Rick Wartzman is a journalist and business historian who in 2003, as the business editor of the Los Angeles Times, oversaw a critical series about Walmart’s part in American jobs moving offshore and the low wages it paid its workers. That series won the Pulitzer Prize. For his latest book, Wartzman interviewed Walmart CEO Doug McMillon and other Walmart executives about how Walmart transformed itself from a widely criticized company for its business practices and low pay two decades ago, to one that is widely admired for its sustainability policies and upping its starting pay today.
Still Broke: Walmart’s Remarkable Transformation and the Limits of Socially Conscious Capitalism will be published on November 15. Wartzman details the boldness of those leaders adopting green initiatives and raising pay. And while lauding both, as the title makes clear, he ultimately concludes that Walmart and other businesses fall short when it comes to paying workers a living wage.
This is the first of a two-part interview. It has been edited and condensed for clarity.
Early in the book, you have this quote from a couple of commentators in 2008: “If you really—we mean, really—want to scare the locals next Halloween, here’s an early costume idea for you or your kids: dress up as Walmart.” Who said this, and how emblematic was it of Walmart’s struggles with its reputation in the early 2000s?
It sounds like, “Oh my God, that must be some left-wing think tank or some union group!” No, these were economists at the Federal Reserve Bank who said this. And they were looking at just how much Walmart had come to represent lots of things that people thought were wrong with the economy.
Walmart was being vilified for all kinds of things at that point, everything from destroying the environment, to driving mom-and-pop businesses out of Main Streets across America, [to] driving jobs overseas and hurting American manufacturing. And for employing an army of low-paid workers who could not make ends meet, didn’t have adequate health care, and—as a result—ending up on food stamps and Medicaid and, in effect, [Walmart] had the taxpayers subsidizing their bottom line.
But you also pointed out that Fortune magazine in 2003 said Walmart was the world’s “most admired company,” according to a survey of executives, directors, and analysts.
Walmart had turned itself, over only a couple of decades, from a mostly Southern regional low-price retailer into the biggest company in America as measured by revenue and by the number of employees… They had accomplished something amazing…They had launched Supercenters, and their combination of general merchandise and supermarkets had completely knocked the supermarket industry back on its heels. From a pure business standpoint, it was impossible to look at them any other way than they were just an incredible success.
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Still, in the book, you mention a confidential survey Walmart had done around 2004 that said that as many as 8% of consumers weren’t shopping at Walmart—or had stopped shopping at Walmart—because of negative press.
Walmart was such a boogeyman—like Amazon today, but on steroids. And there was a real business cost to them when they were trying to expand into urban markets. There was all this resistance because of union campaigns, because of [community] activists trying to keep them out [of their towns], all the negative publicity, and yes, it was cutting into their customer base.
They knew they needed to start attracting more mid-income and higher-income [shoppers] and go up the ladder for growth. And this made it really hard to do that...because those are the kinds of folks who read the New York Times and care about all this negative coverage. And the unions were leaking internal Walmart memos to them that were damaging, and it was just a full-on assault. I quote [former Walmart CEO] Lee Scott in my book saying that this was the most sophisticated corporate campaign ever waged against a company, and that was not hyperbole.
But Walmart’s response to Katrina in 2005—at least as you depicted in the book—doesn’t feel like a PR ploy.
Hurricane Katrina devastates a huge part of Louisiana and surrounding states. New Orleans gets clobbered and—for those old enough to remember—the federal response was really inadequate. FEMA, the Federal Emergency Management Agency, had a really hard time getting critical supplies into the area. And this became a big black eye for the Bush administration.
And Walmart became FEMA, really. They had the logistics network and the scale to move water and other critical supplies and medicines and food into this devastated region. And they did a great job of it and didn’t ask for anything in return. They just stepped up at the behest of their then-CEO Lee Scott.
And in the wake of that, Lee Scott gave a speech in October of 2005 and he said, [paraphrasing]...“Look, we always get criticized for having too much power, or being too big. But on Katrina, we flipped that on [its] head, and our scale became a virtue.”—AAN
Next time, in Part 2: Walmart surprises many with its sustainability measures, and finally raises its starting pay.