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The End of an Era: Wal-Mart’s Decline

Wal-Mart Era Wanes Amid Big Shifts in Retail [Wall Street Journal]

The Wal-Mart Era, the retailer’s time of overwhelming business and social influence in America, is drawing to a close.

Using a combination of low prices and relentless expansion, Wal-Mart Stores Inc. emerged from rural Arkansas in the 1970s to reshape the world’s largest economy. Its co-founder, Sam Walton, taught Americans to demand ever-lower prices and instructed businesses on running a lean company. His company helped boost America’s overall productivity, lowered the inflation rate, and strengthened the buying power for millions of people. Over time, it also accelerated the drive to manufacture products in Asia, drove countless small shops out of business, and sped the decline of Main Street. Those changes are permanent.

Today, though, Wal-Mart’s influence over the retail universe is slipping. In fact, the industry’s titan is scrambling to keep up with swifter rivals that are redefining the business all around it. It can still disrupt prices, as it did last year by cutting some generic prescriptions to $4. But success is no longer guaranteed.

Rival retailers lured Americans away from Wal-Mart’s low-price promise by offering greater convenience, more selection, higher quality, or better service. Amid the country’s growing affluence, Wal-Mart has struggled to overhaul its down-market, politically incorrect image while other discounters pitched themselves as more upscale and more palatable alternatives. The Internet has changed shoppers’ preferences and eroded the commanding influence Wal-Mart had over its suppliers.

As a result, American shoppers are increasingly looking for qualities that Wal-Mart has trouble providing. “For the first time in a long time, quality has a chance to gain on price,” says Lee Peterson, a vice president at Dublin, Ohio-based brand consulting firm WD Partners Inc.

Now, the big-name brands that fueled Wal-Mart’s climb to the top are forging exclusive distribution deals with other retailers, or working to reduce their reliance on its stores. PepsiCo Inc., which favored mass-market campaigns a decade ago, recently skipped Wal-Mart when launching a new energy drink in favor of Whole Foods Market Inc. Consumer-products giant Procter & Gamble Co. gets 15% of its revenue from Wal-Mart, down three percentage points from 2003.

University of Minnesota economics professor Thomas J. Holmes has researched Wal-Mart’s growth patterns and “economics of density” as they apply to the retailer. Read his research and see more animations of Wal-Mart’s store openings.

Wal-Mart’s effort to expand internationally has had mixed success in affluent markets. Last year it exited South Korea and Germany after failing to adapt to local tastes and achieve economies of scale. In Japan, the company’s low-price, high-volume approach has struggled in a country where low prices often equate to low quality.

Wal-Mart remains an enormous force in retailing, of course. Its world-wide sales are almost three times those of France’s Carrefour SA, the world’s second-largest, publicly traded retailer. Wal-Mart’s U.S. revenue is 4½ times that of discount-store rival Target Corp., and four times that of second-largest U.S. food retailer Kroger Co. Its clothing and shoe sales last year alone exceeded the total revenues of Macy’s Inc., parent of Macy’s and Bloomingdale’s department stores.

The company’s unquenchable thirst for scale has been the secret to its market-changing power. “What we are is a ‘supercenter’ with one-stop shopping,” said Wal-Mart’s Vice Chairman John Menzer at an investors’ conference last month. The company expects each year to build another 170 to 190 of the 200,000-square-foot supercenters that are its hallmark and convert 500 smaller discount stores to the bigger format over the next five years. “We would love to wave a magic wand and [make] every one of our discount stores a supercenter,” he says.

But that very focus on scale is now a weakness, for the world has changed on Wal-Mart. The big-box retailing formula that drove Wal-Mart’s success is making it difficult for the retailer to evolve. Consumers are demanding more freshness and choice, which means that foods and new clothing designs must appear on shelves more frequently. They are also demanding more personalized service. Making such changes is difficult for Wal-Mart’s supercenters, which ascended to the top of retailing by superior efficiency, uniformity and scale.

“All retailers have a formula. They grow as far and as fast as they can with that formula,” says Love Goel, a former Fingerhut Cos. executive and now chairman and CEO of Growth Ventures Group, a Minnetonka, Minn.-based private-equity firm that invests in retail businesses. Wal-Mart has outgrown its supercenter recipe, but efforts to win growth from more affluent consumers have fallen flat, he says. “They have hit the wall.”

Wal-Mart declined to make an executive available for an interview and declined to respond to written questions, citing an upcoming meeting with Wall Street analysts.

Business history is littered with companies that grew to enormous size and used their girth to re-arrange the world to fit their strengths. Think International Business Machines Corp. in the mainframe business, General Motors Corp. in autos, or Microsoft Corp. in personal computers. For a time, their success bred an ecosystem that sustained their status. In the 1970s, independent software companies piggybacked on IBM’s mainframes, resulting in greater demand for mainframe computers.

Such orchestration can produce solid growth for decades. But it can also produce corporate blinders. Over time, IBM’s grip on the corporate data center left it unable to anticipate the decentralizing effects of personal computing. GM’s knack at brand creation and frequent model changes left it vulnerable to the incremental quality approach of Japanese auto makers. Microsoft was so busy cramming features into its Windows operating software that it lagged others in the shift to the Internet. Each remains among the top in its industry; yet each has relinquished the role of industry definer—IBM to Intel Corp., GM to Toyota Motor Corp., Microsoft to Google Inc.

Wal-Mart’s great insight was perfecting the so-called “value loop” in retailing. At its most basic, the system works like this: Lower prices generate healthy sales gains and profits. Some of those profits went into further price cuts, generating more sales. The lower the price, the more consumers flocked to Wal-Mart.

But the value loop is beginning to unravel. For 10 years through 2005, Wal-Mart’s sales gains at stores open at least a year averaged 5.2%. So far this year, its comparable-store sales, a measure of market share, is up just 1.3%. The pricing gap between Wal-Mart and rivals has narrowed, and more customers are now choosing convenience over wading through a supercenter.

