Are Wal-Mart's Efforts To Revamp In the Right Direction

The big news from Wal-Mart is that they have redesigned their Web site to make it cleaner, easier to use, and would not only show products but would show how they looked together. Wal-Mart's big announcement was supposed to last 30 minutes, but instead lasted only 17 minutes – in perspective though that's still 17 minutes out of my life that I'll never get back.

Wal-Mart Chief Executive Lee Scott told Wall-Street analysts and investors today that October sales at stores opened at least a year were not acceptable. Monday Scott told investors that same-store sales this month were growing short of its forecast of 2 percent to 4 percent.

Scott blamed remodeling projects in many US stores for the weak sales. Earlier this month Wal-Mart announced a change to its uniforms for Associates – all of this activity is an effort at revamping Wal-Mart so that it can achieve its projected sales, and growth.

Scott, and other Wal-Mart executives see anemic store sales, declines in store traffic, a collapsing public image, worker rebellion, a failure to attract new shoppers, increased public and political anger, and they are stymied. They blame new store construction, and high gas prices as the reason fro these problems. Their answer—redress their 1.39 million US Associates in new uniforms, and revamp their web sites?

Wake up Wal-Mart. Your problems go a little deeper than new store construction, and high gas prices. The solutions to your present, and worsening problems are not revamping your web site, or changing the style of your uniforms.

There are 1.39 million Wal-Mart, Sam's Club, and Neighborhood Store employees in the United States. The majority of these employees work full-time, but earn less than $14,000 a year. Wal-Mart promised its employees in 2004 that it would not place a cap on their hourly wages, and traditionally employees enjoyed an annual merit wage increase of $.05 cents to $.40 per year.

Wal-Mart changed all of this in August 2006 when they rolled out a new pay cap plan that would cap employees pay. Many employees that would have qualified for a wage increase of a few cents are finding out that they will never receive another raise as long as they are at Wal-Mart. What's worse, employees who move from one store job to another may receive a decrease in pay. And, if you transfer to another facility you may receive a pay decrease. Theoretically, a Wal-Mart employee with 10 years employment making $13.00 an hour could transfer to another pay position in his/her facility, or another store, and find that their hourly wage is now only $7.00 an hour.

Wal-Mart claims that the change was necessary because the company needs to evolve, and change, and remain competitive in the markets they serve.

There's a lot of talk at Wal-Mart about saving money, controlling costs, eliminating “shrinkage"-which is anything that causes profits to shrink.

Controlling these costs seems to be directed at Wal-Marts 1.39 million employees first. While Wal-Mart caps and decreases it wages for its already impoverished employees, at the same time its executive enjoy more and better benefits.

Wal-Mart Chief Executive Lee Scott is one of the highest paid executives in the United States. Chief Executives generally earn about 8 times what their lowest paid employee earns. Not so with Scott who received over $5 million dollars in compensation last year. Moreover, while Wal-Mart is cutting employee wages, and putting caps on those wages, its executives just amended their executive and benefits plan to give themselves more money, and better benefits. Under this years compensation plan Scott will receive compensation of over $7 million dollars.

Benefits? Wal-Mart claims to offer the most competitive, and generous pay package of any of its competitors. The majority of Wal-Mart's 1.39 million employees earn less than $14,000 a year—below the poverty level. The majority can't afford Wal-Mart's expensive health insurance, with its high deductibles, and are forced to rely on welfare and public assistance.

750,000 Wal-Mart employees are without medical insurance for themselves and their families. Wal-Mart employees that do have insurance spend 8 percent of their income on health care (according to a secret memo by Wal-Mart Executive Vice President of Benefit Reductions Susan Chambers to the Board of Directors in 2006) which is nearly twice the national average.

68% of the nations employees working for large employers enrolled in their health insurance program because they were provided adequate benefits to them at a lower cost, and were paid fair wages. At Wal-Mart less than half of all of its employees can afford their health insurance because of the high cost, lack of benefits, and substandard wages.

A good many Wal-Mart employees receive their health care through public welfare programs because they can't afford Wal-Mart's health insurance. A good majority of Wal-Mart employees who have children rely on public welfare health insurance for their children. Susan Chambers admitted that Wal-Mart's insurance benefits are “expensive for low-income families, and Wal-Mart has a significant percentages of Associates (employees) and their children on public assistance." In other words, Wal-Mart knows that they pay their employees substandard wages, and that they are “low income."

Wal-Mart's “affordable" health care plan provides for 3 annual doctors visits, 3 annual generic prescriptions, a $1,000 deductible for hospital stays. A $5,000 annual deductible for single employees, and $10,000 for those with a family before Wal-Mart's benefits ever kick in.

Susan Chambers said in her secret memo that it was Wal-Mart's intention to replace its full time employees with more part-time employees who earn less and who qualify for less benefits. She told the Board of Directors that Wal-Mart employees are less healthy, and more obese than the rest of the American workforce. She advised the Board of Directors that Wal-Mart should act to “dissuade unhealthy people from coming to work at Wal-Mart."

Wal-Mart is being sued in at least a hundred different court cases, by hundreds of thousands of former and current employees. In December 2005 a court handed down a $172 million dollar judgment against Wal-Mart for its oppressive, and unfair labor practices. In October 2006 161,000 current and former employees were given a judgment of $78 million dollars against Wal-Mart for their oppressive, and unfair labor practices. Wal-Mart faces potential loses of billions of dollars from these lawsuits, that their competitors don't face. They have been fined for violating child labor laws, as well as hiring illegal aliens, and then unfairly treating them.

At Wal-Mart where the saying is “Our people make the Difference" - its1.39 million employees produced $290 billion dollars in sales last year, which resulted in over $11.230 million dollars in profits to Wal-Mart. Shareholder equity was increased from $49 billion to over $53 billion dollars. Wal-Mart's net worth is almost $41 billion dollars.

Wal-Mart started feeling the heat last year when it created a new executive position for pubic relations talking head Leslie Dach. The very fact that Wal-Mart spent millions of dollars to create Dach's position shows that they started feeling the heat last year.

WakeUpWalmart spokesperson Chris Kofinis told the Associated Press that “Wal-Mart, tragically chooses to ignore the fact that anemic sales, declines in store traffic, a collapsing public image, worker rebellions, a failure to attract new shoppers, increased public and political anger, proves that failures to do what is right for its employees and America has become a clear and present danger to Wal-Mart's future growth and success."

Wal-Mart gave billions of dollars away to charities last year, while their employees who “Make a difference" were living in poverty, and struggling to take care of their families.

Wal-Mart just doesn't get it. Revamping a web site, or changing employee uniforms aren't going to make up for sagging sales, earnings, and performance. Reduce executive salaries and benefits to something reasonable, and redistribute some of the wealth created by those 1.39 million employees by offering them better wages, better benefits, and become the good corporate citizen that you portray yourself to be. Unless this is done immediately, the trend is set, and Wal-Mart will see more sagging sales, as well as the collapse of its public image.

SOURCES/CONTRIBUTORS: WAL-MART FACTS.COM/SEC/DEPARTMENT OF LABOR/UNITED STATES DISTRICT COURT/ASSOCIATED PRESS/WAL-MART.COM

© Copyright 2006 Randy L. Harrington. ALL RIGHTS RESERVED.