Always low prices. Always.
I think that has been, more or less, the tagline for Walmart for the last 198 years. The world’s largest retailer and largest private sector employer in the USA with over 1.4M employees has competed on price (and massive selection and expansion to the point where just about everyone in the country lives within 15 minutes of a Walmart) as long as they have been in operation.
But as the economy in the US continues to improve, is it possible there are some cracks in Walmart’s low price armor? And if so, why should you care?
Surprisingly perhaps, Walmart’s largest revenue segment is grocery, with over $160B in revenues each year. But recently, Walmart has been feeling a pinch in its grocery business with increased competition from the likes of Kroger, Publix, and many others. What is driving the uptick in competitive pressure for Walmart’s grocery segment? Check the commentary from a recent note from financial analyst Wayne Hood:
Grocery sales, which make up 56% of all of Walmart’s sales, have been plagued by miserable customer satisfaction ratings and slowing comparable store sales growth, says Wayne Hood at BMO Capital Markets.
The biggest reason, in Hood’s view, is simply the shopping experience. And in order to course correct, the company needs a huge change:
“Importantly, we believe customer service scores may need to exceed peers to drive meaningful growth and this may require a transformational change in the company’s culture away from focusing on store level tasking and merchandise-driven lowest landed cost strategies to one of increasing customer service through knowledgeable engaged associates (It’s rare to find a store associate asking someone if they need help, in our view).”
Let’s tease out those comments a little bit, and get to the HR/Talent implications beyond just Walmart.
Grocery, particularly mass-market grocery, is a complex, low-margin, and hard-to-distinguish-on-product kind of business. After all, eggs, lettuce, apples, spaghetti, and Sour Patch Kids are pretty much exactly the same no matter where you buy them from. But you have been, at least historically, able to compete in grocery on price, which has been Walmart’s strategy and strength. If lettuce is the same no matter where you get it from, then why not go to the place that charges 10 cents less? Multiply the lettuce example by 20, 50, or 100 items in a family’s shopping cart and the savings add up. And Walmart has made bank on that math for ages.
But if Hood is right and a combination of an improving economy and increased importance being placed on customer service are driving consumers away from Walmart, then the giant retailer may have to respond accordingly. Let’s assume then that a strategy of increasing the number of “knowledgeable, engaged associates” is the way forward. How might that translate to an HR/Talent strategy? A few, fairly obvious, things come to mind:
- More time and investment in training for store employees and department leaders. A big part of providing quality customer service is knowing how to provide quality customer service, combined with better expertise on products.
- An increase in staff in order to have more store employees available to engage with and assist customers. Walmart’s size makes it sometimes difficult to locate any staff member to help you if needed. Even for Walmart, 1.4M employees might not be enough.
- Increased starting wages, more and more frequent performance-based awards, and overall an enhanced ability to compete for more qualified staff via a combination of rewards, benefits, and opportunities for growth.
If, and this is a pretty big if, Walmart takes on significant initiatives to improve customer service, this will have to lead to an improvement in Walmart as an employer. And when an employer the size of Walmart takes HR/Talent-related decisions and changes strategies, this can and will have a ripple effect across many more companies and industries.
If Walmart is a “better” place to work, they will attract and retain better caliber workers, and their size and scope in many local markets will put pressure on other employers (maybe even you) to respond.
Although people love to opine about what Silicon Valley tech companies are doing, or the latest shenanigans going on at Zappos, the truth is what happens there has little impact in the real world that the rest of us work in.
But if suddenly 1.4M employees vote Walmart became a “Best/Top/Greatest/Most Wonderful Company to Work For?”
Then your CEO might take notice.