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Last Friday, Wal-Mart Watch had the opportunity to attend a presentation on “Wal-Mart, China and Responsible Sourcing” at Johns Hopkins University.  Beth Keck, the senior director of international sustainability and strategy for Wal-Mart, was there to represent Wal-Mart.

Keck’s presentation primarily focused on sustainable buildings, plastic bags, and packaging, but also mentioned Wal-Mart’s new supplier standards.

After Keck finished her 28 slide PowerPoint presentation, she fielded questions from the audience.  A great majority of those present wondered if Wal-Mart’s “always low prices” mantra is inherently contradictory to sustainability.  Keck replied that it is not and talked about packaging.

Regarding the new supplier standards, I pointed out to Ms. Keck the reaction Wal-Mart’s sustainability summit had received in the news and I asked her how Wal-Mart suppliers were to supposed to pick up the costs of improving standards when many of Wal-Mart suppliers are forced to supply Wal-Mart with little or no profit. 

Keck talked about packaging…

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As Wal-Mart continues to push suppliers to the brink of death, more and more suppliers are opening up about their relationships with Wal-Mart.  The stories all contain one common denominator:  “It’s always hard to make money from Wal-Mart orders.” And while big brands like Proctor and Gamble can supply Wal-Mart at cost, smaller suppliers do so and “wait to die”.  In an article from Sinotoys.net, “Bo Lin” (an alias), a toy supplier for Wal-Mart, describes the woes of working with the giant.  Aside from Wal-Mart’s low cost bargaining tactics, Bo Lin also describes being bribed by Wal-Mart factory inspection officials to pass inspection, regardless of the circumstances in his factories.

“We’re a small enterprise.  Life and death can happen in a split second,” Bo Lin said great anguish.

Last month, a business owned by a friend of Bo Lin’s closed down.  That was a stationery processing plant with sales that surpassed 400 million [RMB].  Almost all the goods were supplied to Wal-Mart.  Bo Lin’s factory is also a Wal-Mart supplier.  “We all used to do business with Wal-Mart for the glory,” Bo Lin said describing the initial excitement of becoming a Wal-Mart supplier.

During our interview, Bo Lin repeated that sentence 5 times. 

But after 4 years of struggle within Wal-Mart’s supply chain, Bo Lin is determined to withdraw. “Four years is the cycle of death and rebirth”.  This is “established law” for all of Wal-Mart’s suppliers.  The difference is only whether to die or withdraw.

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According to The Christian Science Monitor: “In Britain, carbon footprinting – used initially to broadly measure environmental impact across a company’s entire operations – is morphing into an eco-labeling tool.” This after a British group reported that 80% of a product’s carbon footprint is laid before the consumer actually drives out and buys or uses it.

Unfortunately, carbon-labeling appears to be a tool Wal-Mart believes the American consumer isn’t ready for.

As for carbon-labeling, Wal-Mart’s senior vice president of sustainability, Matt Kistler, says that he doubted existing methodologies and the Wal-Mart customer’s ability to relate carbon with consumer merchandise. “I’m not sure the consumer will ever make a purchase based on the carbon footprint,” he says, “especially the mass consumer.”

Possible. But I think Mr. Kistler underestimates the public’s knowledge on the issue. Sure, many consumers may not know what exactly a carbon-footprint is, but the majority have probably at least heard the term and know it relates in some way to the environment. Carbon-labeling may not affect the buying habits of the majority, yet even if a small percentage of Wal-Mart shoppers were to see the labels and be moved to research the issue further, that can’t be a bad thing, right?

Those making efforts to examine their carbon footprints often do so without transparency – essential to generating both customer support and supply-chain innovation.

At Wal-Mart, consumer transparency is largely tied in to its corporate press releases, a growing assortment of eco-labeled products, and in-store awareness campaigns. A more robust effort is the company’s “Love, Earth” jewelry, which enables customers to use the Internet to map where the jewelry’s gold and silver were mined and manufactured, including information on how the mines manage cyanide and waste dumps.

Are you ready to go on a carbon diet? [The Christian Science Monitor]

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Maybe Wal-Mart doesn’t understand how products are made.

