Jan 29, 2008

Hitting the Wall at Wal-Mart?

Wal-Mart is going to the next level in its drive to provide more value. Long the king of everyday low prices for consumers, the biggest retailer on the planet now wants to take better care of the planet itself.

Wal-Mart wants to sell electric/hybrid cars, use windmills in its parking lots to recharge them, reduce paper use and improve medicine at the same time by digitizing physician prescription records in its network, and make its suppliers more energy efficient, both in their products and in the processes used to manufacture them. And it will demand offshore manufacturers to comply with U.S. environmental and safety standards.

Wow! That’s a fantastic goal. And who better to create the momentum than Wal-Mart? So it may seem boorish to ask, Is Wal-Mart going about this praiseworthy task in the right way? I’m suspicious.

Wal-Mart is notorious for its heavy-handed application of market power. While early on it delivered low prices through fantastic supply chain reinventions and improvements, it has for some time simply gained the upper hand by squeezing suppliers. More and more, this is less about making suppliers more efficient (which is good), and more about leaving them drained, disheartened, and increasingly less differentiated. That’s not good.

To judge from Wal-Mart chief Lee Scott’s public statements, as quoted last week in The New York Times, Wal-Mart is still resorting to the heavy hand. …”[If suppliers do not fall into line by joining the international environmental standards organization C.I.E.S], Wal-Mart will in fact lead; we will move forward by ourselves.”

I read into that single word “lead” a new application of Wal-Mart’s old strong-arm methods. Wal-Mart will in fact mandate. It’s all for the good of the planet, dear vendor. But all the same it’s our way or the highway. The squeeze is still on.

I wish Mr. Scott had said something more like this: Helping the planet is starting to make competitive sense for all of us. Suppliers that differentiate their products on environmental effectiveness will have an enormous and supportive outlet in Wal-Mart. Come work with us in this better way. We’ll feature you.

In other words, how about a little less strong arming and a litte more partnering, Wal-Mart?
Read The Times’s coverage, “Wal-Mart Chief Offers a Social Manifesto,” at: http://www.nytimes.com/2008/01/24/business/24walmart.html?scp=1&sq=wal-mart++%2BC.I.E.S.&st=nyt

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