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Class War and Wal-Mart

Tags The EntrepreneurFree MarketsU.S. Economy

01/16/2008Ryan McMaken

It doesn't take a degree in marketing to see that Wal-Mart has an image problem among the chattering classes. Few corporations in recent decades have been subjected to more relentless criticism, disdain, and fevered condemnation than what is regularly heaped upon the Arkansas-based retail giant.

Wal-Mart has become the poster boy for everything that its opponents love to hate about the modern economy. From its use of nonunion labor to its "low" wages, to its marketing of inexpensive foreign goods, Wal-Mart is uniquely singled out as the most monstrous example of everything that is thought to be wrong with American society today.

Opposition to Wal-Mart takes many forms. At the local level, elections are organized to keep Wal-Mart stores out of town, and local activists sport "Mall Wart" bumper stickers. Planning commissions are filled with local officials who view Wal-Mart as something that is to be at best tolerated, but who frequently and openly condemn the retailer as a monstrosity.

Nationwide, anti-Wal-Mart propaganda is widespread in academia while media productions such as the lengthy "Wal-Mart: The High Cost of Low Price" work to portray the company in the worst possible light. National labor unions could scarcely loathe Wal-Mart more than they already do, and both left-wing and right-wing populists of all stripes rail against the retailer for its selling foreign goods, its alleged war against "mom and pop" stores and its supposed use of tactics such as browbeating suppliers, "dumping" of goods, and other nefarious business practices.

Interestingly however, we rarely hear about Wal-Mart's competitors when they engage in identical business practices, and this is not just because Wal-Mart is bigger than all of its competitors. Wal-Mart seems to elicit an emotional response that many of its competitor's lack, and this emotional response is driven not so much by what Wal-Mart does, but by who and what it represents.

Take this passage from a recent edition of The American Conservative:

Wal-Mart began in Bentonville, Arkansas in 1962 as a single store and has grown to be the world's largest corporation and employer. Target and Kmart opened their first stores the same year; the difference between them and Wal-Mart was, and is, the latter's single-minded focus on offering the lowest possible prices all the time, not just during sales, no matter what it takes. Sam Walton banked on the addictive power of "too good to be true" bargain pricing to grow his business by cannibalizing existing retailers. It has worked—and in the process helped transform America from the workshop of the world into a nation not even of shopkeepers but of shop assistants ("sales associates").

Clearly, this analysis could be applied to Home Depot, or Target, or Kmart, or the new Sears superstores, or any other of the hated "big box" stores that dot the landscape. The allegation that only Wal-Mart uses low prices as a supposedly evil business tactic is patently absurd, yet the author manages to get away with it because her readers are no doubt inclined to assign some kind of unique evil to Wal-Mart alone.

In addition, an anti-Wal-Mart site makes this proposal:

If you have a choice, choosing anyplace other than Wal-Mart helps keep the monster in check. It doesn't have to be some mom-and-pop store. Shopping at Target helps the balance, too. Every dollar diverted from Wal-Mart is one dollar less of influence the company has.

Shopping at Wal-Mart's competitors is apparently fine just as long as one doesn't shop at Wal-Mart itself. Ever. No reason is given for this singling out of Wal-Mart beyond a naked and irrational repugnance of Wal-Mart and everything it stands for.

This loathing of Wal-Mart as unique among big-box retailers is perennially on display as Home Depots and Targets are opened with little to no opposition while Wal-Marts are rewarded with a bevy of anti-Wal-Mart yard signs and protests across the countryside.

While the sheer volume of anti-Wal-Mart articles, books, and documentaries are no doubt a factor, Wal-Mart's woes can also be traced to another phenomenon: its catering to low-income customers.

Alone among major retailers, Wal-Mart is primarily identified with small towns and low-income shoppers. One often hears jokes about unwed mothers shopping at Wal-Mart and about the long lines endured while some customer at the front of the line fumbles with her WIC vouchers. The fact that Wal-Mart recently began selling fine wines was a source of much bemusement among pundits and late-night talk show hosts.

Home Depot and Target certainly don't suffer from the same image, and the fact that those with means avoid Wal-Mart while the penurious take advantage of the low prices offered there, means that Wal-Mart has become irrelevant and contemptible to those who write columns or sit on planning commissions or pontificate on matters of labor and economics. Essentially, Wal-Mart is associated with tacky poor people, while the middle and upper classes can reserve for themselves the more respectable environs of other retailers.