In Wal-Mart’s world, suppliers make products for Wal-Mart because the pleasure of working with Wal-Mart is so great.  In fact, the less profit a supplier makes from working with Wal-Mart, the greater pleasure!  That must be why when Wal-Mart demanded suppliers improve their “sustainability” and “safety”, Wal-Mart said it will not pay for these increased costs.  Rather, Wal-Mart said it would reward compliant factories with longer contracts of the same low-priced orders.

But in the real world - where people have responsibilities outside of their contracts with Wal-Mart (like feeding their families) - suppliers are ailing.  Many report that Wal-Mart has failed to take into consideration reality - that costs of raw materials and manufacturing have increased substantially. Many suppliers are being forced to “either supply Wal-Mart goods while not raising prices and wait to die or raise the prices and court death.”

To make reality just a little more grim, Wal-Mart is now demanding that suppliers implement radio frequency identification (RFID) to replace bar codes.  According to reports, implementing RFID will increase the cost burden on suppliers by 20 times the cost of the currently used bar code.  While the suppliers are left to figure out how to pay for the increased cost, Wal-Mart is expected to save $8.35 BILLION each year. 

As we’ve seen, coercing suppliers to produce at below cost forces suppliers to abuse labor and use inferior materials - thus creating Wal-Mart’s real need to increase sustainability and safety.

If Wal-Mart wants real, sustainable change, Wal-Mart needs to put the money behind it.  Until then, we all lose.

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Apparently, the highly-publicized annual Wal-Mart analyst’s meeting served a purpose other than announcing that Wal-Mart plans to: scale-down domestic expansion, improve existing stores, and embark on foreign conquest.  They also announced a new venture from Sam’s Club, slated to debut in Houston next year. It is a new club-format store, geared toward Hispanics, creatively titled: Más Club ("More Club” in Spanish. They could name every Sam’s this, no?).

The clubs will feature an expanded selection of Hispanic foods and products produced in Mexico and Latin America.  The Houston Chronicle reports that the Selig Center for Economic Growth at the University of Georgia, has estimated that the Hispanic population will account for 1.2 trillion dollars of spending power by 2012 - and Sam’s Club wants a piece of the action. 

The store looks to drape itself Hispanic culture, featuring a cafe that sells ‘fresh’ tortillas (sounds delicious) and branding itself in the red, green and white of Mexican flag. Doug McMillon, president and CEO of Sam’s Club is quoted in Reuters:

“Our objective is to create an additional shopping choice that provides currently unavailable value for families, restaurant owners, convenience stores and more...”

McMillon chose not to discuss Mas Club’s suppliers. Given that it will be carrying mostly Hispanic products, “Mas Club” might actually break a new Wal-Mart record for percentage of products not made in the U.S.  But Latin American suppliers beware. Wal-Mart Stores, Inc. is notorious for bullying down their suppliers to sell products at a price they can barely afford (Vlasic, Levis). 

While the first store is to serve as a prototype, The Northwest Arkansas Morning News said McMillon is ”pumped” about the new chain, which will also feature gas stations…

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Check out this week’s issue of the Wal-Mart Watch Weekly Update for Elected Officials – a compilation of Wal-Mart news from across the country and beyond.

This week’s issue begins with news of Wal-Mart’s closing of a Quebec Tire and Lube Express, just two months after workers there won a precedent-setting collective bargaining agreement. The move has been wildly denounced, although Wal-Mart officials maintain that Wal-Mart is not anti-union. Following up on that, BloggingStocks.com asks whether it’s wise that the retailer would rather see an operation shut down entirely than have employees with any kind of power.

In addition, the Hartford Courant has been following an issue in Connecticut - it seems the CT Consumer Protection Department will review Wal-Mart’s double tax policy to see if it violates state tax law. And on the International side, read more about Wal-Mart’s new green store in Beijing, China, and how the retailer is claiming it will toughen standards on its Chinese suppliers.

And finally, check out our “Stateside” and “Wal-Mart International” sections to find out what’s going on with Wal-Mart around the country and across the globe.

