Walmart: Mad Or Methodical?

Jerry Seglin, a business ethics columnist for The New York Times, once spoke on the topic, “Is it ethical to shop at Wal-mart?” Seglin began his remarks by giving a description of two retail stores. The first one was described as a company “founded by a folksy entrepreneur whose notions of thrift, industry, and the square deal were pure Ben Franklin” (“Is it ethical,” 2004). The organization’s low prices had spurred productivity and had helped to combat inflation (“Is it ethical,” 2004). The company was America’s most admired company.

The other retail store was described as a “very big discount store” that “will do just about anything to get bigger” including hiring illegal immigrants to mop its floors, locking workers inside the store overnight and crushing many an individual proprietor in its ambitions to grow bigger and bigger (“Is it ethical,” 2004). Which one of these descriptions represents Wal-Mart one might ask? Both of them do. And so goes the long-standing argument: does Wal-Mart stimulate an economy or retard it? Does Wal-Mart produce jobs or force jobs overseas? Does Wal-Mart really save the consumer money or are we really just “shopping ourselves out of jobs” as one supplier suggested?

Background on Wal-Mart

According to Sam Walton, the founder of Wal-Mart, “the secret of successful retailing is to give your customers what they want” (Walton, 1993). By focusing on the customer, Wal-Mart grew nearly exponentially. While Walton was only able to raise enough funds to build fifteen stores in the 1960s, the company had 276 by the end of the 1970s (“The Wal-Mart story,” 2006). In the 1980s, Wal-Mart was one of the most successful retailers in America. In 1989, sales grew to $26 billion and employment increased tenfold (“The Wal-Mart story,” 2006).

Today, the global company has “more than 1.8 million associates worldwide and nearly 6,500 stores and wholesale clubs across 15 countries” (“The Wal-Mart story,” 2006). Wal-Mart is not only the world’s largest retailer; it is the world’s largest company (Fishman, 2003). Wal-Mart does more business than Target, Sears, J.C. Penney, Safeway, Kroger and Kmart combined (Fishman, 2003). In fiscal 2005, the company generated more than $312.4 billion and netted almost $11.2 billion of that sum (“The Wal-Mart Story,” 2006).

Many of the companies that supply the mega-retail store with products to sell believe that Wal-Mart is a good entity to do business with. In a December 2003 article entitled, “The Wal-Mart you don’t know,” the overarching sentiment was that Wal-Mart is a great company and a great company to do business with. John Mariotti, the former President of Huffy Bicycle Company and now chairman of World Kitchen, was very clear on his opinion of Wal-Mart: “Wal-Mart has done more good for America by several thousand orders of magnitude than they’ve done bad. They have raised the bar, and raised the bar for everybody” (Fishman, 2003).

Robin Prever, the CEO of Saratoga Beverage Group from 992 until 2000, notes that Wal-Mart’s way of doing business actually changed the way that Saratoga conducted itself. She explains, “Everyone from the forklift driver on up to me knew we had to deliver [to Wal-Mart] on time. You have this 30-second window. Either you’re there, or you’re out. With a customer like that, it changes your organization. For the better. It wakes everybody up. And all our customers benefited. We changed our whole approach to doing business” (Fishman, 2003).

Wal-Mart’s effect on its suppliers doesn’t end there. Some companies actually want to do business with Wal-Mart because of its second-to-none integrity. Wal-Mart pays its bills briskly and it keeps its word. According to Peter Campella, whose company supplied Wal-Mart with Corning kitchenware products, “They are tough people but very honest; they treat you honestly” (Fishman, 2003). When asked to compare his dealings with Wal-Mart with those of other retailers, Campella remarked, “It was a joke to do business with most of their competitors. A fiasco” (Fishman, 2003).

Wal-Mart also has a purported beneficial impact on the economy, at both the local and national level. In Northwest Arkansas, where Wal-Mart’s home office is located, the area has flourished. Its growth has been so dramatic that in 2003, the Milken Institute’s ranked the Fayetteville-Springfield-Rogers, Arkansas area number one in its annual assessment of the nation’s best performing cities (Troy, 2005). At the national level, Wal-Mart is credited with being “at least partly responsible for the low rate of U.S. inflation” (Fishman, 2003). A McKinsey & Company study revealed that approximately 12% of the economy’s productivity gains in the later half of the 1990s could be directly traced to Wal-Mart (Fishman, 2003).

Not everyone, however, agrees that Wal-Mart benefits the economy at any level. At the individual-level, Wal-Mart’s mission to keep its prices low adversely impacts its workers. In 2004, it was estimated that a Wal-Mart employee working a 32-hour work week earned approximately $13,312 a year (“Is it ethical,” 2004). The Federal poverty level that year for a family of three was $14,630 (“Is it ethical,” 2004). Union grocery workers, in contrast, earned 30% more than their Wal-Mart counterparts (“Is it ethical,” 2004).

Approximately two-thirds of Wal-Mart employees cannot afford to participate in the company’s health insurance plan (“Is it ethical,” 2004). Given that Wal-Mart has increased the premium cost for its workers by 200%, which is well above the increase in cost of health insurance, it is no wonder why Wal-Mart employees cannot afford to be insured (“Is it ethical,” 2004). In 2005, a research and advocacy group, Good Job First, produced a report that detailed which employers have the most workers (and their dependents) enrolled in state health insurance programs. The report explains that the state-sponsored programs “put taxpayers in a position of indirectly subsidizing private-sector health cost cutting” (McCrate,