As a consumer, I prefer low prices just as much as the next guy, because who wants to pay more when they don’t have to? Quality does not go hand-in-hand with price, but for many household and everyday items: this does turn out to be the case. Although I prefer low prices, I am not always willing to trade quality for price. However, for the occasions that I am, I usually frequent Wal-Mart to pick up what it is that I need at the lowest price.
With over 4,000 stores around the world, the Wal-Mart corporation is doing pretty well for itself. Every day the company accumulates roughly $36 million per hour, this works out to be roughly $2 million in profit every single day. With over $405 billion in annual sales, over 100 million consumers visit a Wal-Mart store every week. The majority of their visitors are families that are earning less than $40,000 annually. More recently, Wal-Mart sales haven’t been seeing the same profits that they once were: people don’t have a lot of money to spend, but somewhere their dislike for Wal-Mart surpasses the cost factor. Now, Wal-Mart is additionally struggling to keep up with other online competition and stores that offer similar low prices.
1. Wal-Mart And Third-Party Problems
Numerous lawsuits have been launched against the corporation, most notably those that claim Wal-Mart violated federal and state labor laws. A recent settlement for $21 million was reached between the corporation and Schneider Logistics, Inc., following years of labor violations claims and ongoing investigation into a particular Wal-Mart warehouse at Riverside County, CA. The labor violations affected over 1,800 workers who claim that the company paid them less than minimum wage, withheld breaks, benefits, and overtime compensation. The lawsuit covers workers from 3 Mira Loma facilities between the years of 2001 to 2013. It is a subsidiary of Schneider Logistics Inc. that will be forking over the $21 million dollar paycheck: it won’t be coming from the Wal-Mart corporation. Schneider Logistics Inc., oversees various warehouse properties and the firm is worth roughly $3.5 billion in annual sales.
Unfortunately, it isn’t so much Wal-Mart’s fault as it is third party businesses, contractors, logistics companies, and the like that Wal-Mart uses to keep down costs. Although, Wal-Mart does issue their own Standards for Suppliers mission of having safety and well-being for all workers across their supply chain, it is unclear how well (if at all) this is enforced. Wal-Mart teams up with various logistics companies, like Schneider, who then hire employees through subcontractors, and they should understandably be following the labor laws within their respective areas. Schneider Inc. has settled previous settlements that were of a similar nature, most recently was one from last December for $4.7 million.
The question thus becomes: why does Wal-Mart insists on doing business with unreliable and unethical contractors?
Last year the government decided to prosecute Wal-Mart for having illegally fired numerous employees. The National Labor Relations Board (NLRB) made the statement that there was validity to the various claims that the corporation violated the rights of many workers when they threatened, disciplined, and even terminated employees for having engaged in legally protected strikes and protests. The dispute remains ongoing between the NLRB and Wal-Mart, so far Wal-Mart has challenged the accusations and claimed that the company was within its rights when it disciplined workers for taking part in short strikes.
3. Paying CEOs For Namesake
Despite continually declining sales, top executives still receive incredible bonuses. Traditionally, the corporation will issue bonuses if sales grow by 2 percent, for the fiscal year of 2014 however, sales only grew by 1.8 percent, yet executives were still paid large bonuses totaling millions of dollars.
The corporation habitually violates legislation in order to seek further profit, fueling the growing public dissent toward the corporation and its executives. For the year of 2014, Walmart US CEO William Simon’s contract was one which afforded him with the opportunity to earn a $1.5 million bonus on top of his $10 million salary and stock awards, if that 2 percent growth was met. He profited even though that contractual agreement was never met. This is a pattern within the corporation: funneling profit toward executives at a rate that is grossly out-of-tune with the pay award method that is used and applied for associates.
According to the Institute for Policy Studies (IPS), the corporation continues to exploit tax breaks in order to reward executives. In its report, Walmart’s Executive Bonuses Cost Taxpayers Millions, the IPS details that the corporation exploits a tax loophole that allows it to deduct unlimited amounts from its income taxes for the cost of executive compensation, if it is in the form of stock options and other “performance pay.”
Walmart’s recently retired President & CEO, Michael T. Duke, who made over $116 million in his 8+ years working for the company. His work “performance pay” alone translates into a taxpayer subsidy for the corporation that is worth over $40 million.
5. A Bevy Of Unhealthy Products
A majority of the food items that are sold in Wal-Mart are highly-processed, contain unhealthy amounts of sugar, high-fructose corn syrup, and other harmful ingredients to your health. Aside from food, it also supplies supplements, make-up, and other items with toxic chemicals and ingredients that can have a serious negative impact on your bodies and health when used improperly or for extended periods of time. Despite the abundance of unhealthy food options, the chain is increasingly looking toward providing more organic food options as consumers continue to fuel this trend in the market.
Attempts to expand the corporation and continue with the larger store model is a method that is rapidly becoming less effective as consumer habits continue to change. In May, the company reported its fifth consecutive quarter of negative sales in the U.S., excluding newly opened or closed stores, and its sixth straight quarter of dwindling traffic. It is expected that Wal-Mart will look toward encouraging smaller and more localized stores: they need to find something that can compete with the growing success of online competition like Amazon and the quickly expanding dollar-store chains. Currently, the corporation is testing a series of smaller stores, Wal-Mart To Go, which are similar to everyday corner-stores that average 10,000 to 40,000 square feet.
Still, none of these reforms actually deal with any of the 5 major problems we listed about Wal-Mart, and their decreasing market relevance is something we can celebrate.