Chapter 155 - One Buck at a Time: An Insider's Account of How Dollar Tree Remade American Retail
What I learned from Macon Brock and Dollar Tree
Today’s Chapter is based on the book “One Buck at a Time: An Insider’s Account of How Dollar Tree Remade American Retail” by Macon Brock.
Macon F. Brock Jr. was an American businessman best known as the co-founder of Dollar Tree, a single-price-point discount retail chain that grew from a handful of stores into a Fortune 500 company with thousands of locations in the United States and Canada.
Here’s what I learned:
Teamwork
“Four Seasons is the sum of its people—many, many good people.”
— Isadore Sharp
Macon Brock’s journey in building Dollar Tree is a perfect example of the fundamental truth in business that a company’s success is achieved by the people. From his humble beginnings in retail to scaling Dollar Tree into a national Chain, Brock repeatedly emphasizes that all triumps were the result of a collaborative efforts rather than individual brilliance.
As he explains, “I’m no genius. I didn’t come up with the dollar-store idea and can’t claim any flashes of brilliance that transformed one tiny store into a national chain. I worked hard—hell, I worked my ass off—but so did the people around me. Trite though it sounds, I was part of a team. It was a small team early on, and a bigger one later, but always a real team. Every member was essential to what we created, and everyone lived and worked by principles that we came to value together. Do your best. Do the right thing. When in doubt, choose the solution that works best for the long term.”
As such, Brock believes that everyone working at Dollar Tree is part of the collective effort that built Dollar Tree into what it is today, whether they are working as buyers, warehouse workers, store managers or accountants. They are all creators of Dollar Tree according to Brock. This was especially important to concept to understand especially when Dollar Tree rapidly expanded.
“The biggest key to this rapid expansion, far bigger than any other factor, was our people.”
— Macon Brock
Furthermore, Brock understood that to retain his employees at Dollar Tree, it was important to empower his employees, starting from his management philosophy to fully trust his staff. As he once said, “Like I said, ordinary people doing extraordinary things. Regarding management style, I believe you should hire people who are smart and driven to succeed, then empower those people. Trust them to achieve. Trust that they’re honest. They’re usually worth it, and if they’re not, you’ll figure it out soon enough.”
Similarly, sharing the success of the company with the employees is primordial, as such, it was common sense for Brock to provide his employees an opportunity to own shares in the business. Brock mentions, “We’ve always tried to give our people a way to share in our success. Early on, when we were running K&K and still a private company, we made it possible for our rank-and-file folks to obtain stock. Some of them made out very well when we sold the toy company. We tried to deal them into the dollar company when we were private, too. And when we went public, we had forklift drivers who pocketed a lot of money—and by that I mean anybody’s idea of a lot of money.”
“To a large extent, those people in the field are the real story behind Dollar Tree’s success. We try to treat them respectfully and honestly. We try to pay them decently and to provide them with good benefits so they’ll choose to grow with the company. We try to catch people doing something right, and to praise it.”
— Macon Brock
To conclude, Brock was huge believer in teamwork. His experience at Dollar Tree reinforced the concept that to scale a business, entrepreneurs need to foster an environment where people feel valued and integral to the corporate mission. And more importantly, employees need to feel like they are part of the success of the company and sharing the fruits of their hard work. As Brock once said, “If lessons are to be gleaned from this tale, I think it’s these: First, nobody achieves anything worthwhile on his own. We need each other. The whole is almost always greater than the sum of its parts.”
This reminds me of how Paul Orfalea also had a great incentive structure in place at Kinko’s which lead to the success of his company. In fact, Orfalea realized that the workers behind the counter at Kinko’s were the true heroes of the company. As a matter of fact, being in the retail copy centers business, Orfalea had plenty of competitors considering it is an industry with no barriers to entry.
As such, if he wanted to beat his competitors, he would have to make Kinko’s a great place to work; he would have to create an incredible corporate culture and make it a competitive advantage. This starts by setting the right incentives in place. In fact, Orfalea mentions that it is a lot easier to manage the work environment than the people in a store. He once said that “when people are properly motivated, they will essentially manage themselves.”
First, he started calling his employees as coworkers to remind himself that he didn’t want to “use” people, but to work with “empowered entrepreneurs”. To instill this sense of entrepreneurship among Kinko’s workers, the company gave a share of the profits of the store to everyone — partners, managers, and even workers behind the counter.
Orfalea mentions that initially, Kinko’s “gave each manager 25 percent of his or her store’s profits. Later, we expanded the system of profit sharing when we started giving each manager 15 percent of the store’s profits and earmarking the remaining 10 percent to be split among that store’s coworkers.”
“At Kinko’s, we were building a family together at the same time we were building a business.”
— Paul Orfalea
Second, Orfalea mentions that “people want to know they are contributing to society.” As such, other than monetary incentives, Kinko’s had to give a sense of mission to keep their workers both happy and motivated.
