Inside the Box

Often businesses are rewarded for thinking outside of the box. With Wal-Mart, it’s inside-the-box thinking that matters.

Wal-Mart sales have been improving due to “downscaling,” where people who usually shop at Tiffany’s shop at Kohls, and Kohls buyers shift to Wal-Mart. Since Wal-Mart’s efficient operation allows it to be the low-cost leader, there’s not a lot of places for people to go downscale from Sam’s Club.

But what happens when things get better? Do customers migrate back? Wal-Mart has been working hard to see that that doesn’t happen. From electronics to prescriptions to apparel, the Bentonville retailer has been adding features and convenience to keep the increased traffic from evaporating.

Inside-the-box thinking usually pays off: care about your customers, treat your employees well, watch your expenses. With Wal-Mart upgrading itself, it’s less likely that its new customers will upscale away.

Douglas R. Tengdin, CFA
Chief Investment Officer
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