The Intern Who Took Over Sam’s Club | Fortune Daily

0:00So if Sam's Club was a standalone business, it would rank among the 50 biggest companies in the whole of America. Do people know what it is? Okay, cool. And it's in expansion mode while simultaneously updating the looks of its warehouses as well as the items on its shelves. And this means going beyond the bulk bargains and offering premium products, mobile checkout, whilst also fostering a real sense of community in its stores. Leading this new era is president and CEO Latrice Watkins, who started at Walmart as an intern nearly three decades ago. This year, she made her debut on Fortune's Most Powerful Women list.

0:40She's a really dynamic leader. She joined us at the Most Powerful Women Summit a couple of weeks ago in California, where her thoughts on leadership were hugely popular. and I sat down with her then to talk about what's next for the company as well as the role of a warehouse club in the affordability crisis that we're all experiencing right now. I'm Ellie Austin in New York and this is Fortune Daily.

1:11Latrice, it's a pleasure to have you at the summit. Thank you so much for joining us. Great to be here. Thank you so much. I want to start talking about your trajectory because it's pretty remarkable. So you started at Walmart as an intern in the real estate department in 1997. And 29 years later, you are the CEO of Sam's Club. I want to know what that intern in 97 thought her career path was going to look like. It's interesting because that intern thought she would work for Walmart while she was an intern, and then she'd go off and be a lawyer somewhere. That's what she thought. So that obviously didn't happen.

1:47Plan B happened, but it was a pretty great plan B. It was a pretty great plan B. Interestingly, I left after I graduated from law school for three months while I took the bar. But the plan wasn't to go back. The plan was to practice law because I'd gone to law school. And the person who hired me called and said, are you ready to come back? And I said, no. And she called me every day for two weeks until I came back. Wow. And she was right. I came back. I did work. I never imagined doing lots of things. The first job I came back to was in real estate. I spent about 10 years there. And then I went to Sam's Club because the leadership team says you should work in merchandising.

2:34And I said, I don't know what merchandising is. I'm in real estate. I know all about real estate. And the leader of Sam's Club at the time said, you should be a merchant. And I said, no. Second time, he said, you should be a merchant. And I said, this guy's going places. I probably better listen to him. And who was that? That was Doug McMillan. And so I went to merchandising at Sam's Club and I spent a couple of years there learning things I had no concepts for at the time. And the beauty is you get to do that in a company like Walmart. So I had that opportunity. And then I went into a different merchandising job.

3:09I ran the alcohol business at Walmart, which at the time, a lot of people didn't even know Walmart sold alcohol because we didn't sell everywhere. I worked in merchandising in Walmart U.S. for about 10 years and then did a couple of other assignments outside of that, one in HR, one in operations, then went back to merchandising and ended up being the chief merchant of Walmart US merchandising until February when I started this job. You talked about the fact that you had one idea for what your career was going to look like. You thought you were going to be a lawyer and then you ended up taking a completely different one.

3:46What's your advice for a young person right now who's trying to figure out what a fulfilling career might look like for them and how to get started? Sure. One of the advantages you have in starting to work wherever you start is having people there who know more than you know. And in a lot of cases, those people can see things in you that you may not see in yourself. And I've had the good fortune of having people tell me, I think you should do this thing. And I would say no idea what that is. What I learned is when I build relationships with people I trust and I trust the people I work for, I get more opportunities to do things that I had not imagined for myself.

4:32Because people can imagine things for you because they see the potential or they see the work ethic or they see a connection that you can't naturally make. And I would say I've had that experience multiple times in my career doing things that I didn't know how to consider. So I think having people in your corner, having people you trust, talking to them, but more importantly, listening to them is, for me, one of the things that I didn't even know I needed to ask for. Let's talk about the business for a second. And so the Warehouse Club model, it's no longer just about bulk discounts as it maybe was originally.

