Nov 4, 2019

Companies | Wallmart: Walmart’s Strategy When Wading Into Culture Wars: Offend Few

By Michael Corkery

Credit...Gabby Jones for The New York Times
Walmart is getting out of the vaping business, but still sells cigarettes. It is working to reduce plastic packaging for the products on its shelves, but continues to use plastic grocery bags in its checkout lines. After a gunman killed 22 people at a Walmart in El Paso this summer, the retailer said it would no longer offer certain types of ammunition, but stopped short of banning customers from carrying their guns into stores.
When navigating the nation’s culture wars, Walmart follows a strategy is has honed for years: alienate as few customers as possible and do no harm to its core business. In many cases, it appears to be working. Walmart’s stance on guns, for example, drew a lot of attention but had “no discernible impact” on overall sales, according to a top executive, who spoke on the condition of anonymity to discuss internal matters.
Once viewed in many parts of the country as a union-busting killer of Main Street businesses, Walmart and its chief executive, Doug McMillon, have received plaudits of late for taking stands not just on guns, but also issues like carbon emissions and Confederate flags. “When did Walmart grow a conscience?” read a headline in The Boston Globe.
Interviews with more than a dozen Walmart executives, former executives, company advisers and regulators show that the retailer’s approach to public policy issues is more nuanced than a desire to simply do the right thing.
When Walmart said it would remove e-cigarettes from its shelves in September, vaping critics praised the move as validation of their health concerns. But Walmart’s decision was partly driven by concerns that the retailer would be stuck with excess inventory if more regulators began to outlaw vaping, executives say.
Over all, Walmart remains committed to tobacco. In fact, when CVS announced it was ending cigarette sales five years ago, Walmart considered making a similar move. But Walmart ultimately decided to keep selling tobacco after executives concluded that cigarette sales were in keeping with the retailer’s brand as serving the mass market, according to two people briefed on the decision-making who spoke on the condition of anonymity to discuss internal deliberations. Some executives also thought that Walmart might gain market share after the pharmacy chain’s exit from the market, one of the people said.
On the environment, Walmart has been viewed as an industry leader by reducing carbon emissions in its trucking fleet and supplier network, and cutting back on plastic packaging for thousands of food and household items it sells in its stores.
But internal company discussions about plastic grocery bags show the tension between Walmart’s environmental concerns and its sales goals.
Walmart continues to use plastic bags in its checkout lines, while big competitors like Kroger are phasing them out. The company offers reusable bags at some registers, but some executives have expressed concerns that switching entirely out of plastic could delay moving customers through the checkout as quickly as possible and turn off shoppers who prefer the convenience of plastic, according to two people briefed on the discussions.
“My impression is that this is a company that does seem to care beyond the bottom line,” said Arun Sundararajan, a professor at New York University’s Stern School of Business. “But you also have to keep in mind, it is still a highly efficient competitor.”
In the company’s last earnings report, for its fiscal second quarter, its revenue climbed 3 percent, lifted by a 37 percent jump in e-commerce sales. Its profit for the quarter was $5.6 billion, and its stock is up 26 percent since the start of the year.
It is perhaps no coincidence that Walmart’s public relations victories come as its rival Amazon is being battered by antitrust concerns and criticism about onerous working conditions, issues that the original big-box retailer has spent years trying to defuse, with some success.
Many credit Mr. McMillon with positioning Walmart as a socially responsible company, while also finding ways to increase sales in the United States for 20 consecutive quarters. Through a spokesman, Mr. McMillon declined to be interviewed for this article.
Publicly, Mr. McMillon has said he wants to stay above the political fray. But when Walmart takes a stand, Mr. McMillon has tried to convey the company’s position without “spiking the football” and inflaming the other side, one executive said.
“Politics moves around,” Mr. McMillon said during an interview in 2017 in his wood-paneled, first-floor office in a converted, largely windowless warehouse in Bentonville, Ark., where the company’s top officials work. The company’s founder, Sam Walton, used to occupy the same office, and kept a rifle by the front door because he sometimes hunted after work.
“We are on our 11th administration, since Walmart was born,” Mr. McMillon added. “There will be a 12th. There will be a 13th.”
Mr. McMillon, 53, grew up in a small city in northeast Arkansas, but later moved to the northwest part of the state to Bentonville. His father was a dentist and his mother stayed home taking care of the children. Mr. McMillon started working at Walmart in high school and went to the University of Arkansas. He worked his way up the company ladder running Sam’s Club and then the international division. Mr. McMillon was the favorite of Mr. Walton’s heirs, who own a large amount of Walmart’s stock and sit on the board.
Mr. McMillon voices Mr. Walton’s paternalistic view of Walmart as a benevolent employer and economic actor, whose size and scale can force change across the world.
“The world is a better place with Walmart in it,” Mr. McMillon told thousands of cheering employees at last year’s shareholder meeting. “The next generation needs this company.”
Mr. McMillon shared a similar lofty assessment of Walmart with the Obama administration, where some officials had a skeptical view of the big retailer.
Not long after taking over in 2014, Mr. McMillon spoke to Labor Secretary Tom Perez to say he supported stronger overtime rules that favored workers. The C.E.O. explained how improving the fortunes of low-wage workers would help Walmart’s bottom line by increasing the quality of service in its stores.
Many in the administration, which at the time was also pushing for a higher federal minimum wage, appreciated Mr. McMillon’s support on the overtime rule. But some of the officials did not overlook that Walmart, which employs about 1.5 million people in the United States, remained resistant to unionizing its American stores.
The same year Walmart raised its starting wage, the company also eliminated health care coverage for tens of thousands of part-time employees. The company says it provides health insurance to 1.1 million workers and their family members.
“Their strategy is to give a little here and there, but not provide the thing that is most valuable to workers, which is collective bargaining,” said Sharon Block, who ran the policy office at the Labor Department during the Obama administration and now teaches at Harvard Law School. “That is the only way Walmart workers are going to make any real gains.”
Helping shape Walmart’s public affairs strategy is Dan Bartlett, the former head of communications for President George W. Bush. Mr. Bartlett is known for his pragmatism, an ability to work with both parties and for having an understanding of the Deep South, according to a former Walmart colleague. One of Mr. Bartlett’s top deputies was a speechwriter for Hillary Clinton during her 2008 presidential campaign.
Mr. McMillon, who earned about $23 million last year, has seen his profile grow nationally. In September, he was named the next chairman of the Business Roundtable, a lobbying group for large corporations that recently expressed the need for companies to benefit not just shareholders, but also their employees as well as the environment.
It was the needs of Walmart employees, Mr. McMillon said, that prompted him to speak out after the racist-fueled violence in Charlottesville, Va., in August 2017. Walmart is considered the nation’s largest single private employer of Hispanics, and just as many African-American women shop at the retailer as rural white men.
Mr. McMillon, who was serving on a White House advisory board on manufacturing, publicly criticized President Trump for not condemning the white supremacists at the rally. Other executives on the advisory board stepped down, although Mr. McMillon stayed on until Mr. Trump disbanded the group amid the controversy.
“When something like that happens we have to look at our own associates as leaders and feel good about how we are representing the company,” Mr. McMillon said in the 2017 interview.
This year, Mr. McMillon is again advising the Trump administration. In March, he and several other chief executives of large companies joined the White House’s American Workforce Policy Advisory Board, which is discussing issues around workers whose jobs are being displaced by technology.
Walmart did not issue a release about Mr. McMillon’s appointment to the board.

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