Walmart Pioneered 'The Customer Is Always Right'

They wrapped the meeting with the famous Walmart cheer...

Walmart (WMT) founder Sam Walton and the newly minted CEO David Glass had just finished speaking to thousands of employees in stores across 25 states. The two closed with a little cheerleading, Sam called out "Give me a 'W'... give me an 'A'..." and David responded, until they'd spelled out the company name... complete with the squiggle that used to separate the "Wal" from the "Mart."

The short message all seems a little silly, until you realize this broadcast was in 1988... long before the Internet, Zoom calls, and mobile communications took over our lives.

Walton and Glass hosted the January 11, 1988 broadcast to announce that Walmart's Satellite Network had just gone live...  

To connect its nearly 1,200 stores, the retailer had spent $24 million (the equivalent of about $64 million today) to launch its own satellite network. Once complete, it was one of the largest private satellite networks in the world.

But corporate communications was just a side benefit of the monumental investment. It allegedly saved 20% to 30% on the company's telecommunication costs, and helped Walmart implement its just-in-time inventory ordering and sped up credit-card processing and other strategies for the business throughout the '90s.

Perhaps most important, the satellites connected all Walmart operations, including its distribution centers and stores. They allowed for real-time communication that enabled the company to track inventory and sales at each store and quickly replenish items that were selling well.

The data-driven insights gained from this network allowed Walmart to maintain optimal inventory levels and reduce costs, benefits that were passed on to the customers as lower prices.

Walmart was a trailblazer in tracking data to improve its operations and keep customers happy.

We talked last week about how Walmart's focus on its workforce was a key component of its decision-making and helped drive its massive success over the years...

I love the story about Walmart's space investments because it underscores another one of Walmart's guiding principles. Sam Walton didn't just sign on to the old adage that "the customer is always right," he had an almost obsessive focus on figuring out what his customers were right about. He was constantly innovating ways to track his shoppers' habits and desires...

Today, I'll show you how another retail giant has learned the same lesson... and is using its knowledge of us to grow its business to colossal proportions.

Walmart isn't the only company obsessed with using data to engage with its customers...

Consider Walmart's competitor Amazon (AMZN). Since its establishment in 1994, this multifaceted corporation has continuously harvested user data to improve its offerings for its customers.

And in the past 10 years, it has increased its reliance on consumer data.

Between 2014 and 2015, Amazon rolled out its Amazon Alexa product line. Alexa is a voice-activated virtual assistant that can perform a wide range of tasks.

It can play music, make to-do lists, set alarms, stream podcasts, provide real-time information about the weather and traffic, answer trivia, control smart-home devices, and much more.

Alexa also collects data about user interactions, including which skills are used, how often they're used, and any ratings or feedback. This information is used to personalize the user's experience, improve existing skills, develop new ones, and target advertising and recommendations.

Alexa is just one of many ways that Amazon monitors its customers to make life easier for them.

For two decades, it has done things like watch how customers navigate its site. It has looked to reduce the number of clicks for customers to buy a product to make life easier.

And like Walmart, it has had an almost religious dedication to improving sourcing and using its scale to get better pricing – savings it passes to customers.

That commitment to using data to improve its customer experience has paid off for Amazon. It caused its Uniform earnings to balloon from $1.6 billion in 2011 to almost $44 billion in 2022.

That's mind-blowing 35%-per-year growth in earnings for 11 years straight.

Take a look...

Amazon delivered that stellar earnings growth because, just like Walmart, it understands that the customer is the most important part of its business. The best way to keep the customer happy is by using data to better meet their needs.

Collecting user data isn't reserved just for Walmart and tech companies. Every company needs to listen to its customers. The best way to see if management is focusing on its customers' habits is to listen to what the company is telling you. Earnings calls and annual reports are great places to look to see if companies are talking about collecting customer data and leveraging it to improve its business.

Companies that fail to listen to their customers will get fired by them. And those that listen can reap massive rewards. Make sure that whatever stock you're researching has a demonstrated interest in its customer. If it doesn't, it's going to fail.

Wishing you love, joy, and peace,

Joel
August 4, 2023