Money is not a client of any investment adviser featured on this page. The information provided on this page is for educational purposes only and is not intended as investment advice. Money does not offer advisory services.
The shopping experience at Walmart of two or three years ago was frustrating, to put it mildly. Customers routinely decried the plague of empty shelves and understaffed stores. When shoppers needed help, it was nearly impossible to find an employee. And even when there was a worker handy, that worker was often poorly trained—and therefore not particularly helpful.
Walmart may sell more groceries than any other store in the country, but it seemed to achieve this title strictly because of low prices and convenience, not service. In fact, Walmart routinely received the lowest customer satisfaction ratings among all major grocery sellers.
There's no mystery as to why Walmart was viewed so poorly by shoppers. The company was renowned for keeping costs down by hiring a bare minimum of workers to staff stores, and for paying workers meagerly. People were outraged, though probably not super surprised, when in 2013 one Walmart store launched a food drive for needy employees—an effort that wouldn't have been necessary had Walmart been paying workers decently in the first place.
Among America's workers, "years of cost-cutting meant Walmart had become viewed as a last-ditch option for employment—not the place that ambitious people might want to work," a sweeping New York Times article explained this week.
“There’s a stigma with it. It used to be, if you worked at a Walmart, it was the equivalent of a fast-food restaurant,” a 22-year-old Walmart customer service manager named Garrett Watts told the Times.
But times, apparently, have changed. Nearly two years ago, Walmart launched a broad campaign to improve the customer shopping experience mainly by way of improving the ranks of workers stocking shelves and interacting with shoppers. The company announced wage increases for 500,000 employees in early 2015, and most stores even brought back the greeters to stand and welcome shoppers when they came through the front door. Walmart also stepped up its game in terms of spending time and money to train workers, and simultaneously made it easier for junior employees to move up the ranks to managerial positions.
The moves obviously increased costs for Walmart. That has hurt profits, and caused Walmart's stock price to plunge in 2015.
But the moves appear to be paying off in 2016. Sales have rebounded slightly, which is impressive considering that its main brick-and-mortar rival, Target, is in a slump. And the Times reported that better employee pay—full-time non-managers average $13.69 per hour, a 16% increase over 2014—has coincided with higher customer satisfaction:
What's far from clear, however, is the degree to which Walmart's increased investments in workers will pay off in the long run. Lately, the company seems to be winning the battle for shoppers versus Target, but investors are underwhelmed.
Walmart stock has underperformed the market since the company introduced its higher pay initiative in early 2015. Over that same time span, shares of Amazon—the player that Walmart and the rest of the retail world fear the most, for good reason—have more than doubled.