Walmart has always had a low salary strategy in order to minimize the operational costs of its store. Indeed, in a discount retail business model, wages are among the largest expenses. But as a matter of fact, it is also one of the best resources. Indeed, without people to manage stores, to put products on shelves, cash in people, keeping the stores clean and appealing, no much business is possible.
What Walmart has figured out is simple:
Walmart understood its ethic image goes through salary raises
For the longest time Walmart had a bad image because of its low salaries. Moreover, a lot of controversy came from how the government subvention Walmart by giving food stamps and health insurance to Walmart employees because they don't have enough revenues to sustain their familly.
Walmart needs to improve its image because obviously Walmart has a deep impact on communities.
The cost of bad employees
Walmart is known to have beyond 50% rate of turnover. This is big. That means they spend a lot of time and money in the recruiting process, but also on training those new employees, that may not last long.
This is the total opposite of Costco policy, which implies to pay more its employees to make sure of their loyalty and implication on the business growth.
Walmart's move is a big one. It will count for $1,5 billions next year. And in a difficult economy, it is always difficult to make such a move.
