Wal-Mart tries to polish its image but critics aren't buying the changes
By Anne D'lnnocenzio and Marcus Kabel
NEW YORK — Wal-Mart Stores Inc. accelerated its campaign to polish its image by proposing this week a lower-cost health care plan for its employees, promising an environmental initiative, and calling for a boost in the minimum wage.
But the world's largest retailer is finding that by trying to please everyone — the public, politicians, shareholders, and Wall Street — it may be pleasing no one.
The company, which grew to be a $285 billion giant by relentlessly focusing on offering goods at the lowest-possible cost, has come under a barrage of criticism in recent years for how it treats its workers, diversity in the workplace, and its environmental record.
Critics complain that the recent initiatives are merely publicity stunts. At the same time, the company seems to have lost some of its competitive edge to retailers such as Target Corp., and a lackluster economy and high gasoline prices have also hurt sales and profits. The 17 percent drop in Wal-Mart's stock price this year reflects the company's woes. And now a scathing documentary, to be released nationally next month, will put the retailer in its crosshairs.
Wal-Mart's opponents call its new health care plan inadequate because workers would still have a $1,000 deductible. And they term the company's advocacy of a higher minimum wage as a self-serving attempt to boost the buying power of its low-income customers.
"This is a desperate attempt to remake their faltering image," said Chris Kofinis, spokesman at Washington-based Wake Up Wal-Mart, one of Wal-Mart's harshest critics. Opponents argue Wal-Mart's pay and benefits drive down those at other companies trying to compete.
Even some conservative allies aren't embracing Wal-Mart's fuzzy approach.
"Wal-Mart had a pure position earlier" as a capitalist company, said Tim Kane, economist at the conservative Heritage Foundation. "Now they are muddying the waters by trying to offer a softer image. It leaves them vulnerable to charges that they are insincere."
In fact, an internal memo — obtained by Washington-based Wal-Mart Watch and appearing in the New York Times — appeared to undercut Wal-Mart's charm offensive. (Wal-Mart provided a copy to The Associated Press after it learned the New York Times was planning a story.) The memo, written by a company benefits executive to the board, suggested ways to cut soaring medical costs by hiring more part-time workers and discouraging unhealthy job applicants by including physical activity in all jobs.
One longtime Wal-Mart associate, who declined to be named for fear of retaliation, said the memo had left a lot of employees angry. He noted that there is a lot of unhappy talk among employees that Wal-Mart will stop paying for their health insurance.
Wal-Mart spokeswoman Mona Williams says the debate underscored that health coverage is "the No. 1 problem facing our nation today."
Burt Flickinger, managing director of consulting firm Strategic Marketing, estimates that Wal-Mart spends 70 percent less per employee on all benefits, including health care and pension plans, than unionized retailers. Union shops, which include supermarkets and wholesale clubs, pay anywhere from $10,000 to $30,000 in all benefits per full-time employee.
Such a stark difference may not be surprising, given Wal-Mart's focus on cutting costs to maintain its edge as the low-price leader. But it certainly highlights its dilemma going forward.
"Wal-Mart is continuing to mature as a company and this requires us to think about our business in a new way," Williams continued. "Many of the issues we have dealt with from a defensive posture are now seen as an opportunity to embrace proactively and become a more innovative and competitive company as a result."
In fact, on Nov. 4, Wal-Mart is reaching out to critics by holding a conference in Washington to study its impact on the economy. The company hired Global Insight Inc., a global independent economic forecasting company, to conduct an independent study, giving its economists access to internal data on wages and benefits.
But the strategy could backfire: The gathering will also feature presentations from a group of economists, some of which are not flattering.
Wal-Mart says it has listened to critics, employees, and shoppers over the past year. But how much it is willing to sacrifice to please its opponents remains to be seen.
In the memo, Wal-Mart acknowledged that health care is one of the most pressing reputation issues it faces. But how will it keep escalating costs down while still being perceived as a good citizen?
Wal-Mart's benefits costs jumped to $4.2 billion this year, from $2.8 billion in 2002, and the company noted that its workers are getting sicker than the national average, particularly with obesity-related diseases.
At the same time, the company acknowledged the current insurance plan is unaffordable to many people. In fact, less than half of Wal-Mart employees are on company insurance, compared with more than 80 percent at Costco Wholesale Corp.