Wal-Mart: Always Under Attack. Always.
World’s most successful example of free-market retailing doesn’t go unpunished, as media jabs continue on many issues.

By Amy Menefee
Business & Media Institute
Feb. 22, 2006

When journalists start referring to “the retailing behemoth,” a “giant” or a business that “destroys other companies,” it’s time for another Wal-Mart story.      The Washington Post’s Kathleen Day called Wal-Mart the “behemoth” on February 12; CBS’ Russ Mitchell used the popular “giant” on January 14; and CNN’s Andy Serwer doled out the “conventional wisdom” of the company’s destructive ways on February 17. New York Times reporters said on January 16 that Wal-Mart “has come to symbolize corporations that do not provide adequate health benefits to their employees.”      The media continue to jump on every opportunity to attack Wal-Mart, the employer of about 1.3 million Americans. From health benefits to its CEO to bicycles and banking, Wal-Mart might as well change its slogan to “Always under attack.”

The Benefit Battle
     Maryland passed a law aimed directly at Wal-Mart, and unions and the media have been hailing it as “precedent-setting” and “groundbreaking,” as CBS’s Russ Mitchell and Anthony Mason put it on the January 14 “Early Show.” The law, which is now facing a legal challenge from the Retail Industry Leaders Association, fashioned a health-benefits mandate applying only to Wal-Mart in that state. It forces the company to spend at least 8 percent of its payroll on employee health care or pay the difference to Maryland’s Medicaid program. The 400-member retailers’ group is calling the law discriminatory, as it recognizes Wal-Mart isn’t the only business threatened by more government cost mandates.

     Most media reports don’t point out that Wal-Mart’s percentage of workers on Medicaid is almost even with the national average. As Washington Post columnist Sebastian Mallaby wrote on Nov. 28, 2005, Wal-Mart has 5 percent of workers on Medicaid, which is “a typical level for large retail firms,” while the national average for all companies is 4 percent.

     The union campaign to raise others’ costs is their own twisted version of competition, as Washington Post writers Amy Joyce and Matthew Mosk explained on January 14. “Companies that provide higher pay and benefits under union contracts are battling lower-cost competitors here and abroad,” they wrote. “The companies are attempting to level the playing field by cutting back on pay and benefits, sometimes by filing for bankruptcy. Labor is trying the opposite tack: making others pay more.”

     Wal-Mart’s detractors are led by WakeUp Wal-Mart and Wal-Mart Watch, both union-related groups. While Wake Up Wal-Mart calls itself a collection of “grassroots leaders, community groups and activists, “ the Web site’s copyright betrays the reality, stating clearly “© 2005 United Food and Commercial Workers International Union.” The Washington Post reported that Wal-Mart Watch was originally funded by the Service Employees International Union.


Cleaning out the ‘Garage’
     Wal-Mart Watch garnered new headlines with its recent release of communications from Wal-Mart CEO H. Lee Scott’s “Lee’s Garage” Web site. Scott answers questions posed by Wal-Mart employees who access the intranet site.

     In The New York Times February 17, Steven Greenhouse and Michael Barbaro said Scott “tries to strike a chummy, ‘in the trenches’ tone,” but said “his responses often serve to remind managers of the gap between them and their chief executive, who earned more than $17 million last year, including stock options, who hops around the globe on Wal-Mart’s fleet of jets and who lives in a gated community called Pinnacle.”

     But the Times also reported that Scott worked his way up in the company. He “joined Wal-Mart in 1979 as its assistant trucking manager” and was named CEO in 2000. In fact, the company says it promotes many from within, and 76 percent of its store management started in hourly positions.


‘World’s Largest’ Must Be Bad
     Slanting the news toward the negative has been common in Wal-Mart stories. CNN’s Andy Serwer delivered several Wal-Mart items on the February 17 “American Morning.” He started off saying “Conventional wisdom has it that Wal-Mart destroys other companies, other businesses, other retailers, and puts them out of business if they’re nearby. No doubt that is true of thousands of times over, over the past couple decades.” And that was how he introduced a positive story – about “new evidence that shows that companies like to be near Wal-Mart because it helps their businesses.”

     Serwer also took a shot at Wal-Mart for bringing yet another low-cost item to its customers. “We want to talk about the continued power of Wal-Mart because it does continue to exercise this kind of clout,” he said. The “clout” of the moment was the company’s introduction of a new store brand – its version of the popular alternative sweetener Splenda. Serwer said “this has Wall Street analysts very, very, very concerned about the prospects of Splenda. Because once Wal-Mart comes in with sort of a store brand like this, it can really do some serious, serious damage to a product.”

     He didn’t mention that the 138 million customers who shop at Wal-Marts worldwide each week appreciate the lower prices and new options – especially lower-income families who are able to afford other goods because of their savings. The Post’s Mallaby wrote on Nov. 28, 2005, about Jason Furman of New York University and his report of some facts about Wal-Mart. Mallaby said “Wal-Mart’s discounting on food alone boosts the welfare of American shoppers by at least $50 billion a year. The savings are probably five times that much if you count all of Wal-Mart’s products.” That’s very meaningful to Wal-Mart’s customers, who have an average income of $35,000, Mallaby said.

     CBS took a recent opportunity to capitalize on a tragedy that made Wal-Mart look bad. Parents of nine children sued after their children were injured while riding bikes bought at Wal-Mart. A California jury ruled in February that the bikes were not defective and Wal-Mart was not at fault. Wal-Mart hasn’t sold the bikes in question since 2001. But on January 26, when the issue was still unresolved, CBS’ “Early Show” did a one-sided story highlighting the plaintiffs’ claims – without any statements from the company. The report featured angry parents like Cathy Belyeu, who accused the company: “They knew about this bicycle. They knew that it was defective. They knew it was hurting children.” The report said about 500,000 of the bikes had been sold at Wal-Mart, but did not mention other injuries aside from the plaintiffs.

     Another story that has gotten the Wal-Mart treatment is the company’s application for an industrial loan corporation (ILC) in Utah. Although the firm is not seeking to enter retail banking, its critics and the media have made it appear that way. Target Corp. already has an ILC, which it uses to offer credit cards, as The Washington Post’s Kathleen Day reported on February 12. Wal-Mart says it would use its ILC to cut down on the cost of processing credit transactions.

     But that information was buried deep in Day’s story. At the top of the story, she chronicled “the Wal-Mart effect” on other business sectors, as the store’s competitive prices beat its rivals in the grocery and toy industries. Day asked whether federal regulators should “permit Wal-Mart to use a legal loophole to enter banking and potentially do in that arena what it has done to nearly every other consumer product and service it has touched?” She later said that the real opposition to Wal-Mart’s ILC application didn’t come from customers. It came from its potential competitors – bankers.



For more information:

“Retail Rumble,” The Wall Street Journal

Wal-Mart Facts (Wal-Mart’s own site)