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Wal-Mart States Its Case in California

Wal-Mart placed full-page open letters in 15 California newspapers to rebut criticism of its plan to build 40 supercenters in the Golden State.

LOS ANGELES — Wal-Mart, launching an aggressive new public relations strategy just weeks after chief executive officer Lee Scott said the company had failed to communicate its message, took full-page ads in 15 California newspapers in an effort to refute criticism of its expansion in the state.

The unprecedented blitz by the world’s biggest retailer, which wants to build 40 Supercenters in California in the next several years, was in the form of an open letter.

Under the heading “A Letter from Wal-Mart to the people of California,’’ the Bentonville, Ark.-based company said it “has become a target for negative comments from certain elected officials, competitors and powerful special interest groups. While we are always willing to consider constructive criticism, much of what has been said publicly about Wal-Mart in California is simply not true.”

The campaign comes as Wal-Mart, which had sales of $256 billion last year, seeks to blunt opposition to its growth in lucrative markets in the most populous U.S. state. The company’s Supercenters, which combine a traditional Wal-Mart store with a supermarket and are as big as 200,000 square feet, have come under fire in California and other states by opponents who say that the retailer hurts small businesses, pays unfair wages, causes more crime and traffic and discriminates against women.

Wal-Mart is also facing the biggest workplace discrimination lawsuit in history — involving 1.6 million current or former workers — based on a complaint initiated by several female employees. The company is appealing the decision. In addition, the retailer also has been sued over the hiring of illegal aliens who worked in cleaning crews. Wal-Mart said it was unaware of the practice and blamed a subcontractor.

The ads, which appeared on Thursday in The Los Angeles Times, the San Francisco Chronicle, the San Diego Union-Tribune and other newspapers, said Wal-Mart pays competitive wages in California that average $10.37 an hour, offers medical coverage to full- and part-time employees, generated more than $650 million in California sales tax revenue last year and is a major part of the state’s economy in areas as diverse as agriculture, entertainment and technology.

“We are going to continue to be aggressive in our response and making sure that our message is getting out,” said Bob McAdam, Wal-Mart vice president for government relations. “While we have responded before [to criticism], the messages haven’t gotten through to media and in turn our customers.”

This story first appeared in the September 24, 2004 issue of WWD.  Subscribe Today.

McAdam, who acknowledged that the campaign was a first for Wal-Mart, declined to discuss other plans for community outreach, saying, “You are going to see us being more aggressive….What is changing is how we talk about ourselves.”

Wal-Mart’s decision was a necessity if it is to move ahead with its growth strategy, said David Stewart, a professor of marketing at the University of Southern California’s Marshall School of Business. “The criticism is kind of unprecedented, so the response may be unprecedented as well,” he said. “Not responding is not an option unless they are going to withdraw.”

The company set up media stations at five different Wal-Mart stores across the region and made available both Wal-Mart spokesmen and store associates.

“In some respects it’s also for the people who work at Wal-Mart as much as for the general population,” said Richard Giss, partner in the consumer business practice of Deloitte Touche LLT. Giss predicted the campaign will have little impact on communities because the battle is won in consumer dollars, not newsprint. “If people didn’t like the store, they wouldn’t shop there. But they actually do shop there,” he said.

In April, voters in Inglewood, Calif., a Los Angeles suburb, voted to reject a ballot initiative that would have allowed construction of a 60-acre Wal-Mart. Opposition was led by a coalition of unions, churches and community groups.

Inglewood Mayor Roosevelt Dorn, who supported Wal-Mart, said: “Let’s face it, when you have a city that needs, number one, the employment, and you have a development that would bring an estimated $3 million to $5 million in sales tax to the city, how can you turn your back on that kind of development?”

Earlier this month the city council in Rosemead, a municipality about 12 miles east of downtown Los Angeles, voted 5 to nothing to allow construction of a Wal-Mart Supercenter. Opponents of the plan said they would seek to recall the entire council. Wal-Mart officials said the store would bring $600,000 in annual sales tax receipts to the city as well as create 300 jobs.

In Los Angeles, the City Council has voted to approve a measure that would require community impact reports for any proposed retail space of 150,000 square feet or more.

Councilman Ed Reyes, a Wal-Mart critic, said, “The general public, especially Los Angeles, will realize that [the media campaign] is a p.r. stunt.” He said that, in Cathedral City, Calif., “Wal-Mart came in, promised jobs and benefits and then left when it was no longer profitable,’’ leaving a devastated downtown.

Speaking at a Goldman Sachs retail conference on Sept. 9, ceo Scott said: “What we have found is that there is a different group of stakeholders today that are important, and that is a person who’s not familiar with Wal-Mart Stores, they’re not familiar with what we stand for. So their view of Wal-Mart Stores is what they read in the newspaper and what they see on TV. We have decided it is important for us to reach out to that group.’’

Goldman Sachs analyst George Strachan said in a written statement that Wal-Mart’s strategy is a “reversal in approach as they shift from being intensely insular to espousing a nationwide outreach program determined to uphold their reputational image all the while remaining focused on delivering the best value to the customer.’’

Wal-Mart is amenable to changing its game plan if communities insist on it, McAdam said.

If the opposition is “a minority, we’re prepared to fight back, but if it’s a broad-based opposition then we have to rethink whether we should be there.”