Costco, Sam's Club, Trust and Corporate Policy

Recently, I've been thinking a lot about trust.

It's one of those personal and corporate commodities that is so easy to establish and maintain but even easier to lose.  And when it's lost, it's incredibly hard to regain.  Not impossible - because trust, for all its seemingly emotional base, is actually behavioral - but difficult and time consuming for everyone involved.

(I write in detail how to establish and regain trust through the behavioral Trust Model in my book, Executive Thinking.)

One of the best examples of companies that operate on trust both within and in their customer dealings is Costco - one of my favorite stores no matter where or in which country they might be located.

Costco redefined the concept of a warehouse store.  From the early days, other warehouse stores made you feel as if you were shopping in a slightly dingy, badly lit, too large, not well ventilated building and could only purchase low-end, left-over products.  In contrast and with incredible vision, Costco's President and CEO, James D. Sinegal, understood that there were no limits to what could be offered at a good price in more comfortable and well-lit surroundings.

From corn flakes to crystal, Costco has it - with high value and always at an excellent price.

By the way, a few things about Sinegal.  First, he is one of the few CEO's that Warren Buffett cites as best of breed.  Second, one of Sinegal's biggest, ongoing arguments with the Compensation Committee of his Board is that he doesn't want a really high salary - because he doesn't believe in them.  (He does believe, however, in giving his employees excellent benefits.)  And, third, if you want to see what executive humility looks like, take a look at the Executive Officers page on the corporate website.  It's alphabetical - which puts Sinegal down near the end.

Most important, and why Costco is of note in this regard, is because of its return policy.  Basically, you buy it, you don't like it, you return it, you get your money back.  No questions, no problem - as long as it's within 30 days of purchase.  And if you don't have your receipt, that's okay, because they can find your purchase history on their computer.  From a half-eaten watermelon (this is true) to a wide-screen television, you don't like it, you've got your money back.

It's all part of the customer experience.  One in which the customer can trust the provider.

Contrast that with a recent advertising circular from Costco's biggest competitor, Sam's Club, a division of Walmart, and you'll see why trust is such an important component.

Buried on an inner page in really tiny writing is a series of paragraphs that delineate "Sam's Club Advertised Merchandise Policy."  After a bunch of legalese they get to the good part - the part that allowed the corporate lawyers to really let loose.  It says:

"The opinions in this publication are those of the writers themselves and are not statements, positions or endorsements by Sam's Club or its officers."

Translated, what that means is that if you don't like what you've bought (online or in store) because you don't feel that you've been given what you thought you were buying, tough.  The writers, whether they belong to Sam's Club or the product manufacturers, said what they said and you chose to believe them.  Even better, if you're unhappy enough to want to sue (a particularly American trait), you're not going to get near the corporate officers.  They're immune.

It's not that this is necessarily a bad corporate policy.  It's simply one that demonstrates to customers that they shouldn't necessarily trust the provider, Sam's Club, because the company as good as doesn't trust its suppliers...or at least the wordsmiths in marketing who provide the descriptions.

Customers shouldn't have to think about small print when it comes to what you provide - no matter where on the supply chain you may lie.  From raw materials to final product, you want to ensure that anyone who does business with you isn't having to wonder and worry about the small print even as they do the deal.

It used to be that a handshake was as good as a contract.  That "your word is your bond" was true.  Sure there were cheats, but integrity was personal and important - and it worked on both sides of the equation.

In this economic environment, it's more important than ever that that type of integrity be demonstrated in corporate policy - both for your employees and your customers.

I don't know if Sam's Club has as trust-building a return policy as Costco.  Given the small print, however, since they don't trust the integrity of their suppliers they give their customers every reason to question the company's integrity as well.

More than anything, what their policy does is give the customers good reason to walk out their door and directly into Costco's portals.  That is neither good policy nor, I'm sure, is it their intention.