Filed under: Retail, Shopping, Consumer Goods, Wal-Mart, Investing
The Look
Given its cookie-cutter reputation, you might expect that all Walmarts would be created fairly equal -- and that they'd all look like the one closest to you. In fact, the stores come in an array of different sizes and styles: large Supercenters that include supermarkets, neighborhood size (the average Walmart), discount stores, Sam's Clubs and small format (including Walmart Express, Walmart on Campus, Amigo, Super Ahorros and Supermercado).
One of the most common complaints about the stores is aesthetic: Walmarts are perceived as dirty, noisy, crowded, all the same big box. Of the three Walmarts within 15 miles of my home, that is only true of the one that serves the most demographically and economically diverse clientele. Within a block of rivals Target (TGT), Kohl's (KSS), Best Buy (BBY) and Home Depot (HD), it's a depressing, dispiriting place to shop.
The second is in a semi-rural town and is much cleaner and quieter -- a joy to shop in.
The third is a Walmart Supercenter in a bustling small city. It has three (yes, three) beauty salons with spa services, a full-service local bank, an Auntie Anne's and a Subway. It is clean and busy, yet its checkout lines are two to three people deep at most. An assistant manager (who wasn't supposed to talk to reporters at all) likened Walmart to a car with options. Example: his store carried the local high school's colors in various apparel and novelties, but a larger Walmart didn't because it served more high schools.
Wages
Walmart's wage controversy is just one thread in the larger political debate over the minimum wage and U.S. wage stagnation in general. The low wages and part-time hours it offers mean 8 percent to 10 percent of Walmart's 1.3 million U.S. associates have to use food stamps and Medicaid to make ends meet. Conservatives deplore the government aid, and liberals deplore the low wages. The company says its average hourly wage across the U.S. is $12.81 per hour, but this doesn't include part-timers. Officials in big cities like Washington and Chicago have searched their souls about whether they should allow Walmarts to open within their borders, thanks to this issue.
Fanning the fires of anger is the fact that, over the last few years, Walmart's CEOs have been the nation's highest paid, relative to what they pay their workers. Former CEO Michael Duke earned 1,034 times the median Walmart worker salary, according to a Payscale survey in 2013 or 836 times according to NerdWallet's numbers. He also received an outsized deferred compensation package. Doug McMillon is the new CEO, and as an executive vice president, he had a total compensation package of more than $25 million.
Debate rages in the media and academia over what it would cost Walmart and its customers if the company boosted what it paid to a "living wage." According to a policy paper from think tank Demos.org, the company could raise the full-time salary of its average sales associate to $25,000 annually from $18,324.80 (based on independent market research firm IBISWorld's findinghttps://cms.aol.com/554/content/posts/edit/20882658/ of average pay of $8.81 per hour) with only a 1 percent hike in prices. This would cost each Walmart shopper $12.50 more per year, research from Berkeley's Labor Research Center concludes.
Foreign Imports and Trade Practices
Some dislike Walmart because 80 percent of its suppliers are in China, and many of the rest are in Third World countries. Tragedies at factories in Bangladesh and India making products for Walmart haven't improved the chain's image. On the positive side, the company is making an effort to more sustainably source some products, such as fair trade coffee.
Entrepreneurs dream of "making the retail big leagues" by getting a deal to sell their products at Walmart. However, there have long been complaints and lawsuits concerning Walmart's relentless pressure on suppliers to cut prices at the expense of their own margins. This pressure even extends to consumer giants such as Kraft Foods (KRFT), forcing it to lay off 13,500 workers several years ago.
In good news, Walmart is holding an open call for U.S. companies this July to show their products, with a pledge to buy $250 billion in American-made goods over the next decade.
The Competition
Before Sears (SHLD) deteriorated as a major retailer, it was a beloved chain, selling everything a family needed, even kits to build homes. Walmart garners nothing like that warm feeling, yet it sells almost everything one could need, from womb to tomb, including caskets.
It's now a tossup which retailer other retailers fear most: Amazon (AMZN) or Walmart. Whole Foods Market (WFM) just reported disappointing earnings, and its explanation was that Walmart is beating it on organic food, with prices at least 25 percent lower for similar items. Amazon's sales growth of 20 percent can't put a patch on Walmart.com's growth of 30 percent over the last year.
Worldwide, 245 million customers shop Walmart weekly. We love to hate it, even those of us who won't admit to loving its low prices because deep down, we know they come at a cost.