That compares with comparable-store gains of 4.6% at Target, which markets itself as a trend-setting discounter, and 6% at membership-club rival Costco Wholesale Corp., which peddles $500 Bordeaux wines and $4,000 Cartier watches. While Wal-Mart has been portrayed as a ruthless employer, Costco has been praised for providing some of the best employee benefits in retail.

Wal-Mart’s shares trade about where they were at the start of the decade, when the company produced less than half its current revenue. Shares closed yesterday up 40 cents at $44.87, and down 9.3% from the stock’s year-earlier price. Earlier this year, Wal-Mart took the extraordinary step of ratcheting down its U.S. expansion plans because its new stores were stealing too much revenue from existing ones. That wasn’t a concern in the 1980s and 1990s when Wal-Mart was regularly flattening competitors.

In some ways, Wal-Mart’s loss of clout is a reflection of a more fragmented world. Retailing is a mirror to how we live and work. Big-box stores thrived by selling highly recognizable national brands, which themselves were fed by two phenomena: the growth of mass media and freeways, which encouraged large stores in remote areas. Stores and brands together achieved scale efficiencies that allowed them to overwhelm local chain stores and regional brands.

But the Internet is transforming the retail definition of scale. The once-stunning compilation of 142,000 items found in a Wal-Mart supercenter doesn’t seem so vast alongside the millions of products available on the Internet. At the same time, the cost of creating and sustaining a national brand is rising because of media fragmentation. Niche brands, created by Internet word of mouth, are winning shelf space and sapping profits required to fund big brands’ advertising. Manufacturers such as Apple Inc. and Phillips-Van Heusen Corp., lacking the retail distribution or presentation they crave, are opening their own stores. One result is that retail giants hold less sway over their customers—and over their suppliers.

And across the landscape, numerous rivals are using a form of competitive jujitsu to keep the Bentonville behemoth off balance.

Grocery-store chains such as Kroger are resurging on sales of prepared or semicooked meals, which people can grab on their way home. Cincinnati-based Kroger projects sales at stores open at least a year will climb between 4% and 5% this year, on top of a 5.3% increase last year.

Thomas Kim, a financial analyst for a St. Louis scrap-metal firm, describes his family as frugal shoppers who check prices on the Internet. But he and his wife most often shop in local retailers. “It’s the convenience factor,” says Mr. Kim. His family avoids supercenters, describing them as too large and too crowded.

When Wal-Mart pushed heavily into consumer electronics earlier this decade, many industry observers expected it to flatten electronics chains. But five years ago, Best Buy Co. began aggressively marketing installation and other services alongside flat-panel TVs and PCs. Last year, Best Buy’s total sales rose 16%. Wal-Mart, which has struggled to sell big-ticket HDTVs, has only recently begun selling installation services at a few stores using an outside supplier. It doesn’t break out consumer-electronics sales, but analysts estimate sales last year rose 7.6% to $22.6 billion.

Melissa Morris says Best Buy won her loyalty by gladly accepting a notebook PC return and having trained sales clerks. “I go to a store that specializes or has associates there that know about it,” she says. The Erie, Pa., sales executive refuses to go to Wal-Mart, citing its crowded aisles and hurried atmosphere.

Best Buy and specialty retailer PetSmart Inc., which touts pet grooming and kennel stays, put hard-to-copy services at the forefront of their pitch, says Howard N. Jackson, president of retail advisers HSA Consulting Inc., Knoxville, Tenn. “They realize the best way to win a fight is to make sure you don’t get in one,” he says.

Wal-Mart has long sold prescription drugs, setting up its pharmacy business in 1978. But national drug chains CVS Caremark Corp. and Walgreen Co. reacted by redefining their role and selling basic health services, such as school physicals, diagnostic tests, and flu treatment, alongside drugstore wares. CVS and Walgreen each acquired in-store clinic operations, redefining the pharmacy business as basic health-care centers.

Same-store sales at CVS and Walgreen are running about double that of Wal-Mart this year. Wal-Mart has begun offering leases to clinic operators.

Then there’s the host of new entrants. In apparel, smaller retailers with niche market appeal like Hennes & Mauritz AB’s H&M, Inditex Group’s Zara and Los Angeles-based Forever 21 Inc. are growing by offering consumers rapid style changes. Outside the U.S., Britain-based Tesco PLC is challenging Wal-Mart by cultivating the Tesco brand across five different formats, including convenience stores and urban stores as well as supercenters. This fall, Tesco will open its first U.S. outlets, stores that will offer fresh and prepared foods and staples (see related article).

As Wal-Mart’s influence erodes, so does its allure to manufacturers. Burt P. Flickinger III, managing director of retail consulting firm Strategy Resource Group, says Wal-Mart now takes a back seat to regional grocery and national drug chains when it comes to striking deals.

He says some manufacturers now sell their wares faster at other retailers. “Four of the top 10 consumer-products companies say they can move merchandise faster with Walgreen and CVS,” says Mr. Flickinger, who came up with the estimate from his talks with consumer-products firms. Such retailers have been rewarded with lower costs and better sales gains.

The change is apparent at PepsiCo. Wal-Mart is PepsiCo’s largest customer world-wide, accounting for $3.16 billion in sales of drinks and snack foods. But earlier this year, PepsiCo opted to launch Fuelosophy, a new energy drink, at Whole Foods, a high-end supermarket chain.

“We thought that was the best place to introduce and test it,” says PepsiCo spokesman David DeCecco. Whole Foods customers’"health and wellness” profile better match that of likely Fuelosophy buyers than Wal-Mart’s, he says. He declined to name which other retailers were considered for the rollout.

Wal-Mart’s loss of influence can also be seen in logistics. In 1984, Wal-Mart’s decision to embrace bar-code scanners in its distribution centers and stores helped quash the use of a less-efficient technology then used at Sears, Roebuck & Co. and other retailers.

In 2003, the retailer brashly jumped onto the next big logistics technology, called radio-frequency identification, and mandated big suppliers begin slapping RFID tags on products shipped to its warehouses. Wal-Mart installed tag readers at warehouses and stores, hoping to further automate warehouses and lower inventory costs.

