Why Walmart's shelves are empty
Walmart has a problem, says Renee Dudley at Bloomberg News. Plagued with empty shelves, bulging stock rooms, and long checkout lines, America's largest retail chain is losing customers to Target, Costco, and other rival retailers.
America's biggest retailer is still growing — it opened 455 U.S. stores in the past five years — but its sales aren't, and its workforce is actually shrinking — by 20,000 employees, or 1.4 percent, over the last five years. The effect on product stocking, and customer satisfaction, has been predictably grim. "If it's not on the shelf, I can't buy it," says longtime Walmart shopper Margaret Hancock, of Newark, Delaware. "You hate to see a company self-destruct, but there are other places to go."
This isn't exactly breaking news, says Brad Tuttle at TIME. Bloomberg and Reuters have been warning about problematically low staffing levels since 2011. It's also "not surprising that the [new] story features plenty of anecdotal evidence from customers relating their frustrating experiences dealing with Walmart workers," Tuttle says. But it is a sign of how bad things are getting that "Walmart employees feel strongly enough about understaffing that they’re talking to the press about it," using their real names.
Walmart denies that there's a problem, with spokeswoman Brooke Buchanan telling Bloomberg:
Our in stock levels are up significantly in the last few years, so the premise of this story, which is based on the comments of a handful of people, is inaccurate and not representative of what is happening in our stores across the country.... Two-thirds of Americans shop in our stores each month because they know they can find the products they are looking for at low prices. [Bloomberg]
Well, "when a reporter goes into a store and sees lines 'about five deep' and 'empty spaces on shelves large enough for a grown man to lie down,' sights replicated at multiple stores, more than a handful of people are affected," says Laura Clawson at Daily Kos. And even though Walmart is denying the problems in public, the retail giant is "reportedly acknowledging them and trying to address them behind the scenes."
Clawson blames Walmart's philosophy of "screwing workers," keeping prices low by minimizing labor costs. She points out that rival chains like Costco and Trader Joe's pay and treat their employees better, leading to higher productivity and happier customers and workers. Walter Russell Mead at The American Interest blames the "shortage of cheap labor" tied to government policies.
Regulatory policy in the U.S. should be making it easier, not harder to sell cheap goods to the people who depend on them. Unfortunately, current regulations don't make it easy to pay for the labor force required to provide acceptable service while keeping prices low.... While raising the minimum wage to keep up with inflation seems reasonable and making health care accessible makes sense, looking for ways to make it easier for Walmart and its peers (which include chain restaurants like McDonalds) to hire more workers should be higher up on the policy agenda. Taxing employers to provide health care is, for example, a very good way to make sure that fewer people get hired. We aren't saying that revenue isn’t needed for some of these purposes, but the tax system should if anything be encouraging employers to take on more workers rather than punishing them. [American Interest]
Actually, the problem is less political and more managerial, MIT retail expert Zeynep Ton tells Bloomberg. Customer satisfaction may be low at Walmart, but "their view has been that they have the lowest prices so customers keep coming anyway. You don't see that so much anymore."
Retailers consider labor — usually their largest controllable expense — an easy cost-cutting target, Ton said. That's what happened at Home Depot Inc. in the early 2000s, when Robert Nardelli, then chief executive officer, cut staffing levels and increased the percentage of part-time workers to trim expenses and boost profit. Eventually, customer service and customer satisfaction deteriorated and same-store sales growth dropped.... Walmart is entangled in what Ton calls the "vicious cycle" of under-staffing. Too few workers leads to operational problems. Those problems lead to poor store sales, which lead to lower labor budgets. [Bloomberg]
These troubles are especially surprising because, "love it or hate it, Walmart has long been held up as a paragon of operational efficiency, spawning business school case studies and inspiring rivals to copy some of its techniques," says Aimee Picchi at MSN Money. But "regardless of what's causing Walmart's problems" now, "rolling back both customer service and available merchandise generally isn't considered a recipe for retailing success."