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Posted by: David Kiley on June 01, 2007
One can see the dilemma facing Walmart CEO H. Lee Scott. Walmart rose to riches based on a certain set of business principles: relentlessly cut costs, torture vendors into submission, locate stores where a Walmart will draw customers from several downtowns, and keep store employees “down on the farm” as much as possible when it comes to pay and benefits.
Scott’s dilemma is figuring out if Walmart can grow and prosper under those same operating guidelines, or whether some of those bulding blocks are working against the giant retailer with a new generation of buyers and in some developing markets around the world.
Take the lawsuit that was certified to a class action in New Jersey this week: some 80,000 former and current employees who charge they were forced to work off the clock among other onerous practices.
Walmart has already lost one such class action in Pennsylvania.
Store managers who forced or otherwise compelled Walmart employees to punch out and keep working, or skip breaks, so they could meet performance and profit targets, weren’t free-lancing. Anyone who has ever worked in a big retail chain like Walmart knows that certain practices like that get institutionalized as store managers move around, attend their periodic meetings and swap stories.
Walmart says that suveys show that less than 1% of people surveyed indicate they have stopped shopping the stores because of reputational issues. I think it’s more complicated than that, and that measuring for reputational weakness will almost always yield misleading results because the people at the company doing it are staked in the negative results being low.
Walmart is in the fabric of what has become the U.S., not unlike McDonald’s and Ford. Scott, besides making important strategic changes to merchandising, store design and product offerings, also must decide and set a direction for what kind of company Walmart wants to be—how he and the board want Walmart to be perceived and seen in the heartland as well as the cities it is trying to penetrate.
The direction for how store managers treat employees gets set at the top. Certainly, policies about health benefits and hours allocated to employees that determine if they get coverage is set at the top. How Walmart procures goods abroad, and how careful it is about enforcing fair labor practices, is set from the top.
All these issues are becoming more and more important to consumers who make choices on where they shop every day and every week. They maleady make those decisions sub-consciously based on feelings about Walmart welling up inside them. Add to all that baggage Walmart’s strange participation with the business media writing about its investigative prowess when it comes to employee behavior, and a profile of a very odd company gets held up to the light. Why exactly do you want everyone to know you treat employees like they are Will Smith in “Enemy of the State.”
Will a consumer who shops at Target or a hardware store instead of going to Walmart necessarily articulate in a survey, phone poll or focus group why they did that? Maybe it’s just a feeling, a negative feeling toward the brand, that’s hard to convey. After a while, it becomes like the way an individual feels toward a particular political candidate.
“Do you like Hillary Clinton?”
“I don’t know. I just don’t.”
One of the big measures of a political candidate today is…”Who would you most like to have a beer with?”
Walmart, it might be said, should never lose sight of its prowess for cost cutting, distribution efficiency, etc. But CEO Scott increasingly might look at whether Walmart is a brand we want to have a beer with. For a lot of people—shoppers—it’s just that simple.
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