Wal-Mart quietly dropped the mandate earlier this year and refocused its development after suppliers complained of the high costs and lack of a return on their investment in the new technology. While the company says it’s pushing ahead, Wal-Mart says it realigned efforts to focus on areas where the technology offered the most promise, such as assuring vendors’ promotional displays are properly deployed in its stores.

Wal-Mart wasn’t able to demand big suppliers continue investing in a technology that was raising their operating costs, says Ken Rohleder, president of Rohleder Group, a Louisville, Ky., supply-chain consulting firm. “There was a time when they could have dictated anything,” he says.

Posted by Alex Goldschmidt on Wednesday, October 03, 2007

Click Here for a Printer-Friendly Version

COMMENTS

There are a few things wrong with the article. I don’t think the revenue growth chart is in constant dollars, so it’s hard to tell how much of the “growth” is just due to inflation.

There is also the mathematical effect that it requires more growth for a large firm to show the same percentage change as a smaller one. Quoting percentages shows the bias towards information favored by Wall Street. Stock traders focus on percentages, especially the rate of increase. This must decrease as a firm expands.

The emphasis on shoppers demanding high quality and service is not representative. Only those who can afford to pay for these intangibles will be influenced by them. To predict that this segment will continue to grow at the expense of “value” shoppers is to make assumptions about the future trends of the US economy. However, recent trends have indicated that the vast majority of people are not seeing a real increase in earnings and some even a decline. These people will remain Walmart shoppers. If there is a downturn, Walmart will also benefit.

It is true that large firms (especially those with control over their market) are slow to change and can get caught out by newer players, but the examples cited don’t indicate this unequivocally, GM and Microsoft are examples of dinosaurs, but IBM and AT&T;have restructured and done well.

I’m still betting that Walmart will be forced to restructure. Because of the family control of the company it has been insulated from Wall Street pressure, but at some point this will have to change. It may have to wait until the present generation of Waltons on the board retire, but I’m guessing it won’t take that long.

I’m still betting on a franchise model for the stores, with Walmart keeping the supply chain and product development functions. Call it the McDonald’s model.

robertdfeinman in Long Island, NY
Wednesday, October 03 at 09:30 AM

“I’m still betting on a franchise model for the stores, with Walmart keeping the supply chain and product development functions. Call it the McDonald’s model.”

It’s called India, Robert.

Otherwise, yours is the most thought-out piece I have read on WMW a few months…

Bill

Bill in
Wednesday, October 03 at 11:58 AM

Am I surprised that Wal-Mart is in decline? Not a bit.
The comment was made that Wal-Mart may be forced to restructure. Well, they haven’t done it yet! Wal-Mart has only had one formula from the beginning. Sam Walton began by selling goods as cheaply as he could. That formula hasn’t change a bit. But they did add another piece to the mix.
Over the years Wal-Mart has only been interested in building BIG stores. So their formula now has two parts to it. 1) Sell goods as cheaply as we can and 2) Do it in as BIG a space as we can get. Forget about building anything small. Small just isn’t in their formula.
And what about Lee Scott? Is he changing that formula? Not one bit! The only thing he does is build more stores! Reading about the site fights is interesting. Many who oppose a Wal-Mart in their neighborhood complain they are Wal-Marted out where they live. It is common to read that we have 3 Wal-Marts in our area. One about 10 miles down the road, another about 23 miles away, and another 8 miles away. And Wal-Mart wants to build yet another?! Wal-Mart is becoming their own competition and canibalizing their own stores! Do they care? Apparently not.
So is Wal-Mart going to restructure itself? It doesn’t look it’s going to happen anytime soon. Meanwhile the company will continue to decline. And other retailers like Target, Costco, and yes even independent retailers will get bits and pieces of Wal-Marts business and customers. When you are THAT BIG and have been doing business THE SAME WAY FOR SO LONG CHANGE DOESN’T COME OVERNIGHT! And don’t be surprised if it never comes.

Jane in N.Y. in
Wednesday, October 03 at 03:14 PM

Thanks for the compliment Bill. I post on Walmart issues frequently with my fellow bloggers at the Writing on the Wal blog. Each of the four of us has our own area of interest, but we all agree that Walmart needs to behave like a better corporate citizen.

The site is:
http://thewritingonthewal.net

We appreciate comments (especially complimentary ones!)

robertdfeinman in Long Island, NY
Wednesday, October 03 at 03:16 PM

robertdfeinman in Long Island,Ny:Mr.Feinman,several threads back i opined the “possibility” that WalMart thoeretically could “buy out” existing chains such as Dollar General which was recently purchased by Kravis. I countered that the minifootprints would provide Walmart the presence and saturation-without the NIMBYS and other issues involved with developing new real estate and its vicissitudes.I was roundly criticized.Do you think my opinion had merit ?Thanking you in advance for any reply.

ddrb in
Wednesday, October 03 at 03:55 PM

Jane,

“Small just isn’t in their formula.”

What about ‘Neighborhood Markets’? They are small, about the same size as a Walgreens!!

But, then again, with a smaller store, the variety and selection of products becomes limited, you can’t put 10# of potatoes in a 5# bag!! Limited selection and variety, defeats the one stop concept!!

RDS in
Wednesday, October 03 at 04:19 PM

RDS:"you cant put 10# of poatoes in a 5# bag!!’...Duh,..just buy 2 of them ..2x5=10 pounds!!!

ddrb in
Wednesday, October 03 at 04:53 PM

ddrb:
Buyouts haven’t been Walmart’s style, it would seem unlikely that they would change now. However, they have done buyouts in other countries, so perhaps you might be right.

I think the criteria for them would be one of scale. Buying a small chain would add so little to their bottom line that it doesn’t seem like it would tempt them. In foreign markets there is lots of room for growth since there is no store doing exactly what they do.

The reason they have mostly not succeeded seems to be that they only have one business model and that doesn’t translate well to some other cultures. China might be a better bet, but what’s their niche? Buying Chinese-made stuff to sell in China isn’t anything special and opening a chain of stores isn’t anything that others can’t do as well.

Can their supply chain expertise provide them with an edge? It has worked for McDonald’s so perhaps it will for Walmart too.

