business news in context, analysis with attitude

Interesting story in Business Week, as the magazine goes to a number of Wal-Mart store managers to find out what they think the retailer ought to do to solve its ongoing sales and profit woes. Not everybody asked to participate agreed to speak, but a number did. Business Week writes, “These managers care deeply about the retailer. Clearly, the company's future is central to their lives and their professional prospects. Beyond that, they truly believe in what has long been the quintessential American success story. These managers have a wealth of knowledge gleaned from spending so much time at Wal-Mart.”

According to the story, “There are plenty of radical ideas lurking in the minds of Wal-Mart's best and brightest. Many believe the company's relentless focus on whittling down costs — for products and workers — is beginning to have a negative impact on the overall operation. Others take issue with the command-and-control approach currently in vogue at headquarters,” and believe that the company has become less customer-focused sand responsive than it as when founder Sam Walton was in charge.

Other examples cited:

• Chocolate doughnuts. “Freshly baked doughnuts and muffins don't make much money for stores, and managing an in-store bakery can be a hassle because it requires a more skilled staff and different hours. That's why headquarters has been cutting back on such operations. But talk to store managers and they shake their heads. The point, they say, is that chocolate doughnuts get people into a Wal-Mart, often every day. Then they buy other stuff — profitable stuff like a cup of coffee or a bottle of water. Competitors such as Safeway and Kroger see the logic. That's why they're increasing their fresh bakery offerings just as Wal-Mart is cutting back. They're also starting to regain market share in key areas of the country.”

• Penny-pinching. “Managers say the focus on costs, taken to extremes, can lead to broader errors. For example, while top brass wants to cut back on low- and no-margin products such as guns and live fish, managers say that has been a mistake in some cases.

“Why? If you don't sell fish, it's difficult to sell the high-margin fish tanks and cleaning supplies that go with them. And if you don't sell guns, it's harder to sell all the extras people want with them.”

• “The same penny-pinching mentality has hurt the workforce — and by extension, managers say, the company's service. While many outsiders have criticized Wal-Mart for the wages and benefits it provides workers, what has received much less attention is how these policies are affecting Wal-Mart stores internally. Consider Wal-Mart's decision to transform its workforce to 40 percent part-timers, up from 25 percent to 30 percent now, to trim costs. Many store managers are finding it difficult to hire people under those conditions, especially because Wal-Mart requires part-timers to be available for different shifts from week to week.”
KC's View:

The clear message of this story is that Wal-Mart may be sacrificing effectiveness for efficiency, and in doing so is being less responsive to shoppers and to the managers who may know best about how the stores work.

I’m certain that there will be people within the company who will believe that these managers are being disloyal in speaking with Business Week, but I don’t think that’s the case here. It may be that they spoke to the magazine because they felt that nobody else was listening and that they needed to take dramatic steps to get their points across. I believe that these people are, as the magazine suggests, both emotionally and financially invested in the success of Wal-Mart.

Attention should be paid.