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Wal-Mart looks at its impact on economy

Under a barrage of criticism that Wal-Mart Stores Inc is bad for the overall economy, the world's largest company is taking a public look at itself.

In an unusual move, Wal-Mart is sponsoring a gathering of noted economists who will debate the company's impact on the economy and individual communities. The session, to be held today in Washington, is Wal-Mart's latest step in a campaign to appear more open and repair its reputation among investors, politicians, employees and consumers.

Wal-Mart has built a US$285 billion machine on a low-cost model whose prices have given it a competitive edge over its rivals. Now, even as the discounter prepares for the holiday season with a public pledge to be even more aggressive on prices, it faces a dilemma on how to continue its momentum while also appeasing its critics. Negative publicity has already hurt its stock price and a tough economy has slowed its sales growth.

But holding an economic conference, to be attended by about 80 people from the press and academia, is a risky strategy. Some unflattering assessments of Wal-Mart are expected to be presented, according to papers obtained by journalists. Even some supporters who were presen-ting upbeat studies raised doubts about the retailer's business model.

"Wal-Mart has brought lower prices to people, but some of Wal-Mart's labor practices are questionable," said Jerry Hausman, economics professor at the Massachusetts Institute of Technology. His study found that Wal-Mart's entry into the food business has forced supermarkets to lower their prices by 5 percent more than they had planned, straining their profitability.

Wal-Mart's critics have argued that the retailer's low-cost model comes at the expense of the economy; its pay and benefits drive down those at other companies trying to compete. The retailer's low benefits have also forced employees to rely on Medicaid as a safety net, squeezing state coffers, they say. Opponents also believe that Wal-Mart destroys communities and creates retail sprawl.

The retailer has long argued that its low prices raise the standard of living for consumers, particularly low-income shoppers, and help control inflation.

"This is a first step in engaging in a dialogue that will be important to this company and to this country," said Nate Hurst, a Wal-Mart spokesman, though he ac-knowledged that holding the conference carries some risks because of the possibility of negative comments about the company.

The company hired Global Insight Inc, a forecasting company in Waltham, Massachusetts, to conduct a year-long economic analysis, giving economists unfettered access to internal wage and benefits data. All papers will be available for the public and posted on Global Insight's Web site today.

Wal-Mart's opponents believe the company's efforts are better spent elsewhere.

"We don't need additional studies to show us what we already know," said Chris Kofinis, a spokesman at the union-backed Wake Up Wal-Mart, one of the most vocal Wal-Mart critics. "Instead of supporting conferences, it should focus on its core problems and failures that it knows already exists."

Wal-Mart is growing more worried that the bad publicity is keeping some shoppers away from their stores, according to an internal memo made public by Wal-Mart Watch on Monday.

The August last year memo, drawn up by consulting firm McKinsey & Co, reported that 2 percent to 8 percent of 1,800 shoppers polled had stopped shopping at the retailer because of the negative press.

What could make things worse is Robert Greenwald's scathing documentary called Wal-Mart: The High Cost of Low Prices, which will have a limited theatrical release on Nov. 4 in New York and Los Angeles and then go to a week of screenings at 7,000 locations including churches, homes and libraries across the country organized by Wal-Mart critics.

Organizers hope to use the movie as a tool to accelerate the movement against Wal-Mart.
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