One has to be careful of the doom and gloom from Wall Street writers. They like a story with buzz as do traders. Companies that pay a nice dividend and grow at a steady rate aren’t good for either group.

The Walton family seems happy enough collecting their dividends and not worrying about the stock price. This type of stock used to be recommended for “widows and orphans”, but has gone out of fashion now. Others in the same category include Wrigley’s and Coke. Notice how Coke keeps trying to make itself more sexy by adding new products, but it can only produce a slight change. It’s the same issue, they are too big to grow quickly any more.

robertdfeinman in Long Island, NY
Wednesday, October 03 at 05:58 PM

This post was about to go off the 2nd page and it is so good, it deserves a reprise:

I am sick and tired of all the nasty, disturbing comments made about Wal-Mart. Here is what I see. Every person who sits around casting stones at Wal-Mart would love to be as smart and aggressive as Sam Walton. But since they are not--they just love to say all kinds of things about the most successful retail business yet to come along. All of those poor little “pop and mom” stores that “Big ole ugly Wal-Mart put out of business” are moaning every day. Also those small store’s customers who feel the pain of the owners. The truth is this---Many of those mom and pop stores were there before Sam Walton, yet those “pops and moms” simply did not have the vision or the smarts to go after the business. Now they along with a bunch of folks that do not understand or care to understand just sit and whine. And friends while you are whining and moaning about your inability to be creative or to work as hard as Sam Walton did---life passes you by at the successful Wal-Marts. I wish I were as smart and as aggressive as Sam---but I an not and neither are all of those gripping, complaining employees and others who seem to think that Wal-Mart is a disgrace. I truly feel sorry for them and the lawyers who feel they can profit by keeping the “complaints” coming. It is silly and thoughtless for so many folks who do not like Wal-Mart. Another point has to do with the employees who stand in line for hours to get a job at Wal-Mart only to get the job and then to start their compalining about anything and everything from pay, health coverage, etc. Folks, if you can do better in vocations, for everyone’s sake leave Wal-Mart and go some where else. But those folks seemingly had rather stand around and complain about how the business should be run and what Wal-Mart owes them rather than to work their shift with the “right attitude”. Yes, Sam started something and I admire that man very much. I just wish complaining folks would put a sock in it. Even our political leaders have found it “vote profitable” by “going after Wal-Mart. This is a free-enterprise market. If Wal-Mart can get employees for a certain amount of pay, with or without health coverage---power to them. Our costs to purchase an item stays lower. But no, some of our elected officials seemingly believe they have to watch out for the “working man” by jumping on Wal-Mart and letting them (Wal-Mart) understand how to run their business. If Al Sharpton, Nancy Pelosi and other were so smart, guess what---they too would be thinking like Sam Walton. But you know, they could not make it in “real life”. So they turn to politics then “compalin about successful companies. Thanks, Sam Walton for your vision, leadership and smarts.

Don Cary in Marlow, Oklahoma
Wednesday, October 03 at 04:20 PM

Nice post Don, couldn’t have said it better myself!!

ddrb,

But, what if you wanted 5# of red potatoes and 5# of Idaho potatoes, but the store, because of it’s smaller size, only had room for Idaho potatoes in one size, 10# bags?

RDS in
Wednesday, October 03 at 06:01 PM

RDS:Well,I guess I’d buy the instant Idahoan pototoes,which is what i do right now,-they don’t spoil,they’re cost effective,and a convenience store module would do better to stock “instant potatoes” than the cumbersome,produce variety of bagged spuds!

ddrb in
Wednesday, October 03 at 06:31 PM

Don:
You do realize that Sam Walton died in 1992. Since then the company has been run by two of his sons and other family members.

You will see many comments from long-time Walmart employees how the company has changed since then. They loved working for Sam, they hate what has happened since.

I suggest you read up on some of the tactics that Walmart has used to get where they are today. There have been hundreds of findings of labor law violations against them. There has been pressure on local towns to give them tax breaks not available to existing merchants. They also demand things like new interchanges and traffic lights to be paid for by the town. After the period of the tax breaks expires, many of the stores are closed and the same game is played elsewhere. Look it up there are hundreds of abandoned Walmart stores around the country.

Then there are the stories of their pressuring suppliers to move their production to China to lower costs. Charles Fishman has written an entire book about this. Take a look at the stories he tells.

robertdfeinman in Long Island, NY
Wednesday, October 03 at 09:09 PM

robertdfeinman,

“There has been pressure on local towns to give them tax breaks not available to existing merchants. They also demand things like new interchanges and traffic lights to be paid for by the town. After the period of the tax breaks expires, many of the stores are closed and the same game is played elsewhere.”

It has always puzzled me, as how they do this!! If they keep doing this, wouldn’t the towns catch on to it? But, somehow it seems that city councils are so stupid, that they keep doing this over and over again, right? Especially in places they aren’t wanted in the first place!! And, not only that, but those cities keep letting themselves get screwed over 2, 3 or more times as ‘new’ stores are added, right? Hard to believe they are ALL that dumb!!

“Then there are the stories of their pressuring suppliers to move their production to China to lower costs.”

The “stories”? We read stories here everyday about Wal-Mart getting ready to sell recalled lead painted toys, Wal-Mart killing people, Wal-Mart this and Wal-Mart that, but, somehow the law has let all of this stuff pass!! Then we are told about Wal-Mart’s POWER, yet, somehow they can’t even compete anymore and are going down the tubes!! We hear the ‘stories’, yet don’t see anybody going to jail for fraud, corruption or scamming communities, why is that? But, then again, we are told that Wal-Mart is more powerful than the government themselves (with a huge SPY organization), yet a rag tag group of anti Wal-Mart haters is bringing them to their knees!!

Then, we have the SEIU, wanting to HELP Wal-Mart straighten out it’s act, why are they doing this out of the ‘goodness’ of their heart, we are told that this isn’t to unionize Wal-Mart, yet anti-union videos are shown here, and why does Wal-mart have to be straightened out, if they already control everything? None of it makes much sense!!