To do so, Orfalea set a flat organization at Kinko’s. Without having any hierarchy, every single member of the company were treated equally in the company and were part of the decision process. In fact, Orfalea mentions that the head office’s main purpose is to serve the stores. He implemented the “80/20” policy where managers were encouraged to spend 80 percent of their time on the floor of the stores with coworkers and only 20 percent of their time in their offices.
As such, Kinko’s empowered coworkers behind the counter to become autonomous thinkers. They would not be required to ask for permission for implementing new ideas for taking care of customers. As Paul Orfalea once said, “our original store was a hothouse of experimentation.”
“As we grew, we designed a structure for our company that would be as democratic as the services we were providing. For me, this was the true brilliance of the Kinko’s we created.”
— Paul Orfalea
Customer-Centric
“There is only one boss: the customer. And he can fire everybody in the company from the chairman on down, simply by spending his money somewhere else.”
— Sam Walton
Macon Brock’s story is quite interesting. He first started in the retail industry by building a toys store. However, he and his business partners quickly realized that the dollar store model was a much more advantageous one due to being customer-centric. As such, they decided to give up on K&K and to build Dollar Tree, especially since they believed they had the expertise in retail to beat the other competitors.
Here’s how Brock explains his justification to go into the dollar store business:
“The idea appealed for several reasons beyond the fact that Everything’s A Dollar was hot. First, we’d be able to bring to bear our expertise in the variety-store business because, done right, a dollar store would be just that—a variant on the old Woolworth model, with a wide range of goods sold at a fixed price point. Second, we had a ready supply chain. We had relationships with variety-store suppliers in New York, as well as vendors in Hong Kong. We knew how to buy. Third, thanks to K&K, we had infrastructure in place: a fleet of leased tractors and company-owned trailers providing a link between our warehouse and a far-flung network of toy stores. That gave us the ability to locate dollar stores wherever we wanted, so long as they were inside the area we already traveled. Fourth, we’d completely control our destiny. We’d never have to beg for our lives to a Nintendo or Mattel. We’d buy what we wanted, based solely on whether or not we achieved a price we liked. If we didn’t get that price, we could walk away and find something else. Next to the toy business, it promised to be an almost stress-free enterprise. All of this added up to a single overarching thought: we could operate a chain of dollar stores better than the people already doing it. That is, our stores would be better, and we’d be better at running them. We had the experience, the knowledge, and (most importantly) the discipline to outperform Everything’s A Dollar.”
— Macon Brock
A main reason why Dollar Tree works is because it focuses on surprising and delighting customers with the value they can get from a dollar product. Many assume that a discount store succeeds solely because of the cheap price. However, Brock understood that retail is emotional. Even at the one-dollar price point, the shopping experience had to be engaging. He coined the philosophy of “Surprise and Delight.” He wanted customers to walk into a Dollar Tree and be genuinely shocked by the value they found. It wasn’t enough for the item to be worth a dollar; it had to feel like it was worth more than a dollar.
This philosophy was rooted in his earlier days in the toy business. He learned that successful retail isn’t just about stocking shelves; it’s about understanding the psychology of the buyer. He writes that “The toy business had taught us a handful of other guiding principles: One, make shopping convenient and easy. Two, run clean, bright, inviting stores that exceeded customers’ expectations. Three, choose our locations wisely. And four, strive for quality and high value in everything we sold, in hopes of pleasing and occasionally dumbfounding our customers. If we did all that right, we’d get their business and their loyalty. Surprise them. Delight them. Change the inventory to keep them coming back. Make the experience impulsive. If we hewed to that approach, we’d shove aside any competition. If that sounds cutthroat, so be it. Retail isn’t for the faint of heart.”
This can be done because Brock’s team are extremely diligent and innovative at keeping cost low. As he explains, “That’s the key to the company’s success. We can absolutely floor our customers with the prices we offer and still generate a tremendous income. We don’t have to make a killing on each item, just a healthy margin. Which is another way of saying we didn’t get here by being greedy. We got here by being smart.”
One way of keeping cost low was by sourcing their products from overseas. As a matter of fact, Brock only became convinced that they could run a one dollar-based store after visiting Hong Kong. As he explains, “If I had any doubts about the dollar business beforehand, my first few trips back to Hong Kong cured me of them. Look what was out there, waiting for us! Look what we could do if we got Dollar Tree up to top speed! I came home and talked to Doug and Ray about what I’d seen, convinced them we could have everything we wanted by dealing directly with the Chinese. We could control our product lines and slash what we paid for them. We’d have no further worries about supply. We could buy in any quantity we wanted, pay very little for it, mark it up to just a dollar, and still make a tidy profit. A few trips per year would keep us fat with merchandise.”
