Inside This Issue - Opinion
U.S. needs a healthy Walmart
March 21st, 2011
by David Pinto, Editor
Once upon a time in a galaxy far away, Sam Walton, in the midst of building the greatest retailing empire ever conceived, issued a set of guidelines that he hoped would help his associates as they climbed the path to retail supremacy.
Among the tenets Walton laid down were these — embrace change; take risks; don’t be afraid to fail; don’t be satisfied with the status quo.
Indeed, Walmart’s willingness to welcome change and take risks was at the core of the retailer’s success. At that time the guidelines Walton laid down were nothing less than the engine that drove the company. Those tenets still retain validity today.
The problem is they apply to a retailer that no longer exists.
As anyone even remotely connected to retailing knows by now, Walmart’s sales results in the last quarter of its latest fiscal year were disappointing — at best. Domestic sales dipped 0.5%, while same-store sales dropped by 1.8%. The latter figure was but the latest in an unbroken series of seven quarters when comparable-store sales at U.S. stores declined.
The fault can hardly be placed at the doorstep of current leadership — chief executive Mike Duke or Bill Simon, head of the retailer’s U.S. business. Nor can Duncan Mac Naughton, the company’s newly appointed chief merchant, be made the scapegoat. To the contrary, his arrival at Walmart last summer and subsequent promotion are rightly viewed, internally and throughout the supplier community, as a refreshing step in the right direction, a positive break with the recent past that bodes well for a more positive future.
No. Unfortunately, the problem with Walmart today is systemic. And that’s what is making it so difficult to rectify. Simply put, today’s Walmart has drifted far from the dynamic, break-the-rules company Sam Walton founded and built. At the core of its success was an ability to extract superior performance from ordinary people, people who didn’t know how to fail. Walmart worked because it hired and trained merchants who embraced new thinking and new products, operators who thought outside prescribed guidelines in tailoring their stores to their communities, leaders who led by giving their subordinates huge chunks of responsibility, and subordinates who never hesitated to accept and expand upon that responsibility.
Today, much of that entrepreneurial approach to business has disappeared. Walmart has become a legitimate, even desirable, place to work. The world’s largest corporation and the metropolitan area that houses it are now destinations of choice for thousands of job seekers. To an unfortunate extent, traditional thinkers have replaced entrepreneurs in the Walmart workforce.
Once upon a time, the company’s associates came primarily from Middle America, many given a chance despite a lack of education and because, to put it plainly, Walmart needed people. Today, the retailer attracts associates from all over, many of them armed with advanced college degrees. Many among them don’t understand what made the company successful. Lacking this grasp of Walmart’s approach to retailing, many are ill suited to the needs of the organization or the job requirements.
There are other problems. In recent years cutting costs has become more of a priority than building sales. One result is that assistant buyers as a category of merchants have largely been eliminated, drying up a potential talent pool and placing too heavy a burden on the buyers who remain.
Then too, travel to trade shows and other industry events has been discouraged as too time consuming and expensive — with the result that new ideas do not come so easily any longer to a company that once thrived on finding, in the wider world outside Bentonville, better ways of doing things. As anyone who ever traveled with Sam Walton remembers, he always visited the competition with an eye toward “stealing” at least one idea he could use at Walmart.
Once upon a time, the company was able to effectively move buyers from one merchandise category to another every year or two despite the fact that many observers questioned this practice, believing it inhibited a buyer’s ability to master a product category. But if it did work, it worked because individual categories were relatively simple to manage. That is no longer true. Today, it takes years to master the complex categories that are at the core of Walmart’s business. For that reason, shifting buyers from category to category is less productive than it’s been. Yet at Walmart, the practice persists.
The company has changed in other, more subtle ways as well. As a result, it is no longer the retailer that made competitors tremble, kept suppliers engaged, and eagerly brought even the casual shopper to its doors just to see the merchandise — and the prices.
Simply put, this is not a good thing. Traditionally, Walmart made competitors better, suppliers sharper, customers more knowledgeable — and more loyal. To a large extent, Walmart drove the U.S. economy.
Despite the outrageous and clearly unsustainable claims that the retailer stifled competition, just the opposite was true. Despite the equally flimsy argument that Walmart paid substandard wages, the truth is that the company gave people jobs — and the opportunity to build a career. In short, a healthy Walmart usually translated into a healthy economy.
The good news in all this is that it’s not too late for Walmart. Indeed, there are signs even now that the retailer is emerging from the lethargy that recently engulfed it. Entrepreneurs, overlooked for so long in an organization that had misplaced its priorities, are once again being given a chance. Forward-looking, risk-friendly discussions are once again on the agenda at the retailer’s Bentonville headquarters, discussions that debate the wisdom and advantages of multiple formats and the need to compete more aggressively against the regional retailers that are themselves becoming more competitive.
The merchants, once neglected, appear to be in favor again. The arrogance that once marked the company’s approach to its suppliers is fading. And the new leadership is willing to acknowledge that mistakes have been made — and eager to correct them.
Like it or not, America needs a healthy Walmart. Though the road back to true viability will be a long and winding one, the retailer already gets credit for this much: It has chosen to embark on that road. And the path it has chosen to get it there appears to be the correct one.