RDS in
Wednesday, October 03 at 11:00 PM

Hard to believe they are ALL that dumb!!

Not all, RDS. That why there are a couple of hundred communities around the country that are fighting a Wal-Mart invasion tooth and nail. As for the towns that do get screwed over time and again, the answer is not that they are dumb. They’re greedy. Wal-Mart traffics in greed. They hold up charts of projected tax revenues and the powers that be have a wet dream.

It’s the same greed that lures vendors into selling to Wal-Mart even when it’s self-destructive.

We hear the ‘stories’, yet don’t see anybody going to jail for fraud, corruption or scamming communities, why is that?

I don’t know who ‘we’ is, but the reason you don’t see any “fraud, corruption” or whatever is because your head is buried in the sand. (You can start with Coughlin and his posse.)

None of it makes much sense!!

You don’t have to tell us that, RDS. A quick scan of your posts clearly indicates a staggering deficiency of cognitive ability.

Ken V in Texas
Thursday, October 04 at 04:11 AM

Corporate What?

Walmart needs to behave like a better corporate citizen. ~ robertdfeinman in Long Island, NY

No offense Robert. This comment is neither critical or complimentary. I just have to say that my blood boils everytime I see someone use the term “corporate citizen.”

Nowhere (that I’m aware of at least) does the United States Constitution define or talk about “corporate citizens.”

While my quick search is not meant to be definitive by any means, but I thought this definition from the CCRU in Australia, does a good job of defining what I think most people mean when they say, “corporate citizen.”

“Corporate Citizenship is a recognition that a business, corporation or business-like organisation, has social, cultural and environmental responsibilities to the community in which it seeks a licence to operate, as well as economic and financial ones to its shareholders or immediate stakeholders. Corporate citizenship involves an organisation coming to terms with the need for, often, radical internal and external changes, in order to better meet its responsibilities to all of its stakeholders (direct or indirect), in order to establish, and maintain, sustainable success for the organisation, and, as a result of that success, to achieve long term sustainable success for the community at large.” (CCRU (Corporate Citizen Research Unit) at Deakin University in Australia)

ScrewedbyWal-Mart in Anytown, America
Thursday, October 04 at 07:08 AM

Dumbing Down this Website

<i>"Hard to believe they are ALL that dumb!!"<i> ~RDS

Yeah, it’s hard to believe you’re that dumb too RDS, but you keep “amazing” us with your persistent presence.

ScrewedbyWal-Mart in Anytown, America
Thursday, October 04 at 07:15 AM

Screwed:
The constitution doesn’t say anything at all about corporations. The modern corporation didn’t even exist at the time it was written. The early firms like the British East India Company were organized along different lines.

The corporation is defined by the state. Libertarians like to say that the only duty of a corporation is to maximize its profits for the benefit of its stockholders. If this is true then it’s because they were set up to meet this goal. Actually we know that it isn’t realistic.

Corporations are required to meet health and safety standards for their workers, they are required to pay a minimum wage and they are required to sell safe and effective products. Each of these requirements can limit their profits. So expanding the rules they must obey is only a matter of degree, not of anything new.

I argue that meeting such standards doesn’t even cut into profits. If every firm must meet the same requirements then no one of them has a competitive advantage over any of the others. If they want to recover the extra cost of, say, health care, they are free to raise their prices to do so. The need to maximize profit is a fiction.

The pressure on US firms exists because foreign firms don’t have to follow the same rule. Not only do they pay their workers less, but as we keep being reminded, they don’t provide safe working conditions or products. If US firms want to remain competitive with those who don’t follow the rules then they should be pushing for international standards and better enforcement by the US government.

Of course, many of them are now profiting from the lax standards abroad, so they are happy selling tainted products. They just don’t like getting caught at it.

robertdfeinman in Long Island, NY
Thursday, October 04 at 08:54 AM

RDS--I’m sorry but it my understanding that neighborhood markets sell ONLY groceries. Neighborhood markets are not department stores. They average abut 40,000 square feet-but sell only groceries.
With this in mind Wal-mart’s formula hasn’t changed from the beginning. They only know BIG when it comes to their stores. Now you can argue that BIG means one stop shopping. But what about the person who wants to “grab it and go?” You’ll never do that in a BIG store. Why? Because it takes too long to find what you want, and then wait in the check out lines that are miles and miles long.
Now why are the check out lines so long? Because Wal-Mart understaffs them deliberately. They have to cut expenses to the bone, and payroll is the first place you begin to do that. Sorry--but Wal-Mart’s formula hasn’t changed since Sam opened his first store. The formula is still 1) sell goods as cheaply as they can and 2) do it in as large a space as they can. Apparently, Wal-Mart hasn’t learned that big is not necessarilly better!

Jane in N.Y. in
Thursday, October 04 at 09:26 AM

Jane in:It has been my experience while in checkout lines at other retailers,I have rarely experienced long waits,whether groceries or other retail goods(but then I don’t shop WalMart). What has intrigued me ,are the conversations i overhear at the checkout register,usually between shoppers and clerks.Invariably,the shopper will say-I would have been in line all day at WalMart,or I’ll never go to Walmart again-but my personal favorite was the shopper who said"WalMart must put rudeness down as a requirement on the job application!Often the cashier replies,"Tell me about it ..I USED to work there,never again!"Just last week I witnessed an exchange between the cashier and the bagger-the bagger says,” I stopped shopping at Walmart when they stopped having layaways last year..and yeah,they tell people that their prices are so low,well thats just talk-I guess they think if they say it long enough people will believe them! “Needless to say,they went ahead and made my day!

ddrb in
Thursday, October 04 at 10:46 AM

I like your stuff, Robert. Your condemnation of Wal-Mart did sound a little vapid at first but you warmed to the task.

When it comes to Wal-Mart the classic Eldridge Cleaver quote sums it up:

You’re either part of the solution or you’re part of the problem.

Ken V in Texas
Thursday, October 04 at 11:48 AM

Ken:
Visit our blog at TheWritingOnTheWal.net and you can read more along the same lines.

I usually write about the business aspects but the others write about issues such as product safety and employee relations.

