How does Wal-Mart shape our world? Consider two almost trivial examples. In October 2004, Music Trades magazine observed that Wal-Mart’s decision to sell inexpensive guitars and horns was scaring independent dealers. The magazine quoted an instrument retailer: “After seeing an $89 guitar in Wal-Mart, if they walk into your store and see a guitar for $500, their immediate reaction is, ‘This guy’s ripping me off.’ ”
In January 2005, Bloomberg News published a story on nickel’s prospects on the commodity markets. “Nickel, the best performer on the London Metal Exchange since 2003, may record its first annual drop in four years as buyers such as Wal-Mart Stores Inc. and Ikea International use cheaper alternatives in products.” Soaring nickel prices were causing Wal-Mart to look at home furnishings with cheaper grades of stainless steel containing little or no nickel content. The result: softening worldwide demand for nickel.
Here are some more conspicuous recent examples of the Wal-Mart effect. The venerable (if shabby) grocery chain Winn-Dixie files for bankruptcy, announcing the closing of one-third of its stores. Sears and Kmart, which in 20 years have evolved from dominance to irrelevance in U.S. retail, agree to merge in a desperate attempt to survive. Procter & Gamble and Gillette, two of the world’s most powerful and innovative consumer-products companies, join forces in a $57 billion merger.
All of this–from cheap guitars to corporate megamergers–owes to Wal-Mart. The massive retailer has been shaping the economy for a decade, and our December 2003 cover story, “The Wal-Mart You Don’t Know,” revealed its power to make and break both competitors and suppliers. What’s changed in the two years since is the noise level–the attention, the debate, and the questions that Wal-Mart now attracts. In a way, our story was just the start: It attracted well over 1,000 letters, emails, and Web posts. Today, Wal-Mart is still a store, but it has also become a flashpoint for political issues–the viability of U.S. manufacturing, consumerism, offshoring, wages, and how big any company should be.
Wal-Mart has stumbled badly in the past two years. We’ve read that in 10% of its stores, Wal-Mart locks its employees inside overnight, making it difficult even for people who are sick or injured to get out. A lawsuit by six women alleging systematic gender discrimination was given class-action status on behalf of 1.6 million current and former female employees–the largest such suit in history. Wal-Mart settled federal charges of both child-labor violations and using illegal immigrants to clean stores–the illegal-immigrant case resulting in a record payment of $11 million.
Wal-Mart does one very worthwhile thing brilliantly: It delivers everyday products at low prices. Yet public antipathy for the world’s second-biggest company is stronger and uglier than ever. “Move Over Enron. Wal-Mart Is the New Punching Bag,” headlined a story from The Christian Science Monitor. A coalition of unions, environmental groups, and other activist organizations joined forces in April to create Wal-Mart Watch, an organization dedicated to publicizing the “true costs” of everyday low prices and forcing changes in the company’s labor and environmental practices.
Where is this headed? What will America make, finally, of Wal-Mart? Even Wall Street is holding its breath: The stock is trading exactly where it was five years ago. Meanwhile, however, a quiet referendum continues every day–and in that voting, Wal-Mart is doing just fine. In the past two years, the retailer’s sales have grown by $56.7 billion, well more than the total revenue of Target Stores. Profits are up 30%. Shoppers, whether enthusiastic, ambivalent, or just uninformed, continue to buy what Wal-Mart is selling.