Wal-Mart's Spin Cycle
David Batstone on Business
Do you think Wal-Mart is changing its tune or singing the same old song?
Wal-Mart has come to terms with the fact that its public image is taking a nose dive. According to The New York Times, Wal-Mart hired a top-notch polling group to gauge the consumer impact of its reputation. The results reportedly show that anywhere from 2 percent to 8 percent of Wal-Mart shoppers have stopped visiting its retail stores due to 'negative press they have heard.'
Wal-Mart is trying hard to change that public sentiment, of course. The retailer harvested bushels of good will with its aid to victims of Katrina. While government agencies floundered, Wal-Mart effectively delivered emergency goods to those in most need. Late in 2005 Wal-Mart also announced a campaign that it trumpeted as the beginning of a new era for the company. Among the noteworthy initiatives: reducing greenhouse gases at its stores around the world by 20 percent in the next seven years; offering health-care coverage to all workers for around $25 a month; and calling on Congress to raise the nation's minimum wage above the current $5.15 per hour.
All good steps. Nonetheless, I can't help but feel cynical about Wal-Mart's efforts. The company seems more concerned about public relations than an actual reform of its business operations. Wal-Mart now has a rapid-response 'war room' that handles criticism like a political operative. In actual fact, former advisers from the Reagan, Clinton, and Kerry electoral campaigns coordinate the image campaign. For that reason, it is hard to separate fact from spin at Wal-Mart.
To its credit, the company did host a public forum on its business practices last November. Advertised as 'An In-Depth Look at Wal-Mart and Society,' the retailer invited nine economists to assess its effects on the economy. Overall, the news was not good for the host. The majority of the economists put forward research demonstrating that Wal-Mart makes total payroll wages per person fall in towns where it does business and increases Medicaid costs significantly among its own workers.\n\nOn the other side of the ledger, Jerry Hausman, a professor at the Massachusetts Institute of Technology, showed that Wal-Mart's entry into a local market lowers food prices at all retailers about 25 percent, with the biggest benefits going to poor and minority households. 'I'm actually quite disturbed at some of my liberal friends who want to keep Wal-Mart out,' said Hausman.\n\nNo one disputes that Wal-Mart delivers lower prices, nor the fact that Wal-Mart employs 1.33 million working-class Americans. But what are the trade-offs for these benefits? Will Wal-Mart continue to squeeze its labor costs to sharpen its competitive edge?\n\nA troubling answer to those questions came in a leaked memo sent in 2005 by a senior Wal-Mart executive to the company's board of directors. The memo may be the best indicator of Wal-Mart's intentions. \n\nSusan Chambers, Wal-Mart's executive vice president for worker benefits, recommended in the memo that the company hire more part-time workers in order to keep down health-care costs and screen out unhealthy people from the Wal-Mart labor force. The Chambers memo acknowledged that 46 percent of Wal-Mart's employees already were uninsured or on Medicaid. Nonetheless, the primary purpose of the memo was to offer strategies for slicing benefits even further.\n\nThe Chambers memo also clearly expressed her anxiety about how Wal-Martâ€™s battered reputation might suffer further if these actions were taken. Consumers and activists alike need to ensure that her concerns are justified. Even the strongest company brand is vulnerable to a soiled reputation.\n