As such, Brock had a clear and strict criteria of what merchandises would be acceptable to be sold at Dollar Tree. Here’s how he explains it:
“From early on, we had three tests for merchandise. First, and most obviously, it had to sell for a dollar, so it had to have a “first cost” of considerably less—meaning sixty-five cents or so, tops, and as a rule considerably less than that, before tax, shipping, and such. Second, it had to have a perceived value of higher than a dollar, so anyone encountering it in our stores would be surprised it was priced so low. They’d reasonably expect to pay more. The third test was that it had to be of some quality, some value. It had to be something people would want. It couldn’t be junk. Otherwise, we observed few rules. Random, serendipitous, whatever, we’d buy it, whatever it was, in any quantities we could: two dozen, a gross, five gross.“
— Macon Brock
To conclude, it is clear that being customer-centric is part of the core philosophy at Dollar Tree and is the reason why the dollar-only concept remains sacred. As Brock says, “You can go on Dollar Tree’s website today and find that statement pretty much as we wrote it then: “Dollar Tree, Inc. is a customer-oriented, value-driven variety store operating at a one dollar price point. We will operate profitably, empower our associates to share in its opportunities, rewards and successes, and deal with others in an honest and considerate way. The company’s mission will be consistent with measured and profitable growth.””
This story reminds me of what we have learned from the Turners at Dollar General. At the beginning of Dollar General, ****Cal Turner Sr. was initially much more focused on beating their competition rather than on filling their customers’ needs. He believed that the key for the survival of the business was to control the company’s expenses better than the competition. To prove this point even further, the company’s first mission statement was “To serve better than anyone else does our customer’s need for quality basic merchandise at everyday low prices.”
“As Larry looked over the company, his eye lit on our mission statement: “To serve better than anyone else does our customer’s need for quality basic merchandise at everyday low prices.” He had real problems with that, recognizing it as the long, unwieldy, and off-base statement it was. He said, “It’s not a mission statement when you compare yourself to the competition. A mission statement is about you, your unique situation, and the opportunities you want to strive for.””
— Cal Turner Jr.
Considering this, Cal Turner Sr. & Jr. often purchased merchandises without thinking too much of their customers’ need and would rather focus on obtaining as many items as cheap as possible. As a matter of fact, they would often follow Luther’s concept of “If it’s bought right, it’s half sold.” However, this often led the company being stuck with half-sold inventory in their hands. This only changed after Cal Turner Jr. listened to one of his employees that convinced him that “If we’re going to have this business grow, we’re going to have to stock what the customers want, so that they come in more often and we can serve them better. We now have buyer push. What we need is customer pull.” From then on, Dollar General started to only stock items based on a customer driven approach.
“We took a look at it strictly from our customers’ point of view. They were the same as they’d been since the beginning they didn’t have much money and they needed a retailer who could help them make what they did have go further. To make our approach truly customer driven, we were going to have to do that not just with great buys, but also with the things they needed day to day.”
— Cal Turner Jr.
Furthermore, Turner Jr., by focusing on the customers’ need, realized that low-price trumped everything. As a matter of fact, he learned that, once a certain quality threshold was passed, customers would always purchase the cheaper version of two items even if the higher-priced item offered some higher quality. By consequence, the company, unlike other retailers, did not fall in the trap of trying to upgrade their products to higher-quality products and stuck with their concept of serving the low-income customers. This only helped the company as Dollar General would only stock “core” products that would never not be in-demand as they were basic products that are needed in anyone’s every day life. Sometimes, keeping it simple is the way to grow revenues. As Charlie Munger once said, “We have a passion for keeping things simple.”
“We were fortunate in our stubborn determination to stay at the low end and serve the low-income customer. There would be no French perfume, designer dresses, or diamond-studded dog collars. My father had always kept it simple.”
— Cal Turner Jr.
Leadership
“Always do everything you ask of those you command.”
— George S. Patton
Macon Brock mentions that his military background deeply shaped his leadership style, teaching him to trust subordinates and to avoid micromanagement. This approach to leadership he learned from the Marine Corps was translated seamlessly to business where he empowered employees to make decisions and take ownership. For modern leaders, Brock’s tenure at Dollar Tree highlights the efficiency of delegation and the importance of fostering independence, leading to innovation and loyalty.
In fact, Brock mentions that most of what he learned from leadership comes from his career with the Marine Corps. He says, “We learned the philosophies that guided the movement of marines under arms, the decision-making processes and tactics that might spell the difference between life and death on a battlefield. We were inculcated with Marine Corps culture—the service’s history, its jargon, the measures by which all of us new officers would be judged. We took up marksmanship. I was a good shot, felt easy around weapons, and enjoyed that quite a bit. At the time, I probably didn’t appreciate the effect this training had on me, but I certainly do now. It remade me—how I related to people, how I made decisions, how I handled the unexpected, both good and bad. My style as a leader is based on the principles I learned there. Many of today’s top American business executives are Basic School graduates. That’s no accident. It changes you. You come out of Quantico with conviction. You know what you have to do, and you know how to get it done. Looking back, it occurs to me that college didn’t teach me anything about life, just how to learn. Basic School taught me how to live.“
Therefore, it is clear that it mainly taught him discipline, decision-making under pressure and most importantly, the value of trusting competent people to execute their duties. He learned that micromanagement is a corrosive waste of time and talent, a lesson he carried directly into business.
