October 7, 2019 

BY David Millward

Whisper it quietly, but Walmart is trying to play nice. The retail behemoth, which started life as Sam Walton’s Five and Dime store in Bentonville, Arkansas in 1950, has not always enjoyed the best of reputations.

Walmart has trodden on a lot of toes as it expanded to become an empire encompassing more than 11,300 stores in 27 countries, including Britain, where it has owned Asda since 1999.

Author Brian Quinn dubbed the company the “Beast of Bentonville” as he laid out an extensive charge sheet in his book How Walmart is destroying America (and the world).

The book may be 20 years old, but many of the complaints still resonate among critics today – from sucking the life out of towns and killing off mom and pop stores, to treating its staff and suppliers badly.

But there are signs that the company culture has been changing. Many observers see Doug McMillon, who was appointed chief executive in 2014, as the driving force.

Within months of taking over, he pushed up the company’s minimum wage to $10 an hour and there have been further increases since.

Earlier this year he predicted that the minimum wage in the retail business would top $15 an hour.

Only last week Walmart announced it was overhauling the health benefits it offers workers, which, it says, will provide staff improved care.

These moves have been driven by a shortage of workers in what has become a tight labour market, says Neil Saunders of GlobalData Retail.

“Walmart needs to work harder to attract and retain associates. That is one of the reasons it is investing more in its employees,” he says.

Walmart remains incredibly successful. It is on course to turn over more than $500bn (£406bn) this year and make a $129bn profit

The improvement in healthcare was just one of a blizzard of “good news” announcements from the company over the last few months as Walmart embraces sustainability with initiatives such as encouraging staff to cycle to work at a planned corporate campus.

Last month, following two mass shootings at Walmart stores, McMillon announced the company would no longer sell ammunition that could be used in military-style weapons and handguns. He also called on other retailers to follow suit. Arguably, in doing so he has offended the company’s blue-collar customer base.

But it is not the first time he has run into trouble with conservative groups. Earlier this year Walmart posted an ad on its Facebook page showing two gay men on a date.

It prompted outrage from a group called “one million moms”, who accused the company of being politically correct and promoting “the homosexual agenda”.

Such things would never have happened under Sam Walton, the group complained.

Nevertheless, experts believe that McMillon is adapting to changing demographics.

“You can’t target baby boomers anymore,” says retail analyst Jane
Hali. “It is a very competitive retail landscape out there and Walmart is getting on board.

“They are looking at a much younger audience and if they continue selling guns, they will lose a lot of their customer base. It is not just a case of playing nice, it is paying attention to what their customers want.”

Marcia Mogelonsky, a food and drink analyst at Mintel, believes McMillon had to act or risk being left behind.

“On recent lists of the best supermarkets, Walmart didn’t make it. I think playing nice is commercially driven, but then a lot of things are commercially driven.”

The consensus among analysts is that the shift in corporate culture was inevitable.

“There are two reasons for this, both of which are to do with money,” says Doug Stephens, founder of the Retail Prophet consultancy.

“If you look at the ascent of Walmart in the Seventies and Eighties and the issues that followed them: unions were fighting them, environmentalists were fighting them and towns and cities were fighting to keep them out of town.

“It was a poster child for what we would call a toxic company. Things abruptly changed however in 2015 when Walmart suffered its first sales decline and that was really a wake-up call for the organisation.

“It was like a bucket of cold water on Walmart. And it was clear that if they continued on their current path, they were done.

“Also by this time there was a new villain in town called Amazon, which is a modern version of what Walmart was becoming. Amazon provided Walmart with a much-needed foil, giving Walmart the opportunity to improve its image relatively speaking.”

Walmart has long been playing catch-up with Amazon. It spent
$3.3bn buying ecommerce site Jet.com in 2016 in a bid to capture urban shoppers. The following year it shelled out $16bn to take a majority stake in up-and-coming Indian platform Flipkart, a deal widely seen as an attempt to steal a march on Amazon in one of the world's most prospective retail markets.

Stephen Greyser of Harvard Business School warns Walmart has some way to go to convince critics its heart is in the right place.

“The key to success in sprucing up a reputation is in fact a track record of performance across the dimension of corporate citizenship," he says. "Plans are good, but performance is better. Words are not enough.”

 

Original Post Here

© 2020 JHA Jane Hali & Associates, Investment Research

561-288-0675   |   1001 Yamato Road, Suite 302 • Boca Raton • Florida 33487