The Business of America is Business

Wal-Mart workers earn a competitive market wage. Cashiers make $8.78 an hour on average vs. $8.06 at other retailers, based on data from the Bureau of Labor Statistics; Wal-Mart stockers make $9.76 vs. $10.14 elsewhere.

Lower prices led to savings of $263 billion by 2004, or $895 a person and $2,329 a household.

Non-competing stores tend to show a rise in sales once Wal-Mart opens.

In Mississippi, furniture sales rose 2.5% the first year of a new nearby Wal-Mart.

Global Insight's study showed a gain of 137 jobs per county, or 3.7%, within the first three years.

The only cloud in the otherwise clear sky was reported in a study by David Neumark of the Public Policy Institute of California who is dismayed over the fact that smaller competitors are apparently driven out when Wal-Mart enters:

"We find clear evidence of adverse effects of Wal-Mart stores on retail employment," particularly in the South, where there are more Wal-Marts, according to his study.

While there is a lot that can be said about empirical studies, in general, and these empirical studies in particular, I'll mention a few that I see as the most important:

Linking lower prices to the use of information systems, savvy or otherwise, is an endeavor fraught with difficulty. Much of my own research addresses this specifically. Chief among the difficulties is finding the right measure of "technology use". Next comes finding the appropriate measure of performance- there are so many to choose from at the process- and firm-level. Finally, there is the task of explicating the means or mechanism by which the former is thought to influence the latter. All of this is to say that studies with conclusions like, more or better IT led to more or better performance are never as clear cut as they appear.

Secondly, results of the kind presented above are necessarily aggregate in nature. They often cover thousands of stores, dozens of regions, and span one or more decades. Thus, while the results can and likely do hold true when considering the big picture, there are bound to be many, many notable exceptions to the "on-average" findings. For every store or region or time period for which results cast Wal-Mart in a positive light, there will be many cases that fall below the averages, some spectacularly so.

What this means as a practical matter for Wal-Mart can not be under-scored enough: its critics like Wal-Mart Watch, the makers of the new documentary "The High Cost of Low Price", and various labor unions are not generally predisposed towards the use of impersonal, sterile, empirical methods like the ones presented at the aforementioned academic seminar.

Rather, their focus is and will always be on the individual, local, anecdotal stories of job lossses, store closings, employer abuses, etc. They will always seek to put a human and personal face on their often legitimate grievances and grind the company down, one anecdote or exception at a time. They will always generalize from those real and compelling experiences. And regardless of whether or not those generalizations are justifiable, there will always be a sizable audience for whom one or two compelling and heart-wrenching stories are sufficient proof that Wal-Mart is not just bad, but evil incorporate.

Finally, it is worth noting what was said by one of the professors in the article about Wal-Mart's belated PR offensive:

"It's unfortunate that they have to wait until they get into these sorts of problems before they start to generate information that lets people know all of the good things they are doing," says Paul Argenti, an expert in reputation management at the Tuck School of Business at Dartmouth College.

I agree with Paul that it is unfortunate. I would also add that Wal-Mart's use of empirical studies to counter the representations of its increasingly vocal critics can only be one prong- and a strong one, to be sure- of a multi-pronged approach to shoring up its battered reputation. After all, it's not just in politics that emotional appeals and hyperbole and bombast win far more often than they ought. Pointing to $2,329 of consumer surplus per household means nothing to parents convinced that the company sold them defective products that injured their children. Wal-Mart would be wise to keep this in mind.

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