I popped up here because of the WSJ article reference. Much as I would like to see Walmart taken down a peg, it certainly isn’t in “decline”. A slowing growth rate is not a decline.

robertdfeinman in Long Island, NY
Thursday, October 04 at 12:35 PM

Jane,

“I’m sorry but it my understanding that neighborhood markets sell ONLY groceries. Neighborhood markets are not department stores.”

I don’t know about other Neighborhood Markets in the country, but 1/3rd of the store floor space in the stores in my area (4), are products other than groceries, plus a pharmacy!! That said, your complaint was that “Small just isn’t in their formula”, and Neighborhood Markets are small compared to a Super Center!!

“Because it takes too long to find what you want, and then wait in the check out lines that are miles and miles long.”

Again, in my area, I have never seen a line longer than 3 people, except sometimes in the EXPRESS LANE!!

ddrb,

I find it amusing that where you shop, people in the checkout lanes have nothing better to talk about, other than complaints about Wal-Mart and still they have FAST checkouts and NO long lines!! And, besides, maybe you can get checked out faster at those other stores, because they have fewer customers!!

RDS in
Thursday, October 04 at 01:02 PM

There’s small...and then there’s small

“Neighborhood Markets are small compared to a Super Center!!”

I’m going to steal a page from your “How to Over-state Your Case Playbook,” RDS…

Even Lambeau Field is small compared to some Wal-Mart SuperCenters! Go Packers 4-0!

ScrewedbyWal-Mart in Anytown, America
Thursday, October 04 at 01:16 PM

A slowing growth rate is not a decline.

Weakness, slipping, slowing, soft, stagnant, or decline. Merely a question of semantics.

“There are a lot of issues here, but what they add up to is the end of the age of Wal-Mart,” contends Richard Hastings, a senior analyst for the retail rating agency Bernard Sands. “The glory days are over.”

Ken V in Texas
Thursday, October 04 at 02:22 PM

RDS: Unlike you,some people can do two things simutaneously,i.e.,talk while they are working,and I purposely select the hours in which I shop specifcally to avoid the crowds,when possible,and to show consideration for those who do not have that luxury of choosing their shopping times.(That oughtta pluck your hard little heart-strings-PERSONAL RESPONSIBILITY!.......Zing!)

ddrb in
Thursday, October 04 at 02:23 PM

I found the McWilliams WSJ article supercilious.

As if he were the now anointed of the WSJ, supreme financial and strategic analyst of all megalith corporations.
I thought he was a ‘techie-nerd’?

No way.. No how.. is there looming on the horizon any indication that:
“ The Wal-Mart Era, the retailer’s time of overwhelming business and social influence in America, is drawing to a close…”. McWilliams.
That is a simply biased, and pedagogic view, from one, single, reporter.

I worked for Wal-Mart, many years, and I certainly have no ‘love-loss’ for the way they engage in business, especially regarding labor relations.
However…
It is so much hyperbole and artistic whimsy which paints ‘The Wal-Mart Era’, just as if one could also so easily define the French impressionist period, based on ONE painter.

cazar in
Thursday, October 04 at 03:25 PM

Cazar in:PLEASE DONT QUIT POSTING HERE! It’s such a pleasure to read your views,not to mention ,instructive.

ddrb in
Thursday, October 04 at 03:46 PM

Screwedby,

“Even Lambeau Field is small compared to some Wal-Mart SuperCenters! Go Packers 4-0!”

I was just up at Lambeau Field a couple of months past and it is not Small, compared to what it was when I left Wisconsin!! Back then all they had was a few skyboxes, now they have a huge section with a couple of Packers stores, elevators, escalators, food shops, etc., when was the last time you were there?

I agree, Go Packers, my farorite team!! And, who said Brett Farve was ‘over the hill’, he looks like he could play for a couple of more years!! And, he broke Marino’s record, how great is that?

RDS in
Thursday, October 04 at 04:30 PM

I Have to Disagree With You Cazar

As Ken V has pointed out more than once, we can split hairs over semantics ad nauseum. “Decline” or “slow growth?” Slipping or...?

I found the McWilliams WSJ article to be balanced, not biased. He said:

“The Wal-Mart Era...is drawing to a close.”

He did not say the Wal-Mart era is over. In fact, later he stated:

“Wal-Mart remains an enormous force in retailing, of course.”

By almost any measure, Wal-Mart has reached its zenith. If this were not so, then why all the talk about “restructuring” or “reorganizing” by building smaller stores? Why all this newfound emphasis on reducing Wal-Mart’s “carbon footprint?” It’s because Wal-Mart knows that its “business as usual” isn’t going to cut it anymore.

ScrewedbyWal-Mart in Anytown, America
Thursday, October 04 at 08:13 PM

Screwedby:
I have a theory about Walmart, you can agree or not since it’s speculation on my part.

Walmart is run by the Walton family even though it is a public company. They control about 40% of the stock which gives them effective control. They have no interest is selling their shares so the price of the stock is not of real interest to them. What is of interest is the size of the stock dividend. This has been rising at a good clip for over a decade.

The dividend is what they use as annual income. As it rises so does their income. Wall Street speculators have exactly the opposite objectives. They are only interested in seeing the stock price go up, the dividend isn’t large enough (in annual percentage terms) for it to affect their profits. A stock can easily move 20-30% within a year and this is where traders make their money - or hope to.

So the Walton’s have had a policy over the past two decades of making changes that enhance the dividend rather than the stock price. It’s in their self interest.

Wall Street commentators can’t play this game so they criticize the company for not adopting policies which will favor the game that they can play. The Walton’s couldn’t care less. Here’s what I mean:

“The Board of Directors of Wal-Mart Stores, Inc. has approved an increase in the annual dividend to $0.88 per share, a 31% increase from the $0.67 per share paid during fiscal year 2007. “ - March 2007

This means that the Walton’s get a 31% increase in their income. Why should they change their business plan?

robertdfeinman in Long Island, NY
Thursday, October 04 at 09:05 PM

For Wal-Mart, The Gig is Up!

