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Best of 2005: 3 O'Clock High: The Goal is Soul


"Teach your children well."


Editor's Note: This article was published on 11/9/2005

Minyan Sandi Lynne writes:

Mr. Macke,

AMBIENCE score: WalMart (WMT) scores -5 [+5 protestors] on ambience; a main reason Target (TGT) is growing faster and why chains like Abercrombie & Fitch (ANF) have been successful. Those stores have created an ambience customers can enjoy. Now in the case of WMT, it's plain filthy, crowded, and stocked only with what WMT gets a deal on.

Walk into a K-Mart (SHLD) if you haven't in awhile. Brightly lit, prices at least as low as WMT, wide aisles two carts can pass through at once, sales associates who pass and ask, "Are you finding everything you're looking for?" NO KIDDING! K-Mart. At WMT an aged (at our store) greeter pushes a cart to ya, t'ain't nothing but dirt, boxes, crowded aisles, and many items you'd like to buy but WMT doesn't have.

As for prices, item for item, both TGT and K-Mart are often cheaper now. WMT's price cutter ads are the biggest con in the world. I can buy banana's for 20c per pound less at Publix and don't have to stub my shins getting through the aisles or break an axle getting into the lot.

If I can spend $10 for the same thing at two places, am I going to the filthy crowded place or the one that offers up the shopping equivalent of dining?

Check it out and revise



Revise? You might as well ask me to pick you up at the airport.

That said, you're right about ambience and store cleanliness. I actually considered putting it into my fake stock rating system but didn't get around to it for entirely personal reasons.

Which is another way of saying that we can talk about store cleanliness but I'm going to take the long-road. If you prefer your financial chat straight, sans emotional digressions, go ahead and click out of this now.

I'm 50% Irish and I spent Sunday with my dying father. What's more, U2 is coming to town and the band has provided the soundtrack for my life since 9th grade. As a result, I'm in the midst of about 10 different visceral flashbacks and in the mood to over-share in the way of my ancestors (sans the 12 pack of Gunniess, the fist fight and the heartfelt reconciliation). Bear with me, there will eventually be a point.

Shopping with Ken Macke

As often (but sheepishly) mentioned before, my dad spent a decade as the CEO of Dayton Hudson (Now Target). He was a decent CEO but he was, and remains, a merchant at his core. The further he got from the stores the unhappier, and less effective, he was. He ran the Target stores for Dayton Hudson, taking over the chain when it was nothing more than a handful of stores in the upper Midwest. 25 years later, when my dad was removed as CEO, Target had over 800 stores and did about $15Billion in revenues.

My father is the reason I enjoy, actually crave, a good argument. He would challenge virtually any statement simply by reflex, probing for weakness of conviction. The more respect he had for you the harder he would attack. Suffice it to say, dad and I have a huge amount of respect for one another.

Some of my earliest memories are of shopping at Target with my father. When we'd go on weekends (at peak traffic hours because those times are when a retailer sees if the store model works) he'd stay out of the store managers' faces, if possible. Weekend visits were reserved for the associates, engaging them and asking how they liked working for Target.

When the service was good dad would write something complimentary on a pad of stationary with his name and the phrase "I heard something good about you..." written at the bottom. If the clerk didn't already know (or say anything) about the fact that Ken was the boss my dad wouldn't tell them. He would just tell them to be sure to pass his note along to their manager then thank them and move along.

When service was poor my dad would say nothing to the sales people. Instead he would seek out the store manager, throw an arm around him (or her) and disappear behind closed doors for a little "chat". I wasn't included in those conversations but I recognized the look on the managers' faces when my dad was leaving.

Someday those managers might have looked back and laughed; but it was going to take a good amount of time before that happened.

"A dirty store is a 'screw you' to the customer" - Ken Macke

Only after offering examples of Ken's softer management skills do I feel comfortable sharing my teachings on the topic of keeping a store clean. Without that context, a description of our off-hours, low traffic store visits, the ones in which dad demonstrated his curious form of "respect" for store managers out on the sales floor (for me and anyone else who cared to drop in on the lesson to see), may seem the actions of a deranged man and something of a modern Great Santini, dad-wise.

My dad loved, admired and wanted to kill WalMart. It says much about the man that he bought the stock for himself and his children shortly after it went public and then quite literally spent the best years of his life trying to beat WalMart into the ground. It wasn't a hedge (my dad wasn't one to hedge his bets); it was respect.

Ken knew he couldn't out-execute the WalMart on WalMart's terms. Target had to be what WalMart (and, at the time, Kmart) weren't in order to compete. What WalMart stores weren't then, aren't now and never have been is particularly clean. WalMart, at least traditionally, throws up the outside walls, installs the shelving and, from the looks of it, never spends another penny on store maintenance (or, alternatively, resorts to more extreme measures to cut cleaning costs).

As a result and very much by intention, my dad was entirely obsessed with store cleanliness. I've seen him take a fully-loaded shopping cart and purposefully ram it into a display he felt was "cheap looking and flimsy". Then, while the merchandise was being collected and re-displayed in a more crisp manner, dad gave the team a little chat on how a customer would probably feel "clumsy and like a jackass" shopping in a store with such inferior racks.

Those stories spread through an organization. That was the point. To my dad, a CEO could stand for one, maybe two, things inside an organization. My dad wanted store managers horrified at the prospect of an executive in the organization finding a unkempt Target. If he was regarded as slightly crazed on the matter it was all the better. "The divisional and regional (managers) make me the bad guy... that way the store stays clean and his people don't think he's a dictator. They think I am, which is fine."

In recent years the chain-wide spread in the ambiance level between Target and WalMart has grown. Targets have gotten nicer and WalMarts have deteriorated somewhat. With prices roughly equal and a wider selection at Target, upkeep becomes a key point of differentiation.

I agree that it's important to consider WalMart's initiatives within the context of their store base. People don't like to buy food in unclean stores. They also resist buying high-end items in such a setting. The logic of thinking that consumers would want to buy both food and high end televisions at such a place thus escapes me.

I'll give WalMart a -6 (6 protestors) for ambiance but it doesn't change my overarching view of the stock.

Thanks for the trip down memory lane and, of course, the chance to mix it up a little bit. I'm feeling much respect from you having given me the opportunity!

No positions in stocks mentioned.

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