Customer satisfaction: some folks get it and others don’t

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Reading Time: 3 minutes

Published: May 25, 2023

Corporate photo of a Walmart produce section in one of their stores.

Walmart is smart.

It takes its customers seriously. It knows they can invest their dollars anywhere, so the company needs to provide them with high-quality food at the cheapest price possible.

It doesn’t take its customers for granted.

Recently Ron DeSantis has been dumb. Really dumb.

He’s launched a crusade against his state’s biggest employer and most important investor — and no doubt its biggest provider of spin-off taxes from the millions of us who get nagged into taking our children there.

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DeSantis, the Florida governor who has likely launched his bid for the Republican presidential nomination by the time you read this, has taken Disney Corporation for granted, and recently treated it with open hostility.

Now he and Florida are paying the price. Disney has pulled the plug on a billion-dollar project to relocate 2,000 high-income employees from California to Orlando, following DeSantis’s move to strip Disney of some of its long-held privileges in the state.

Disney isn’t leaving Florida, but it doesn’t need to invest a bunch more money there either. That’s what DeSantis is discovering.

Walmart’s week was much better. It surprised markets by reporting better than expected sales, based mostly on food sales. While the cost of a standard food basket in the United States has increased by 7.2 percent in the last year, Walmart’s sales rose 7.4 percent, which was much better than the five percent analysts expected.

The reason? Walmart is working to keep food prices as low as possible. It might seem counter-intuitive, but higher food prices are pushing higher sales at Walmart, due to consumers switching to the low-cost leader from more expensive grocery store chains.

It isn’t jumping on inflation and using it as an excuse to push prices as high as possible, as some companies are suspected of doing. It’s doubling down on its low-price advantage to increase the pressure on its competitors.

That’s good for Walmart shoppers, but likely to become more and more painful for Walmart suppliers. After it released its results, the company said it was turning to the companies that supply its food and other products and insisting they reduce or control their costs further.

That might sound like taking suppliers for granted, but if a company is doing business with Walmart, it knows the company’s motto of “Save Money — Live Better” means it will have to live with constant margin pressure if it wants to make the big sales Walmart offers. With about one-quarter of all U.S. grocery store sales occurring at Walmart stores, the company can both offer and demand a lot.

That’s not vindictive. It’s just business.

Unfortunately for all of you who farm, you’re one of those suppliers, although at an arms-length. You’re supplying millions of tonnes of grains, vegetable oil crops and meats to the companies that supply Walmart. When Walmart turns to them to hammer down their prices, it won’t take long before these suppliers turn to crop and meat suppliers and demand they hold down their prices.

Then those grain, meat and ingredient companies will turn to you and say… nothing, at least not in words. But they’ll speak with the one language that is true: money. When they’re getting squeezed by food companies and Walmart, they’re going to look for relief by squeezing crop and meat prices. They just won’t seem as keen to suck up crops and meat at any price as they might have a few months ago.

Walmart surprised everybody by doing so well in this inflationary environment. But these are challenging times, with unfamiliar dynamics, and a lot more surprises are coming.

Farmers have always complained that they’re price-takers, with little power to push back. That’s true, and the next year might be an uncomfortable time to be a price taker.

But farmers are smart enough to realize they rely upon their customers. They might complain and fret, but they’re unlikely to offend and outrage their buyers, despite the pressure.

DeSantis is realizing what happens when you get dumb with your customers. You find out you might need them more than they need you.

About the author

Ed White

Ed White

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