I would tend to agree with the case you present, robertdfeinman. I think you are correct in your assessment that it’s not in the Walton family’s best interest to “change their business plan.”

But I don’t think it’s going to matter much longer what the Walton family “wants.” Wal-Mart “leadership” will have to change its course, or risk driving the “Big Ship” straight into the rocky shore. But nobody ever said that turning a tired old battleship like Wal-Mart is an easy thing to do. Wal-Mart’s sins are many and have been well-documented. Denial is no longer an option. The layers are being peeled back a little more every day. More and more people are realizing the true meaning of the epithet, “The Beast of Bentonville.”

ScrewedbyWal-Mart in Anytown, America
Thursday, October 04 at 09:45 PM

While your explanation of the evolution of WMT from a price stock to a value stock is correct, Robert, it does raise a question in my mind.

If all the ‘fat cats’ are interested in is “the size of the stock dividend”, perhaps you can explain why Lee Scott liquidated three times (30,000) his usual annual sale of stock? Or why David Glass, the last living link to Sam’s Dream, recently dumped 300,000 shares?

Another consequence of the change from price to value is it squeezes out the ‘little’ guy thereby dismantling another tenet of Sam’s formula, employee ownership (an idea ‘borrowed’ from J.C. Penny).

If we could see the numbers for associate participation in Wal-Mart’s stock purchase program we might find an area where we can all agree on the term decline.

Ken V in Texas
Friday, October 05 at 05:09 AM

Ken:
Lee Scott is not a Walton, he’s a (high priced) salaried employee. Thus his objectives are not the same as theirs. He makes money off the stock price, not the dividend.

If he expects the stock to stagnate he is better off moving some of the money into something which will earn him more. He can’t sell too much stock or it would damage his credibility as CEO.

Employee stock ownership is a bad deal both ways, they don’t get the price appreciation and the dividend doesn’t yield much to a small holder. Studies have shown that over-investment in one’s company’s stock is usually not a good idea. Diversification works better over the long run.

robertdfeinman in Long Island, NY
Friday, October 05 at 09:49 AM

robertdfeinman in Long Island,NY:"Studies have shown that over-investment in one’s company"s stock is usuall not a good idea."Too bad the Enron employees didn’t have your input!

ddrb in
Friday, October 05 at 12:59 PM

“Too bad the Enron employees didn’t have your input!”

Ditto for the associates of the former Kmart Corporation.

Bill in
Friday, October 05 at 01:03 PM

Thus his objectives are not the same as theirs.

You may not be old enough to remember this phrase, Robert, but your answer is a cop out.

Scott and Glass aren’t Waltons, duh! But they are major stockholders.

....damage his credibility as CEO.

Now that’s funny!

I recommend you stick to TheWritingOnTheWal, Robert. You’re a little too slippery for this blog. Kinda like Nick on steroids.

Bean counters! Bah!

Ken V in Texas
Friday, October 05 at 01:31 PM

P.S. Are we to believe the Waltons didn’t see the change from price to value as little as four years ago?

7/15/03
Wal-Mart chairman sells stock for$110M
By Rachel Katz, Bloomberg News

“Wal-Mart Stores Inc. Chairman S. Robson Walton, the seventh-richest person in the world according to Forbes magazine, sold about $110 million in Wal-Mart stock last week, his first stock sale in almost four years.

Walton, the son of the Bentonville, Ark.- based discounter’s founder, Sam Walton, sold 1.95 million indirectly held shares at prices between $56 and $56.70, according to filings with the Securities and Exchange Commission.

The sale was Walton’s first since November 1999, when he sold 1.9 million shares, according to Washington Service, which tracks insider trading.

In addition to this stock sale, reports to the Securities and Exchange Commission indicate that former top honcho David Glass recently sold stock worth $16.51 million on June 25. The sale amounted on about one-third of his total holdings in Wal-Mart stock.”

Ken V in Texas
Friday, October 05 at 01:38 PM

Lee doesn’t make any money off of dividend . WHAT ARE YOU TALKING ABOUT?

oo in
Friday, October 05 at 01:43 PM

GO to detailed stock info under stock price on this page ,scroll down on left to insider trading something of interest there.

oo in
Friday, October 05 at 01:47 PM

THATS INSIDER TRANSACTIONS, sorry.

oo in
Friday, October 05 at 01:50 PM

“I recommend you stick to TheWritingOnTheWal, Robert. You’re a little too slippery for this blog. Kinda like Nick on steroids.”

Robert - Kenny is king of this little fort called WMW, and it really starts to bug him if he thinks someone is trying to steal his thunder.

That said, it was refreshing to see something intelligently-written from a different perspective, for a change. Thanks.

As for you, Mr. V—you need guys like Robert more than they need you.

Otherwise, all you have are guys like SDV, ddrb, and ooo to “contribute”, which really isn’t much of a contribution, at all…

Bill

Bill in
Friday, October 05 at 02:21 PM

and you do what.

oo in
Friday, October 05 at 02:43 PM

Bill in: Sounds like EN-VY rhymes with KEN-V right ,Bill?

ddrb in
Friday, October 05 at 02:52 PM

From de facto moderator to King! Is that a promotion?

And jive is jive, no matter how “intelligently-written”.

Ken V in Texas
Friday, October 05 at 03:44 PM

Remember Bill Is RDS Wallsteet said so.

OO in
Friday, October 05 at 04:15 PM

<b>Now this is Funny!

Bill commenting on others who bring little to the blog...it doesn’t get much stranger than that.

Would you remind us of all your “intelligent” contributions, Bill? I, for one, must have missed them the first time.

ScrewedbyWal-Mart in Anytown, America
Friday, October 05 at 09:34 PM

Robert,

You have ruffeled some feathers with your logic, so they are starting to gang up on you!! They don’t go for logic, they try to work on an emotional level!! People selling stock, to diversify, doesn’t sound as good to them as ‘Jumping the ship”!!

RDS in
Saturday, October 06 at 12:41 AM

Studies have shown that over-investment in one’s company’s stock is usually not a good idea.

You know, RDS, if it wasn’t for Robert’s superior command of the English language, I’d think you wrote that. It’s that stupid.

