Calculating Wal-Mart’s Savings
When Hurricane Katrina devastated the U.S. Gulf Coast last year, Wal-Mart Stores Inc., the world’s largest retailer, kicked into action.
Wal-Mart trucks, driven by volunteers and tracked by satellite from the retailer’s headquarters in Bentonville, Ark., were applauded as they rolled up at emergency centers with the first supplies of food and water. A tearful New Orleans district official, quoted in Anthony Bianco’s “The Bully of Bentonville,” declared that if only “the federal government had responded like Wal-Mart responded, we wouldn’t be in this crisis.”
The spectacle of a discount store chain outperforming the federal government underlined what the retailer has become since Sam Walton opened his first Wal-Mart store in 1962.
With 1.3 million U.S. employees, the company is the country’s largest private employer. It has stores in 15 countries, and global sales last year exceeded $312 billion. More than 100 million Americans visit a Wal-Mart every week.
The retailer has become what labor historian Nelson Lichtenstein has dubbed a template for 21st-century capitalism: hailed by economists for increasing economic productivity, blamed by critics for low wages, poor healthcare, urban sprawl and the trade deficit with China.
It also has become a litmus test of personal politics, almost on a par with gay marriage. Good liberals don’t shop at the Wal-monster, but at Target, its smaller, more upscale rival.
But in her 2004 country hit, “Redneck Woman,” Gretchen Wilson sings defiantly about buying underwear at Wal-Mart, not Victoria’s Secret. The chain had to be forced by the threat of legal action to stock a morning-after birth control drug. And the only sports event Wal-Mart sponsors is a bass-fishing league -- lowbrow and down-home.
The subject sprawls like a 200,000-square-foot supercenter, and Bianco’s book is the latest contribution to the rapidly expanding field of Wal-Martology.
Bianco, a senior writer at Business Week, takes us into the equivalent of the emergency operations control room at Bentonville to survey the blinking lights of almost 4,000 U.S. stores and distribution centers. Despite its title, “The Bully of Bentonville” is well-reasoned and researched, drawing on newspapers, academic papers and past books to produce a comprehensive and well-written history.
Walton, Bianco argues, was not an innovator, but a student of other people, whose one big idea was that there was “a whole lot more business to be done, at a price, in rural America than anyone else thought.” He pursued that idea with a business model that worked well “only if its hourly workers were both poorly paid and highly inspired.”
Bianco argues that under David Glass, chief executive from 1988 to 1999, Wal-Mart turned itself into a machine that consumed not only its competitors, but also its workforce. Store employees started quitting at the rate of 70% a year, while Glass and Don Soderquist, then vice chairman, sought to enshrine Walton’s memory, stopping “just short of stuffing their late mentor and propping him up behind his desk.”
But Bianco’s book comes as the 1990s model of Wal-Mart -- which underpinned its dramatic growth in that decade -- is undergoing another transformation under Lee Scott, its current chief executive.
Sales to its low-wage core customers are faltering in the economy that Wal-Mart helped to create, and the share price is moribund. As the company seeks to expand beyond its rural strongholds into the cities on the coasts, it is also having to face up to a new class of customer, one that isn’t necessarily happy with its battered reputation.
Scott has changed tack, engaging for the first time with Wal-Mart’s critics. He set ambitious objectives to improve the retailer’s environmental record, and -- anathema to Walton -- called on the government to raise the minimum wage. Bianco suggests “the ordeal of engaging outsiders in debate and discussion has caused Wal-Mart to define self-interest in ways that appear to be changing it for the better.” But he remains skeptical.
The book refers in passing to a recent credible study of Wal-Mart’s effect on the U.S. economy. The study, produced for the chain in 2005 by economic research firm Global Insight, concludes that although Wal-Mart does lower wages, this is offset by its effect on lower consumer prices -- with the end result being a 0.9% increase in disposable income -- amounting to a not inconsiderable $118 billion in 2004.
But that calculation obviously excludes other issues, such as how the benefits are distributed, the trauma caused by job losses and the environmental effect of customers driving farther to reach a Wal-Mart after their local store went broke.
Bianco sees those other costs. And like a customer lost in a giant supercenter while searching for a package of sugar-free fudge-dipped mint cookies, he wonders whether the savings are really worth it.
Jonathan Birchall covers the retailing industry for the Financial Times, where this review first appeared.
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The cost of saving
The Bully of Bentonville
* By Anthony Bianco
* Currency/Doubleday $24.95, 336 pages
Source: Publisher
Los Angeles Times
