Reply #12: Wal-Mart: A 'Reputation Crisis'

[UpInArms]

http://www.businessweek.com/print/bwdaily/dnflash/content/oct2006/db20061031_471519.htm

excerpt:

One of the most surprising targets of criticism, however, has been Wal-Mart (WMT). The retailer didn't have any hand in the ads attacking Ford. However, Wal-Mart did have Nelson on its payroll as a consultant, as part of the company's growing effort to burnish its own image. Shortly after the Ford ads aired, Reverend Jesse Jackson came out attacking Wal-Mart and demanded that the company sever its relations with Nelson. Two days later, Nelson bowed to the pressure and submitted a letter ending his relationship to the company.

"A Real Threat" It's been that kind of year for Wal-Mart. The Bentonville (Ark.)-based company has been pushing hard to improve its public image, at a time when its financial fortunes increasingly depend on it. It's come under heavy fire from workers and politicians, for everything from the low wages it pays workers to the small retailers it pushes out of business. That dark reputation has resulted in communities around the country taking on Wal-Mart, by trying to halt construction of new stores or forcing it to pay higher wages and benefits.

At the same time, the company is scraping for every dollar of sales it can get. On Oct. 30, Wal-Mart reported that estimated same-store sales for October rose a slim 0.5%, the smallest such increase in nearly six years (see BusinessWeek.com, 10/30/06, "Wal-Mart's 'Comps' Creep Lower"). Slow sales have resulted in Wal-Mart's stock going sideways for five years, a harsh situation for investors long accustomed to outsized returns.

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The Working Families group also hired the couple who published the "Wal-Marting Across America" blog. They were known only as Jim and Laura, and they drove cross-country in an RV to capture the stories of people they met in Wal-Mart parking lots. BusinessWeek.com first revealed that the Working Families group was paying for the RV, the gas, and the blog writings (see BusinessWeek.com, 10/8/06, "Wal-Mart's Jim and Laura: The Real Story").

The effort became notorious in the blogging community, where writers took Wal-Mart to task for tarnishing the reputation of blogs (see BusinessWeek.com, 10/17/06, "Wal-Mart vs. the Blogosphere"). When the Wal-Marting blog was exposed, a Wal-Mart spokesman said, "It was a Working Families for Wal-Mart initiative, and we didn't have anything to do with it." Edelman's CEO issued a mea culpa and took full responsibility for the mess.

Losing Support How much of Wal-Mart's problem is style and how much substance? The answer is unclear at this point. However, at least some consumers are no longer shopping at the company's stores because of its reputation. According to a study by the consulting firm McKinsey & Co. for Wal-Mart, 2% to 8% of the company's customers have stopped shopping there, "because of negative press they have heard." Reputation is even more important as the company pushes upscale, trying to sell everything from organic food to high-end apparel, through its Metro 7 line. So far these initiatives have failed to ignite sales as much as the retailer hoped.

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