5:17So it's about premium curation and it's also about member lifestyle fit. So tell me a bit about how Sam's Club is evolving to retain the millennial customer and maybe the slightly higher income customer as well. Sure. I love that question and I love all the lead into the question. The opportunity for people who join a membership club like Sam's Club is about showing them the things that they would want to buy, showing a member a curated assortment. It's also about listening to them about what they love. So we think the items are why people join. So they join for the items, they join for the work that we owe them in curating the assortment and we owed them an easy shopping experience and listening to members is what got us to where we are today the technology you see in clubs today is because people want to save time and they want to save money on the items what are members telling you what are you hearing about what they really love right now what are the products that work and maybe tell me one that didn't work sure i'll tell you first what i know they love for sure because they give us the highest mark on it and it is scan and go.

6:28So scan and go in a club saves a member time. Yes, they love items and I can tell you about items they love. But when you think about listening to members and they say they want to save time and they want to save money, saving money alone and finding great items when you don't save them time doesn't trigger the kind of response. Are you taking out the checkout lanes? We have checkout lanes, but if you don't want to use a checkout lane, however you want to shop, you can. You can scan your items as you go and then go through our exit arches and just leave. So the technology sees the items that you've purchased and the associate there will thank you for shopping at Sam's Club and allow you to keep moving on to your car.

7:11Items that members love. What they tell us is they want items that are made without things that they don't want in their and their products. They like items that have few ingredients. And one of the items that has been a star that we created under the Members Mark brand is our organic popcorn. Now, I wish I had a bag. I always have items with me. I probably have one close by. I'll show you later. It's a huge bag of popcorn. It has three ingredients and it is this big and it's$4.98. It is a favorite of members today. They bought it, you know, when we first launched the product, when we looked into what was selling at back to school, those clean ingredients or only having a few ingredients is what resonated with members.

8:06And that popcorn was one of the top selling items. And what hasn't worked? Give me an example of something you thought would be a runaway success and maybe it wasn't? I think from time to time, we might make a bet on a seasonal item that doesn't turn out exactly the way we had planned. And that means we may not sell as many as we thought we'd sell. And the way we buy, we try to keep the inventory levels really tight. And we buy not only for today, but thinking about what members will want into the future. So So there are opportunities to buy things seasonally, take a grill that you would sell the same grill next year.

8:47You just may not sell all of the grills you want to sell this year. So you keep them in stock. You raise membership fees in May for the first time in three and a half years, which is really interesting. How do you decide a price increase is safe, particularly given that we're living in a time of affordability crisis right now? Sure. I think we are very thoughtful about how much we charge for membership. And one of the things that we did is all the advances I just talked to you about in technology, all of the ability to come in club and use scan and go technology, pick up at the curbside, get delivery, exit arches, all of those technology, all of those advances we made well ahead of any increase in fee.

9:33And so when we thought about what we might change, we were really intentional about, do we make sure that we give members the value for what they're paying for their membership in total? And so when we think about affordability, we're very sensitive to it. And we are sensitive that whether we increase the fee or not in the items that we sell every day, in the services that we provide, and offering more options for the membership versus just increasing the fee. So there are more options available with the$10 increase than there were before. Have those technological innovations resulted in staffing cuts?

10:10In staffing cuts? Yeah. No, I wouldn't say so. It's interesting the way we've, one of the things, one of the benefits we gave members prior to the increase was more hours. So a plus member can shop early. Those hours require staffing. And so I'd say no, there were no cuts due to the membership increase. And we are working every day to make sure we give our associates really meaningful work to do in the time that they're there. You mentioned earlier that you had this goal within your first year visiting all Sam's clubs. 600? Yeah, 603. 603. You're realizing now, understandably, that might have been a bit of an ambitious bet.

10:55But I know you spend a lot of time in the clubs. I do. What's been a particularly memorable experience you've had on the floor of the club since you've taken over as CEO? One of my favorite things to do is meet members. So obviously I go in and I stop at the membership desk first and talk to our associates because those associates interact with our members regularly. but I've met some incredible members along the way who tell me the things that they love or that they would like to be different about Sam's Club. So for me, the most memorable experience, there was a gentleman, we were in Pennsylvania and he was in one of our carts and it was full and I always offer to add another cart for anybody who looks like they filled up the one that they have.

