Piling on City Council for Walmart

DC recently passed legislation forcing large big box retailers to pay higher wages. The bill is focused on Walmart, which has plans for 6 stores in the city, but the legislation applies to other stores as well. Three of the stores are underway and the stores not currently being built would not be, according to Walmart, if the law is upheld.

Now I wasn't in favor of the law because it was misdirected. I prefer to see the city pass a comprehensive big box review ordinance that would focus on urban form, development, and other elements.

Left: Walmart was a sponsor of last September's H Street Festival and at their booth they were gathering names of supporters for their entry into the city.

What gets me about the campaign by Walmart, and now I understand why they have been organizing continuously since they began the process (see "If you don't know urban political theory, it's likely that you don't understand local land use: St. Louis: DC; etc."), in order to be able to ward off efforts such as this, is that "the other side" hasn't been articulate about Walmart's two biggest weaknesses.

1. In virtually every consumer satisfaction study, on every element except price*, they are ranked very low (see "Who's right about Wal-Mart's customer satisfaction?" from MSN Money).

2. The way that Walmart treats non-managerial staff is horrid, horrid, horrid, at least according to this series of articles from Gawker (e.g., "Life at Wal-mart, Vol. 3: Welcome to Hell").  Also see "Wal-Mart Relies On Taxpayers To Subsidize Low Wages" from Business Insider.

3.  Related to both customer satisfaction and labor treatment-management, Wal-mart's primary priority is managing for stock price, and in the face of sales drops they have been continuing to cut labor, about 50 people per store.  This has resulted in highly significant levels of "out-of-stocks" on the weekends ("Customers Flee Wal-Mart Empty Shelves for Target, Costco" from Bloomberg).

Why would we want to roll out a red carpet for such a company's entry into DC?

Anyway, Walmart continues to gather support, according to this article, "Major retailers urge Gray veto of living wage bill, threaten to table expansion plans," from the Washington Business Journal. From the article:

A half-dozen major retailers have signed a letter to D.C. Mayor Vincent Gray urging him to veto the large retailer living wage bill, threatening to "revisit" expansion plans if the legislation is enacted.

Here's the irony about this statement. Walgreen's and Autozone stores are small, they will never be subject to the legislation. Macy's is not likely to ever open a second store in DC, maybe a Bloomingdales, but probably not. Neither Target nor Home Depot is likely to open a second store in DC. Lowe's has been listed as coming to the city, probably, to a development on New York Avenue.

And the companies are not in the business of wanting to ever help Walmart.

But the companies must be so against local regulations concerning labor relations and wages that they would join forces, with concern that such regulations could end up being extended to other types of businesses.

I even saw an on-air broadcast editorial in favor of Walmart on the wage bill issue, on Fox5 (WTTG-TV).  I've never seen them do an on-air broadcast editorial--maybe they do them all the time and I just am never watching at the right time? 

Walmart plays very hard ball, as I wrote about last year, about how they successfully got a big box review ordinance overturned in San Diego, and I expect they are likely to win on this issue in DC.

* There is a report from Zenith Management Consulting, How To Exploit Wal-Mart's Weaknesses, that makes the point that the reality is that only 20% of the products that Walmart sells are significantly less than the prices at other retailers.

But they use these products as a way to shape a consumer's overall impression about Walmart as always being the lowest priced store.  From the piece:

• Wal-Mart’s business model is not really low-price, it is creating perceptions that
prices are lower than they really are.
• All retail customers have five core needs that must be met.
• Low prices matter more to consumers because they think Wal-Mart’s are so much lower.
• Consumers forgive Wal-Mart’s poor quality, service, and convenience because they think Wal-Mart’s prices are so low.
Consumers who shop at Wal-Mart become caught in a self-reinforcing loop that makes them keep shopping there.
• Wal-Mart’s buying practices injure its vendors.
• Wal-Mart actually serves well only one stakeholder group: shareholders.
• Wal-Mart’s great weakness is that it serves poorly four out of five stakeholders.
• Wal-Mart is so successful nonetheless because it creates perceptions that it is actually serving all its stakeholders well.
• The only way to recapture market share from Wal-Mart is to interfere with the
mis-perceptions.
• This cannot be done by individual organizations, but must involve groups of
organizations acting together.
 --
Walmart's total sales include 55% grocery sales ("Walmart's Grocery Segment Accounts for 55% of U.S. Sales" from Retail Leader; "Wal-Mart Fattens Up On Poor America With 25% Of U.S. Grocery Sales" from Forbes).  And because people eat every day, food purchases drive a lot of store traffic.

One of the company's campaigns is price comparisons ("Walmart Gets a Boost From Local Price-Comparison Ads" from Advertising Age), which they have been running in this market.  The ads typically cherry pick products for the comparison and they go head-to-head with the company that they are most likely to compete with--in this case, Giant Supermarkets.

In some other markets, supermarkets like Publix ("Publix swats back in Walmart price war" from the Tampa Tribune) and HEB ("H-E-B beats Wal-Mart on advertised claim of big savings" from the Houston Chronicle) have successfully run counter-advertising ("interfering with the mis-perceptions") that has led Walmart to back off on the campaign in those markets, because these companies can successfully compete.