Last week, WMT’s full year guidance was ratcheted even lower than analysts’ already bleak expectations. Over the past three months the stock had fallen by nearly 6% (vs. a 3% increase in the overall market during the same period). In prerecorded remarks incoming WMT US CEO Greg Foran said “Walmart U.S. is a great business, with a deep and rich heritage in serving our customers with a smile, in clean, tidy, well-merchandised stores, with terrific low prices and value. A cornerstone of our success has been our wonderful associates, from our stores to our DCs, our Home Office and e-commerce facilities. They still are.”
Over the past several months, WMT officials have clearly articulated a desire to ramp up investments in ecommerce and small format stores, but critics have pointed out that these initiatives represent a different business model than that of the supercenter, as well as significant new capital expenditures, and even defenders of the strategy acknowledge it is primarily a defensive one. In response, WMT officials have sought to emphasize the ways the new investments will leverage the company’s existing big box base—initiatives such as “site to store” (allowing customers to pick up website purchases at brick and mortar stores) and “tethering” (using supercenter backrooms as secondary distribution centers to supply new small format stores nearby).
Today WMT officials are hosting a “US Manufacturing Summit,” cast as an effort to jump start domestic sourcing, but this is not the first such effort. WMT’s first “Buy American” campaign was launched in the late 1980s, and also promised to boost US manufacturing jobs. While the overall effect on jobs was unclear (WMT shifted production some items such as shirts to US manufacturers while simultaneously increasing imports from China and other low wage export platforms) the program was widely considered a PR success. But WMT’s “Buy American” campaign had another goal as well. As one then Wal-Mart board member told Wall Street Journal reporter Bob Ortega, one of the main objectives of the campaign “was to put the heat on American manufacturers to lower their prices.”
One consequence of this “heat,” according to one WMT vendor who spoke with Discount Store News, was that companies like his were “no longer manufacturers,” and had merely become sources who “produce only the products that Wal-Mart has decided it wants to sell, which in turn makes R&D and introduction of new products redundant and unprofitable.”
When even those prices weren’t low enough, some suppliers, now completely dependent on WMT for their markets, were told to move offshore. As Professor Gary Gereffi at Duke University observed in 2004: “Wal-Mart is able to transfer whole U.S. industries to overseas economies.”
How many jobs were affected? According to a report by the Economic Policy Institute, Wal-Mart’s imports from China had reached $27 billion by 2006, and Wal-Mart’s imports alone accounted for 11% of the growth of the US trade deficit with China between 2001 and 2006. EPI estimates WMT was responsible for the loss of an estimated 200,000 US manufacturing jobs.
What about Wal-Mart’s 2014 “Made in the USA” campaign? If WMT’s earlier foray into US manufacturing resulted in tragedy for thousands of US workers, the current edition resembles something closer to farce.
To illustrate its “commitment to American renewal” Wal-Mart has identified a handful of suppliers it says are part of an effort to grow US manufacturing jobs. One of the examples most often profiled in recent press accounts is that of Element Electronics Corp., a producer of flat screen TVs in Michigan and South Carolina. One report called Element “the campaign’s biggest surprise to date,” touting the supplier’s “six assembly lines making 32- and 40-inch TVs that are now available in all of Walmart’s more than 4,000 U.S. stores.”
But, as a subsequent Wall Street Journal report noted, the real surprise may be the one that awaits unsuspecting US consumers:
“WINNSBORO, S.C.—Every flat-screen television set that rolls off conveyor belts here goes in to a box marked “Assembled in the USA” before it ships to Wal-Mart customers. What might surprise buyers is how little those TVs change after arriving from China in the same boxes.”
The Journal describes how Element’s US workers merely unbox the TVs, insert Chinese-made memory boards, then test them before replacing them in their patriotic cardboard cubes. Element would like to do more assembly in the US, but, as Professor Gereffi noted ten years ago, the necessary supply chains were moved offshore years ago, often at the behest of a large Arkansas based buyer.
It’s not surprising then that WMT’s actual “commitment” amounts to zero: the company’s press releases announce an additional $250 billion in domestic purchases over the next ten years, but that is actually slightly less than what WMT was already on track to purchase, assuming WMT US and Sam’s Club’s sales and cost of goods sold simply continue to grow at the rate they have over the past three years (2.9%).
Meanwhile, as it has in the past, WMT continues to lobby in favor of “free trade” legislation including the secretive Trans-Pacific Partnership and “fast track” authority for trade bills. We eagerly await any indication the company is considering reversing these positions as part of its commitment to US jobs.
There is a widespread attribution of WMT’s woes to the state of the low-income consumer—continued high unemployment, nonexistent wage growth, cuts to food stamp benefits. But here we see a tension inherent in WMT’s business model. As the largest employer in the country, with a labor policy based on notoriously low wages and benefits, and the increased use of temporary employees, WMT has driven standards down in the service sector labor market. These effects are felt most acutely in the local labor markets where WMT also has the largest market shares among low income consumers. As economic geographer David Harvey wryly observed, “Impoverished workers do not constitute a vibrant market.”
A recent survey by Lake Research Partners provides some insight into this opposition: a large segment of the public has a negative perception of WMT, and many view the company as treating its workers badly. Among the 27% of consumers who rarely or never shop at WMT, over one-third (36%) cited “poor treatment of workers” as a reason. Even among WMT’s most loyal shoppers, those who shop there weekly, 9% say they have been shopping there less, and among those 25% cite “poor treatment of workers” as a reason.
Last year, just as Walmart was illegally firing workers for participating in legally protected strikes, Walmart Associates who are members of OUR Walmart were attending the Yahoo! shareholder meeting. They did so in order to address their concerns about Walmart’s illegal retaliation to Yahoo! CEO Marissa Mayer, who is also a member of the Walmart Board of Directors. The workers and the questions they directed to Mayer were widely covered in the press.
It’s disturbing, but not surprising. Walmart Board member Aida Alvarez is nothing if not consistent. For eight years, Alvarez has served on the Board of Walmart. For more than two years, Walmart workers who are members of the Organization United for Respect at Walmart have been asking to meet with Ms. Alvarez. She has refused or ignored more than a dozen requests from Walmart workers and their allies to meet. That’s consistency.
In another sign of the growing pressure from Walmart workers and their allies, Walmart announced in its annual proxy statement (a report filed with the SEC in advance of the annual shareholders meeting) yesterday that two long-time board members would be stepping down. The two board members are former Walmart CEO Lee Scott, Jr. and independent board member and Audit Committee chairman Christopher Williams.
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Walmart’s ruling family, the Waltons, owns a majority of shares and keeps a tight rein on the company – which churns out more than 8 million dollars in dividends for them every single day.