Wal-Mart's old bag of tricks just wasn't working anymore.
Over the course of several decades, the world's largest retailer grew into a $400 billion behemoth using two basic strategies as the crux of its playbook. The first of those tactics dated back to Sam Walton's foundation for Wal-Mart in the 1960s: If you charge less than your competitors, shoppers will spend their money at your stores.
The second part of its plan was to build a large network of cavernous stores that were within a few minutes' drive of nearly everyone in America — and at which customers could purchase just about anything they wanted.
And for years, it worked.
Fast forward to the start of the 21st century, however, when Amazon's sales growth regularly topped 25 percent. With the introduction of its subscription Prime service in 2005, shoppers no longer needed to worry about finding the closest store to buy a roll of paper towels — they could buy them online instead. Prices on the website were low, to boot — effectively taking away two of the major advantages to Wal-Mart's business.
Amazon's breakneck growth was one reason why in 2013, Wal-Mart's 2014 fiscal year, comparable sales at its U.S. stores dropped every single quarter.
And so began the reinvention of Wal-Mart.
Under a new leadership team — CEO Doug McMillon joined the retailer in February 2014, followed by U.S. President and CEO Greg Foran six months later — Wal-Mart is finding a new reason for shoppers to come into its stores.
The company shocked Wall Street in 2015, when McMillon announced that his company would invest $2.7 billion over the course of two years to improve its training processes, and give a two-stage, broad-based pay increase to millions of workers. That included boosting their pay to a minimum of $9 an hour, with the promise of moving to $10 in 2016. The idea was that a happier and more motivated workforce would help create cleaner, more customer-friendly stores for shoppers to visit.
But there were caveats to the company's promises — and in true Wal-Mart style, its critics did not keep quiet. Organizations dedicated to workers' rights, some of which are specifically focused on Wal-Mart, argued the raises were still not enough, given the comparatively astronomical salaries of the company's executives.
In the following months, they contended that Wal-Mart was finding new ways to keep its costs low. Those tactics included requiring new hires to complete an exhaustive training program that lasted a minimum of six months before they would be boosted to $10 an hour, they said. The first of the 150,000 employees enrolled in that program will complete it this month.
Still others questioned the content Wal-Mart is teaching its workers, arguing the material it chose to explain economics pushes its corporate views on capitalism. Yet regardless of which side you take, the benefits of Wal-Mart's investments are already showing up on the top line. Since its stumbles in 2013, Wal-Mart has been steadily building momentum, including seven straight quarters of domestic same-store sales gains. That includes a 1 percent lift in the most recent quarter, a time when many of its competitors flailed. And on Monday, the company's shares rose to a 52-week high above $74.
Shoppers are also happier when they visit the retailer's stores. For the past 84 weeks, customers have reported higher satisfaction on their stores' cleanliness, speed and customer service through an internal survey.
And while the investments have taken a significant bite out of Wal-Mart's profits — during the first quarter, its domestic operating income slid 8.8 percent — experts say they could eventually turn into a positive for the company's financials, as they may lead to lower turnover among its employees. That would result in fewer expenses tied to hiring and training.
"The economics can absolutely work out in Wal-Mart's favor if it reduces turnover and increases the average tenure of employees," said Kathy Gersch, executive vice president at Kotter International, a leadership consulting firm.