco so exciting?
To help you picture what Sol saw, when I was a boy, a neighbor who was a Fedco member, took me to the store with his family. Fedco was in a run-down building in a modest neighborhood.
Before we went in, he said the incredibly low prices were a secret for as a Fedco member, he had to keep it confidential or potentially lose his membership.
Only government employees were allowed to join, which he was, and as we entered the store a stern security guard checked his membership card and asked about each of us, before we could go in. It was all top-secret and it made him and his family feel important.
Other than at the cash registers, it was self-serve and the selection was limited and haphazardly displayed. But there were expensive household name appliances such as washers and dryers at unbelievably low prices, and televisions, jewelry and more. Self delivery was the rule.
Fedco’s success was based on buying merchandise at rock bottom prices, keeping overhead low and creating an aura of privilege among those lucky enough to be allowed to shop there.
Customers packed the store and like bells ringing constantly, cash registers rung-up sales.
Sol heard those cash registers and witnessed all those customers. But what he really saw was an entrepreneurial opportunity of a lifetime. Fedco had a great concept but it could be so much more.
Sol convinced those clients and others to invest $5,000 each, totaling $40,000. His law firm put in $10,000 for a total of $50,000 to launch their own Fedco like store.
To get it started, some of Sol’s investors became suppliers. The jewelry wholesalers invested, as did a furniture wholesaler and a liquor supplier and they all provided popular merchandise.
They called it Fedmart, which like Fedco, was easy to remember, for like Fedco, they made it government employee membership only, charging an annual fee. Also as Fedco had done, they used a cheap, run-down building, in this case, Sol’s warehouse in industrial San Diego.
Like Fedco, Fedmart was self-service and had no advertising expense. It too bought merchandise at rock bottom wholesale prices and customers found great bargains throughout the store..
From the start, the business was successful. Revenue in the first year was $4.5 million, four times what they had projected. And Sol kept innovating, opening an in-store pharmacy and an in-store optical department. Fedmart even sold groceries and gasoline at wholesale prices.
Sol’s son Robert joined Fedmart, becoming an executive vice president, and they built it into 45-stores, with annual sales of $300 million, when they sold it very profitably in 1975, after 21 years.
The following year Sol and Robert launched Price Club. After its success and merger into Costco, even at 77, Sol wasn’t done. He and Robert started a spin-off of Fedmart called PriceSmart, with Robert in charge.
Headquartered in San Diego, PriceSmart today runs 26 membership stores in the Caribbean and in Latin America and licenses 11 more in China. It employs more than 3,000 people and has over $600 million in annual revenue. Sol and Robert became successful yet again.
But no-one lives forever. In December, at the age of 93, Sol passed away of natural causes in his La Jolla, CA home. Helen, his wife of 70 years had passed away the prior year. They are survived by their sons Robert and Laurence and by five grandchildren and four great-grandchildren.
Yet Sol is survived by so many more people, starting with the tens of thousands he employed in his businesses and the thousands more that worked for his suppliers. And his survivors include the millions of people who saved money by shopping in his discount stores.
His survivors include as well, the many thousands who benefited from the millions of dollars Sol donated to help numerous charities.
What did Sol Price teach us? Have the courage to act for even the greatest ideas will die without action. If you don’t have enough money, if the idea is good and you have the talent to execute it, you may yet find a way to raise the money you need as he did.
But that’s not all. Be innovative. Fedco had the original idea but Sol expanded upon it, offering his customers additional products. And that leads us to the final lessons:
Listen carefully to your customers to learn what they want, keep your costs as low as possible so you can price cheaply to give customers unmatched bargains. And remember, it’s not a bargain if it’s not quality merchandise and you don’t stand behind it.
Success Tip of the Week:
If you don’t have a great idea, look around you. The next outstanding opportunity may be a venture someone else has started but you could become an integral part of as your enthusiasm and work ethic take you to a leadership position.
In the next KazanToday:
The story of a female television pioneer and how she succeeded against difficult odds.