A Security Guard Almost Killed a Billion-Dollar EmpireBy Joel Litman, chief investment officer, Altimetry
 The Price Club security guard was just doing his job...
Little did he know he'd soon apprehend one of the wealthiest people in America. Dozens of unassuming customers wandered the aisles of the San Diego store. But one of them stood out. A man in his 60s was scrutinizing different products, taking notes... and speaking into a tape recorder. The guard approached him and confiscated the device. (That was Price Club's store policy.) He also warned that the content would be destroyed. The mysterious customer didn't protest, but he did want part of the tape back... He had recorded some important content outside of the store. The man also offered to write a note to Robert Price – the son of Price Club founder and discount-retail legend Sol Price – to explain exactly what he was doing. That should've tipped the guard off right there... This was no ordinary customer. In fact, it was none other than Sam Walton, the founder of Walmart. Back in the late 1970s, Walmart was on the rise...The business was catapulting from a regional discount store to a national chain. Walton was building a billion-dollar retail empire. But he craved more. Walton also wanted to own a piece of the wholesale business. So he often conducted "corporate espionage" by visiting and surveying competitors' stores.
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Walton chatted with stock boys about products and shipments and even got on the floor to measure aisle widths. He would then implement the things he liked best at his own stores. Walton claimed to have stolen more ideas from Sol Price than from anyone else in the business. The foundation of wholesale retail is simple: Sell bulk goods at low prices...Stores like Costco Wholesale (COST) and BJ's Wholesale Club (BJ) do this by eliminating typical retail frills. They nix tidy shelves in favor of pallets and offer a limited number of high-quality products. Usually, when entrepreneurs create a successful business model, they guard it very closely. Sol had a totally different perspective... He wanted everyone to embrace his approach. Sol practically invited Walton to copy the Price Club model. He didn't care if Walton opened up a competing business because he was the visionary, the innovator... Sol always kept his finger on the pulse of the retail industry. So it's no surprise that Walton got his tape recorder back in the San Diego Price Club... with all his content untouched. Tacked on was a personal note from Robert Price that wished him luck. (Walton opened his first Sam's Club in April 1983, in Midwest City, Oklahoma.) The wholesale business model is one of the most durable in all of retail...And it's easy to see why. Buying in bulk lowers the cost of each product. And selling in bulk drives up the sales volume. Companies like Costco and BJ's reinvest their savings to lower prices even further, which fuel more sales. Meanwhile, store membership fees generate recurring revenue before a single product is ever sold. This is the "flywheel" that makes the wholesale model so difficult to beat. Traditional retailers spend heaps on marketing and store layouts. Wholesale operators skip all of that and pass the savings on to customers. And you don't have to be Sol Price or Sam Walton to do this. Smaller companies in the industry are working to adopt the wholesale business model as well. And when they do, higher profits will follow. Regards, Joel Litman
September 14, 2026
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