Wal-Mart Watch Weekly Update for Elected Officials [October 22, 2008]

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SweatFree Communities, an anti-sweatshop activist group, went undercover in Bangladesh to examine working conditions in Wal-Mart’s supplier factories. The resulting report (PDF) paints a heart-wrenching portrait of the poverty and abuse that make Wal-Mart’s low prices possible.

BusinessWeek’s article on SweatFree’s findings is equally troubling. The piece highlights problems at Wal-Mart that enable sweatshops: preannounced factory inspections mean managers can hide violations, and fewer corporate reports on the state of its supply chain means Wal-Mart executives are turning a blind eye. Wal-Mart also tried to suppress SweatFree’s report, alone a worrysome fact. SweatFree Communities Executive Director Bjorn Claeson is quoted in the article saying, “Wal-Mart has incredible economic muscle in that country. If it takes the leadership position as a retailer and works with other brands, there is no question that it can really have an impact.”

Wal-Mart Supplier Accused of Sweatshop Conditions [BusinessWeek]

The world’s largest retailer, Wal-Mart Stores (WMT), is being accused of buying school uniforms that were made under extreme sweatshop conditions at a factory in Bangladesh.

The JMS Garments Factory in Chittagong, Bangladesh, produces school uniforms that are sold in Wal-Mart stores under the Faded Glory brand name. A report from SweatFree Communities, an anti-sweatshop activist group based in Bangor (Me.), found that workers at the factory work up to 19-hour shifts to finish Wal-Mart’s orders under tight deadlines; are made to stand for hours as punishment for arriving late to work; and are frequently subject to verbal abuse and kicking or beatings. Some workers earn as little as $20 each month, the group says—even lower than the country’s legal minimum wage of $24 per month.

The report is based on interviews with more than 90 workers conducted away from the factory in workers’ homes by a Bangladeshi nongovernmental labor research organization on behalf of SweatFree Communities, a five-year-old nonprofit group funded by activist foundations such as the Solidago Foundation, CarEth Foundation, and Presbyterian Hunger Program. The group works to get commitments from schools, cities, and other employers to buy goods with employee rights in mind.

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Labor rights violations have plagued Wal-Mart’s supply chain since the company abandoned its “Buy American” campaign in the early 1990’s. Wal-Mart’s business model relies on low prices, and those low prices are made possible by manufacturing products overseas where economies are weaker and human rights enforcement is lax.

Yesterday, the company announced that it will require suppliers to avoid cotton from Uzbekistan, which is known for using children to harvest cotton each year. From IWPR’s The Cost of Uzbek White Gold:

Gathering cotton in the autumn has been considered the most important part of life for an Uzbek citizen since Soviet times. But the hefty dollar revenues reaped by the government from its monopoly export and processing business are made on the backs of children who provide cheap labour.

Many other retailers have also started boycotting Uzbekistan’s cotton, and it is without a doubt an issue that should be addressed by every conscientious company. Wal-Mart use it’s purchasing power like this a thousand different times in dozens of countries and still not resolve all the problems in its supply chain. We only hope to see more efforts like this coming out of Bentonville.

Wal-Mart asks suppliers to avoid Uzbek cotton [Reuters]

Wal-Mart Stores Inc said on Tuesday it is requiring its suppliers to stop sourcing cotton from Uzbekistan, in an effort to end child labor there.

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Wal-Mart has already acknowledged (PDF) the fact that illegal logging goes on in its wood supply chain. A new investigation by The New Yorker follows lumber from the forests of Russia to the toilet seat aisle of Wal-Mart stores.

Taking six years to eliminate illegal logging from its supply seems like a long time for a company that can get Procter and Gamble to sell concentrated laundry detergent in a matter of months, don’t you think?

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Wal-Mart stockpiles massive amounts of information about its customers. The retailer’s databases are enormous - bigger than the internet - and the information contained on its servers includes everything from which aisles shoppers choose to go down to the time of day chocolate milk sells quickest.