11:47But what he talked to me about was why he shops at Sam's Club and the things that he loves about Sam's Club. And he talked about the people at Sam's Club because he had shopped at that club for a long time. We're part of the community. And so the relationships we build with members makes a difference. And I love when members will tell me about the experience they're having with our club leadership team or a particular associate in the club. So, Chase, congratulations on debuting on the Most Powerful Women list. And thank you so much for joining us. Thank you so much. The New York City Marathon, which is the biggest marathon in the world, takes place on Sunday.

12:21And Fortune senior writer Phil Warber, who's running the marathon again, laced up with the CEO of the organization that wrangles over 100 ,000 feet through the streets of New York City. This is the business of sports. Phil, a big weekend for you this weekend. It's the New York City Marathon. You're running as a pacer. Yep. What number marathon is this for you personally at this point? Overall, 84 and 23rd New York. You recently spoke to the CEO of the New York Roadrunners, the organization that runs the marathon. Tell me how that company operates. Well, they're a non-profit and most of the proceeds go to supporting running programs for disadvantaged youth across the five boroughs.

13:04But the real crux of the revenue comes from the marathon, about 50%. And then they also do another 40 races most of them at Central Park during the year, which will get 8 ,000 to 10 ,000 runners. And then, of course, now because of the popularity of their events, they are attracting major sponsors for all their events. So they're a big business. I think last year they took in about $150 million. And when you say much of the revenue comes from the New York City Marathon, that's partnerships and entry fees? Because we hear over and over how expensive it is now to run the New York Marathon. How much does it cost today?

13:39I pay$260 and it depends where you're from and if you have a membership, but that's ballpark. But in fact, it's in line with Chicago, London, Paris and the other majors. Is there anything special about this year's New York City Marathon that we should watch out for? Well, they're doing a lot of their messaging around the fact that it's 50 years since the New York City Marathon started going through the five boroughs. Originally, for the first few years, it was such a small race that it was just four and a half loops of Central Park, which was a little boring and quite difficult. And this year, you know, they had 1 ,500 participants the first year that they did the five bros.

14:16And we're going to look, we're looking at 60 ,000 on Sunday. 60 ,000. And how does that compare to other marathons elsewhere in the world? Well, it's, I asked the CEO of New York Roadrunners about that, Rob Simulcare, because, you know, Chicago, London, Paris, even Berlin, they're all getting it to the upper 50 ,000 and they're all kind of in a war to be the biggest. They want the bragging rights. And I asked him, I said, well, you know, how much bigger can you get and how do you balance that against the quality of the race? And what did he say? That's a really interesting point. Well, he said that they do, they raise it incrementally and it's true.

14:51It feels like it's gone up by a thousand or 2000 capacity every year. And they've, they're, there are now five waves instead of four. But of course, at one point there is a limit. And also, for runners, there is also a limit to how crowded it can be because you have to get those 60 ,000 people to Staten Island, which is no easy feat. Which is where it starts. Which is where it starts. And then at the finish, it's in a narrow part of the road in Central Park, and you have to get those people out so that you don't get clogged. So it's a tough balance. And lots of people come to the city to take part in the marathon, to watch the marathon.

15:24Is there a way of measuring its economic impact? Does it boost the city's economy? Well, it's huge for hotels and restaurants in Manhattan. And that's part of the messaging too, because New York Roadrunners relies on the city of New York to provide police and authorize street closures. It's not all free to New York Roadrunners. But when you fill your hotels in November, which is not the peak season, it has a very good economic benefit for the city. And of course, playing devil's advocate, but there's also people who are anti-the-marathon residents who say it's very inconvenient. Did you speak to the CEO of Roadrunners about that?

