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Home > Blog > Wal-Mart's Spin Cycle
Out of Our Minds
Thursday, January 26, 2006 3:07 PM
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-Mart’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


4 comments

Romeo Bravo - 2/2/2006 7:54:42 PM
Janet and David: Just saw something interesting today in the news about Craig's List and how it is now being compared to a 'Digital Wal-Mart.'

Comes into communities, guts local publications and destroys good local jobs and leaves no tangible benefit in its place but lower 'prices' and more 'merchandise' , in this case ads of all kinds.

Thoughts?
Janet Auty-Carlisle - 1/29/2006 1:55:07 PM
Hi Romeo, Good points for sure, and, I appreciate your perspective. To answer some of your questions. Yes, I shopped at Wal-mart a few times but choose not to for many reasons, the most prevalent for me being the use of off shore workers. I do make an effort to shop locally at all times. That can be tough and it is expensive. I know many people feel they cannot afford the prices of other shops and I am not disputing that. As to your point about the local mom and pop shops I could name quite a few in my area. I know they could not compete with big box stores, including Wal-mart, partly because they could not buy in the same volumes and they did go out of business. As to the 25,000 people applying for 500 jobs in Illinois, that is not uncommon. There are many jobs going off shore. That creates a huge problem for the former employees. If there is no other place for them to work then Wal-mart it will be. As North America becomes a continent that exports many of our technical jobs to other countries, to save money, the local economy takes a hit. Witness Ford, GM, clothing retailers, IT companies and call centres for starters. Yes, companies do have to keep their costs down, but, the other side to that which I would like to see, and I know it is only a dream, is to have share holders not wanting such a large return on their investments. Realistic? No way. Nobody is going to say 'Oh okay, if it means the guy down the street can keep his job then I'll accept that my shares are less valuable.'
I'm not naive about work/emloyee relationships. I am a board of referee adjucator for the Employment Insurance Commission so I have some knowledge base. Workers are being forced out of their jobs, they are being downsized, optimized and replaced by technology.They are losing their rights and they are losing their benefits. Wal-mart is but one part of this issue. They are not the sole problem that is for certain. Thanks for the perspective.
Living la vida fearless, Jan
Romeo Bravo - 1/29/2006 11:45:22 AM
I wonder if anyone with this perspective has actually shopped at a Wal-Mart? More than once or twice? Look at the people who shop there, look at what they buy.

These aren't down on your luck kind of people. They are people who want to save money, shop in a clean and comfortable environment and have a choice of things to buy.

Do you or anyone who has this opinion know of the 'Mom and Pop' shops that have been displaced by Wal-Mart? Can you name them? Do you know where there are/were located?

Do companies also not have a duty to keep their costs down, which they pass along to the consumer? If Wal-Mart is such a terrible place and abuser of employees, why did 25,000 people recently apply for under 500 jobs at a Wal-Mart in Illinois? They actually must be doing a few things right.

Janet Auty-Carlisle - 1/26/2006 5:08:30 PM
Wal-mart again in the news. One thing's for sure, they can get the press to notice them. It feels like a vicious, self-perpetuating cycle to me with this story. Wal-mart comes to town, buys up cheap real estate, moves out the mom and pop operations and hires locals at reduced wages and less benefits. Probably some of the same workers who were employed at the smaller places before with better benefits. So, then, these same people have to shop at a place like Wal-mart because it's all they can afford. Has Wal-mart created it's own spin cycle? How can one get off the Wal-mart turnabout? Is there a better way for them to do business? Probably. Up here in Canada they have tried to unionize two Wal-marts. One was successful. The other one was not and the store closed it's doors and moved elsewhere. What happens to those workers after that happens? They have no benefits, they worked for less wages, they have no job because the local shops are long gone....and, the Employment Insurance program only covers them for a year, at 66% of their huge wage, if they qualify. (and that's hard to do!) Will unions help clean up Wal-mart? I don't know. Will public opinion help clean it up...absolutely, if the public yells loud enough. They will be heard and, if it means less money in the pockets of the shareholders because of the backlash I can guarantee you that the policies will change....It's that bottom line thing again. Living la vida fearless, Jan

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