Now, the statistics firm ACNeilson (best known for its TV viewership ratings) is taking Wal-Mart’s data and helping the retailer understand its shoppers even better. At a recent conference of Wal-Mart suppliers, Neilson reps broke down how many cartons of eggs, car parts, and bags of dog food Wal-Mart customers buy each year. The study also revealed the average household incomes of Wal-Mart’s shoppers, the average number of trips each shopper makes and how much shoppers spent at the stores, on average. Ultimately, Wal-Mart hopes to use this information to customize store inventories and increase profits.

The study comes at a time when political analysts everywhere are desperately trying to understand Wal-Mart’s core demographic. “Wal-Mart Moms” may be the key to November’s election, some pundits say. Political alignment might not have been on Neilson’s questionnaire, but the study does provide some insight. According to Neilson, the average Wal-Mart shopper is a “pet-loving, pasta-eating, car-driving, gadget-obsessed dieter who either doesn’t care for cheese or buys it elsewhere.” (That part about the cheese may or may not impact the election directly.)

The data in the study doesn’t provide a complete picture of Wal-Mart’s shoppers - and it certainly doesn’t encompass all of the middle-aged women being wooed by politicians - but Wal-Mart is trying harder than ever to win over “the core female head of household” i.e., the “Wal-Mart Mom.” The retailer isn’t alone in catering to this powerful group not alone, and who knows - maybe quality dog food actually is the secret to winning the presidency in November.

Marketing firm looks at Wal-Mart shopper, trends [NW Arkansas Morning News]

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The past couple weeks have seen plenty of stories describing ways in which Wal-Mart has mobilized to aid the Gulf Coast in preparation and relief efforts during hurricane season.

It seems, however, that even though the corporation was making efforts to lessen the blow of the storm, they still haven’t lost sight of the bottom-line.  In a story posted yesterday in The Examiner, Wal-Mart was accused of price-gouging gasoline at one of their stations along an evacuation route in Southeast Texas. The Wal-Mart/Murphy USA located on U.S. 69 in Lumberton raised their price of gasoline a total of 12 cents in the day leading up to the evacuation for Hurricane Gustav, then another 10 cents when the evacuation was announced. 

These prices were NOT consistent with other gas-stations in the area and following the storm, prices dropped again to reflect market prices. And despite a gas station manager claiming that prices went up because of a “gas price rise”, the cost of oil per barrel dropped over each of the three days. 

Evacuation Gas Game [The Examiner (Texas)]:

In the days and hours leading to the potential call for a mandatory evacuation for Southeast Texas residents the Texas Department of Transportation (TxDOT) blasted across its electronic billboard alert system that a hurricane was coming and residents needed to fill up their tanks with gasoline.

According to a local wholesale fuel provider, most everyone heeded TxDOT’s advice, but The Examiner also kept close watch on one gasoline retailer located along the main evacuation route from Southeast Texas.

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Yesterday we posted a story from the U.K. about a list of “requests” Asda’s magazine purchaser made of its suppliers. Among the set of outrageous demands: profit improvements, new fees for store space and two pages of editorial space in every publication.

As is so often the case with Wal-Mart, once its exploitative behavior was exposed to the light of day the retailer backpedaled furiously, said the demands were “a mistake” and blamed some poor low-level executive.

This isn’t an isolated incident, however, of Wal-Mart using its power unfairly. The statement of one publishing industry insider could be applied to any one of a number of industries that Wal-Mart has relentlessly bullied in to lowering prices:

“Its absurd demands show a complete failure to comprehend the costs of producing a magazine. A demand for two pages of advertising/editorial in each magazine is tantamount to blackmail.”

For those who argue that Wal-Mart’s monopsony is good for consumers, think about a world where corporations write your magazine articles. Wal-Mart’s marketplace dominance might mean lower prices, but it seems unwise to trust a corporation with so much power.

Asda admits ‘mistake’ in magazine distribution row [Brand Republic]

Asda has told Campaign that it made a mistake when it asked magazine distributors to grant it free editorial space in titles of its choosing.

Magazine publishers have branded Asda a “schoolyard bully” after it proposed changes to distribution arrangements that insiders say would “devastate” the industry.

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