Door shut to Wal-Mart closed shop
February 28, 2005
SAM Walton, the legendary founder of the Wal-Mart chain of discount stores, had 10 rules for success in business.
They served him pretty well because when he died in 1992, only Bill Gates had more personal wealth and Wal-Mart - which began in 1962 as a single store in the backwoods of Arkansas - was well on the road to becoming the world's biggest retailer.
In the US today, Wal-Mart has more than 3600 retail outlets, employs more than 1.2 million people and is responsible for more than 2 per cent of US gross domestic product. In 2005, the company has forecast the creation of 100,000 new jobs, up from 83,000 last year.
When a company is that big and that labour-intensive, it almost always gets what it wants. That's why it was a huge surprise last week when the developer of a new shopping and residential precinct in the New York City burrough of Queens dumped Wal-Mart from the project.
The developer, Vornado Realty Trust, caved in after a concerted campaign by an alliance of little guys - resident actions groups, local small businesses and unions - who wanted the Wal-Mart octopus kept at bay.
For the small businesses involved - most of them family-run shops selling shoes, clothing, hardware and the like - it was do or die. Traditionally it has been businesses such as these that go under when Wal-Mart comes to town.
Extraordinary as it seems, the VRT decision means Wal-Mart still has no store in the free enterprise capital of the world and now, no immediate prospect of getting one.
This has the potential to damage the company, which has identified a need to achieve expansion in New York and the big urban centres of California.
In the past, the Wal-Mart money shot was always Sam Walton's rule No.9 which states: "Control your expenses better than your competition. This is where you can always find the competitive advantage. You can make a lot of mistakes and still recover if you run an efficient operation."
Over the years, Wal-Mart has turned this into an art form, ruthlessly cutting costs in the key areas of wages and purchasing. The wages methodology has been underpinned by a highly aggressive anti-union company philosophy which has managed to keep Wal-Mart's entire US workforce non-unionised.
The company has worn this as a badge of honour and is so determined to keep unions out of its operations that it recently decided to close a Wal-Mart store in Canada where the workforce had voted in favour of union coverage.
But the problem for Wal-Mart, as the New York decision indicates, is that it is a company starting to be seen as too ruthless.
Over the past 12 months, there have been scandals over child labour and the recruitment of illegal Mexican immigrants on miserly wages, along with concerns about the company's treatment of women and the disabled.
On the same day that VRT announced it was ditching Wal-Mart from its Queens project, a former employee with cerebral palsy won a $7.5 million payout in a federal court anti-discrimination suit.
The man had been hired to work in the pharmacy section of a Long Island Wal-Mart store but once his disability was known, he was sent to the carpark to empty bins and collect shopping trolleys.
Stories such as these make the news - and the brand name suffers, a cardinal sin in retailing. They also make it easier for activists in community groups and trade unions to build the kinds of political alliances that succeeded in keeping Wal-Mart out of Queens.
The future success of Wal-Mart may well depend on how quickly it learns that selling the cheapest shirt is no longer enough. Smart companies today go out of their way to understand their people and to treat them fairly.
That means paying fair wages and - as hard as it may be for the custodians of the Sam Walton legacy - allowing employees to be members of trade unions if they want to be.