Like there’s a chance some poor snook of a Wal-mart associate is going to be over-invested by buying a share of WMT every payday or so.

Sorry, Robert, but we’re more Main Street than Wall Street and that may make us a little rough around the edges, but if you say something preposterous, you’re going to get called on it.

While you don’t directly defend the Waltons per se, you defend the system that allows them to be what they are.

Ken V in Texas
Saturday, October 06 at 05:09 AM

Ken V,

“It’s that stupid.’

Tell that to the people at Enron!!

“Like there’s a chance some poor snook of a Wal-mart associate is going to be over-invested by buying a share of WMT every payday or so”

Let’s see, if a person bought 1 share, each week, that would be 52 shares a year, and if they reinvested their dividends. they would gain another ‘Free’ share, so they would then have 53 shares, if they worked there 10 years, they would have 530 shares (not counting any splits)at todays price of $45.37 a share, it would be worth $24,046.10 and while not a fortune to most, it would be a ‘good’ amount to a low income worker!!

RDS in
Saturday, October 06 at 12:38 PM

“Would you remind us of all your “intelligent” contributions, Bill? I, for one, must have missed them the first time.”

That’s because you didn’t shut your pie hole long-enough to listen!

(I couldn’t resist—after all, what have I to lose?)

Bill

Bill in
Saturday, October 06 at 02:17 PM

IRS COMES AND DOES WHAT TO THOSE SHARES WHEN CASHED.

oo in
Saturday, October 06 at 02:55 PM

Usually I stop commenting when people start making personal attacks, but there was one bit of factual misinformation in all the noise so I’ll break my own rule.

The Walton family owns about 1.7 billion shares of stock. With an annual divided of $0.88 per share that amounts to an income of about $1.5 billion.

Lee Scott had overall earnings of about $30 million last year. Exercising some of his options brought him about $2 million. He seems to have options on another 1 million shares. The dividend on these would amount to about $800,000 per year. This is another 3% in income.

So the Walton’s care about dividends and everyone else doesn’t. The Walton’s control the company. The company is set up to yield dividends, not stock appreciation. Why is this so hard to understand?

You can read all the details in the proxy statement:

http://media.corporate-ir.net/media_files/irol/11/112761/2007_proxy.pdf

How anyone could come to the conclusion that I’m supporting the Walton’s is beyond me. They are the most selfish wealthy family in the US. They have worked behind the scenes for over a decade to get the estate tax repealed. They stand to save about $40 billion if they succeed.

You can read about their effort and the rest of the 18 families behind the “death tax” propaganda campaign in this report:

http://www.citizen.org/documents/EstateTaxFinal.pdf

robertdfeinman in Long Island, NY
Saturday, October 06 at 03:08 PM

oo,

“IRS COMES AND DOES WHAT TO THOSE SHARES WHEN CASHED.”

To a person with high income, the IRS hits you for capital gains taxes, but, if you are a ‘low income’ person, the effect on your taxes is almost nothing!! But, if you look ‘long term’ and don’t get too anxious and keep those shares as an investment or sell and reinvest in something else, it can amount to a better future for you!! That is the main problem though, people selling off their shares almost as fast as they get them!!

RDS in
Saturday, October 06 at 10:10 PM

Why is this so hard to understand?

It’s not. What is hard to understand is where do you draw the line? We both know RDS’s piddly numbers are ridiculous, but just how many shares do you have to own to be the beneficiary of the change from price to value? Ten thousand shares? A hundred thousand? A million?

And it seems to me that if you leave your money in and clip coupons, you’re supporting the company and if you exercise your options and profit-take, you’re not.

Usually I stop commenting when people start making personal attacks...

I apologise if I came off as belligerent , Robert, and welcome you here. WMT is a little more rough-and-tumble than what you’re used to, but I wouldn’t let a little flame run you off.

My suggestion you return to The Wal was based on content not personality. You seem to have a real handle on financial aspects of the Beast, but I fear very few Wall Streeters read* WMW looking for investing advice. (If they do, they’re in the wrong racket.)

I’m all about elevating the level of discourse here, and even if we fail to agree, you’re posts will do that.

*They might read this site, however, to access the potential affect of the Anti Wal-Mart Movement.

Ken V in Texas
Sunday, October 07 at 06:41 AM

rds and thats why you are where you are ,in your thinking. END OF DISCUSSION , KEN JUST YOU.

oo in
Sunday, October 07 at 11:36 AM

THATS KEN JUST TOLD YOU.

oo in
Sunday, October 07 at 04:31 PM

oo,

“rds and thats why you are where you are ,in your thinking”

And, that is why most ‘poor’ people remain ‘poor’ and ‘rich’ people get ‘richer’!! The ‘poor’ think like Ken, while the ‘rich’ think like me!! Rich people invest their money, to make it multiply, while ‘poor’ people spend all of their money!! Guess that is why I’M not ‘poor’ anymore, I learned to think ‘rich’!!

RDS in
Monday, October 08 at 12:27 PM

(((pats))) Bootstrap Bob on the head. You’re a good boy, RDS.

Ken V in Texas
Monday, October 08 at 03:14 PM

HE HAS IT SO FAR UP ,THE MEDICAL TEAM IS GOING TO HAVE TO CRACK HIS PELVIS TO LET HIM OUT FOR AIR.

00 in
Tuesday, October 09 at 12:32 PM

he thinks he is rich ha ha

OO in
Tuesday, October 09 at 12:34 PM

oo in:When your air supply gets cut off for too long,it deprives the brain cells, and the effect is irreversible,unfortunately.But I’m not certain what studies have been done on the long term effects upon vision.Certainly this acute condition creates an inability to see and think clearly, but hearing is also impaired.Therefore,one can neither hear,see ,or think clearly-speech may or may not be affected due to the depth of insertion.

ddrb in
Tuesday, October 09 at 04:45 PM

ddrd so I was right.

oo in
Tuesday, October 09 at 05:42 PM

oo:More or less,oo.

ddrb in
Tuesday, October 09 at 05:55 PM

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