“Among the important lessons I learned was that effective leaders knew when to get out of the way. I trusted my sergeants to do their jobs, and they didn’t let me down. In the marines, as in the business world, micromanagement is a waste of time and talent.”
— Macon Brock
Furthermore, Brock’s leadership style was to hire smart, driven people, to provide clear principles and objectives, and then to get out of their way. This empowerment allowed initiative, accountability and a sense of ownership to grow at all levels of Dollar Tree. He genuinely believed that people who are treated with respect and trust rise to the occasion and often exceed all expectations.
This trust-based leadership was evident even in the company’s most uncertain growth phases. Instead of presenting himself as an omniscient founder, Brock fostered a culture of collaborative problem-solving, where the best ideas could come from anywhere. He explains, “We were building this company, Doug and I, with no firmer idea of how to succeed than most of the people we hired to help us. They’d ask me questions, and I’d tell them, “Don’t ask me how to do it. I’ve never done it either. Just go do it, and I have your back. We’ll figure it out.” And we did—mostly because we hired well.”
“We try to encourage ideas from our associates on just about any topic. When we improve some aspect of our stores, the idea almost always comes from someone with an up-close view of our day-to-day habits. We try to promote independent thought and initiative in our people, to impress upon them that whatever their decision is—and of course they have to make decisions, everybody does—if they do it for the right reasons, with honesty and integrity, they’ll generally come out okay.”
— Macon Brock
Brock’s leadership style reminds me of Tom Murphy’s tenure at Capital Cities which exemplifies how granting extreme autonomy to managers can foster a corporate culture of responsibility, innovation and efficiency. Unlike traditional large companies that often stifles innovation with layers of bureaucracy, Tom Murphy believed in hiring capable individuals and then stepping back, allowing them to own their decisions fully. This decentralized approach motivated employees by instilling a sense of ownership that made them reluctant to leave. As Murphy once said, “Hire as few of the best people available, pay them well, give them equity and autonomy in an ethical company and leave them alone.”
This decentralized approach was inspired by the founder of Capital Cities, Frank Smith who once said, “Some of you fellows may think I tie you to Capital Cities by corrupting you with compensation and stock options. But I’ve decided the reason you are afraid to leave this company is more because our system naturally corrupts you with autonomy and authority. And I suspect that after living that way for a time, you’re fearful that someplace else might not operate in the same manner.”
As such, it is not surprising to see that extreme autonomy for its operating managers is a core philosophy at Capital Cities. In fact, it is mentioned so on the inside cover of every Capital Cities annual report:
“Decentralization is the cornerstone of our philosophy. Our goal is to hire the best people we can and give them the responsibility and authority they need to perform their jobs. All decisions are made at the local level. . . . We expect our managers . . . to be forever cost conscious and to recognize and exploit sales potential.”
— Tom Murphy
A great example of the success of full autonomy can be seen in Dan Burke’s early experiences, where he learned that silence from headquarters signaled trust, allowing him to prioritize operations over reporting. In fact, Burke famously said, “Murphy delegates to the point of anarchy.”
As William Thorndike explained, “The guinea pig in the development of this philosophy was Dan Burke himself. In 1961, after he took over as general manager at WTEN, Burke began sending weekly memos to Murphy as he had been trained to do at General Foods. After several months of receiving no response, he stopped sending them, realizing his time was better spent on local operations than on reporting to headquarters. “
This was similar to Phil Beuth’s experience working with Murphy. Beuth echoes Murphy’s hands-off style, where often a brief conversation sufficed for assigning new responsibilities, trusting employees to deliver without micromanagement. As Don Polec, a manager from a competing company once said, “My parent company in Cincinnati, tells me, the manager, what I am going to do. The difference, is you tell New York what you are going to do.” That is just pure Capital Cities at its best.
By consequence, by providing so much autonomy to its employees, there was an extremely low turnover among employees. As Robert Price, a rival broadcaster once said, “We always see lots of résumés but we never see any from Capital Cities.” Similarly, Frank Smith once said, “The system in place corrupts you with so much autonomy and authority that you can’t imagine leaving.”
Beyond the Book
Read “ The Power of Incentives: The Hidden Forces That Shape Behavior” by Farnam Street
Read “ 16 Leadership Lessons from a Four Star General“ by Farnam Street
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