16:00And how do they approach the backlash? Well, it's a fact of life. I mean, there are parades all the time in New York. Fifth Avenue, every Sunday in summer, there's something that blocks it. There are the street fairs on the Upper West Side. So it's part of life. But what they do do is, of course, they give ample warning. And this year, actually, for the first time in 15 years, they changed the course just a little. in the Bronx because locals were complaining that it was blocking their access to a popular grocery store in the Bronx. And so now they've changed one of the little street turns to make people go one street north before they make a left somewhere like at 140th Street.

16:40I forget the details. So they do listen. Yes. Phil, you were recently profiled in the West Side Rack, a venerable publication. As a result of your marathon running, you've run over 450 races, 84 of them marathons how did it feel to be the subject of the story for once and not the person writing it well you know it's it's uh it was nice to be recognized um i do these races because i just i like running even if i don't feel like putting my best foot forward or my fastest foot forward that day it's just nice there's community um and uh but one thing i do love about running uh the sport is that no matter how much you've accomplished and how proud you can be of your accomplishments, there's always somebody who does better.

17:23And in fact, I know a woman, she's 80, so I have time to catch up to her maybe. She's 82, and she's an icon. And she's run 1070 New York Roadrunner races throughout the years. And she has difficulty even walking now, but she still does them with her walker. So there's always somebody who can inspire you to do more. Well, very good luck this weekend to you, Phil, and all the other runners. Thank you.

17:52Latriece Watkins: I want to be a part of it. New York, New York. So up next, it's the Business of Boo, part two. We've done Trick, and now it's time for Treat. So has your candy become more expensive than you remember in previous years? The answer is most likely yes, it has. And news editor Katerina Giono joins me to explain why. Kat, hello. You're back for our hard-hitting business of boo segment, which I can't say with a straight face. Some more Halloween reporting here. The price of Halloween candy has skyrocketed this year. It has. Tell me why that's happened. Well, I mean, it's a mixture of the Iran war and a mixture of relief from the cacao shortage in Western Africa that never came.

18:38So inflation alone for Halloween candy specifically has been around 44 % in the last two years, as opposed to general inflation for food, which is, let's not say that it hasn't gone high, it's gone up only 22%. So nearly double the price of regular food that you and I eat, unless you eat Halloween candy all the time, which is great, has doubled just for Halloween candy specifically. And this is chocolate. Oh, that's what I was going to say. You're talking about chocolates. Yeah. And what's happening specifically with Reese's Chocolates? Because I know you've done some reporting on that company in particular.

19:09Of course. So I reached out to Hershey's because a lot of people on my team eat chocolate all the time, which we all love. And they've been following this, let's say, debacle that's going on in public sphere regarding the grandson of the Reese's founder. And Hershey's owns Reese's. Hershey's owns Reese's, Brad Reese. And back in Valentine's Day, Brad Reese released this letter on Valentine's Day saying, hey, I'm looking at this recipe for my grandfather and I'm looking at the current chocolate and there's vegetable oil, there's sugar, there's no cacao, there's chocolate candy mix, it's called.

19:45So he was horrified. He was horrified. He said that you are basically bestowing my father's grandfather's legacy into something that's not what it's supposed to be. That was why he released that entire letter. Throughout the year, it's been an ongoing debate between whether Hershey did or did not change the ingredients. What does Hershey say about it? Hershey said they never did. Then at some point in April, they had an investor call saying we're going to return to the original kinds of recipes. And they said we only changed it for special occasions, like Valentine's Day, like Halloween. So what does all this mean for trick-or-treaters?

20:16You might start seeing some more competition from other people. Kat, hard-hitting reporting. As ever, we really appreciate it. Thank you for being on the front lines for us this Halloween. Thank you. That's it for Fortune Daily. I'm Ellie Austin. Please remember to subscribe to our YouTube channel because it really helps other people find the show. In the meantime, have a spooktacular Halloween and I'll see you next week.

20:44Thank you.