If we look deeper, we find that Target, Home Depot, Kmart, and others engage in more or less identical labor and retailing practices as Wal-Mart. Target's average wages are no higher than those of Wal-Mart. Target's health care options are no more lucrative. Target imports foreign goods just as much as any other retailer (including Wal-Mart) yet this seems to trouble few. Few big-box stores pay their sales associates "high" wages, and all rely on keeping costs low by finding the least expensive (imported or otherwise) goods available. These facts are often pointed out during the occasional anti–Home Depot or anti-Target protest, but they're generally ignored.

Wal-Mart's connection to small towns and low-incomes is not an accident, of course. Wal-Mart has long marketed itself to small-town residents, and those with medium to low incomes. Only recently has Wal-Mart begun opening stores in central urban areas, and in many small towns, Wal-Mart is the only large retailer to be found. This focus on cornering the discount-store market in small towns across America has no doubt contributed to the fact that Wal-Mart's revenues are now four times those of Target, but this strategy has also created an image of Wal-Mart that has not helped it much with the people who spend their days trying to influence public opinion.

For most of its history, Wal-Mart naively assumed that if it minded its own business, local and national pundits and politicians would leave it alone. Microsoft once made the same mistake. Yet, during the last several years they've figured out that their image with both local and national elites is important if Wal-Mart wants to protect its interests from official and heavy-handed meddling from outside. This is an unfortunate but inexorable reality.

Wal-Mart has begun to hire lobbyists and has made public relations and public affairs — for the first time in its history — a company priority. These measures would not be necessary if governments were not routinely threatening Wal-Mart with restrictive new laws and regulations, but Wal-Mart has seen the writing on the wall.

And while a correlation doesn't prove causation, we've also begun to see Wal-Mart abandon its highly successful homey and unsophisticated image for a slicker, more urban, and more Target-like appearance. This may prove unfortunate if it means that Wal-Mart will no longer cater to the low-income shoppers who have so long benefited from its discount goods, but the change is undeniable.

Consider the Wal-Mart television ads of the late 1990s and early 2000s. The emphasis is on prices, and on family budgets and living on a small income. The formulas for Wal-Mart's advertising in this period were simple: regular focus on the low prices while profiling large families with small incomes.

Most recognizable during this period were the famous smiley face commercials. One 1999 ad featured the smiley face slashing prices to the tune of the Rawhide theme. The tone is friendly with the focus always on prices.

Then there were ads featuring mothers and parents who talked about how they shopped at Wal-Mart because it let them feed and clothe their families for less money. This 1998 commercial features a mother of four:

During the late 1990s Target made a conscious decision to distance itself from the Wal-Mart clientele and to appeal to a more young, hip, and (slightly) higher-income demographic. Target was still a discount store, but its image changed substantially throughout the '90s. And it became more and more a place where the young, educated, and fairly well-moneyed could imagine themselves shopping.

Here are two recent ads from the last decade that well typify the image that Target has recently cultivated:

Note the kitsch and the lack of any mention of prices or families or practical considerations of any kind. Everyone knows that Target is a discount store. The idea is to convince you that it's a stylish discount store.

One can buy discount paper towels and dog food at both Target and Wal-Mart at similar prices while being served by minimum wage workers. Yet, few would confuse the two stores. One is simply more charming than the other from the point of view of those who are prone to have contempt for discount retailers, so Target becomes a place where a congressman's twenty-something children (if not the congressman himself) might actually shop. In their minds, however, Wal-Mart remains relegated to the realm of the impoverished and unstylish. The fact that Wal-Mart is perceived as useless by those with money and power has, not surprisingly, led to political problems for the retailer.

The general bias against Wal-Mart extends far deeper than any generic bias against capitalism or against Wal-Mart's success. The people who hate Wal-Mart seem to have few scruples about shopping at Bed, Bath & Beyond or Target. Even if Target enjoyed a market share similar to that of Wal-Mart, it's difficult to imagine the same culturally based disdain being directed with nearly as much passion at Target as has been the case for Wal-Mart.

These socio-economic biases are not noticed only by those who oppose Wal-Mart. Its customers have not been oblivious as Wal-Mart has made changes to its image.

In a recent article on Wal-Mart's abandonment of its layaway program, MSNBC painted a picture of widespread shopper condemnation of the change:

"I always believed that they're always trying to give us the lowest prices and they're not for the rich man, you know?" said Jennifer Reynolds, a 28-year-old mother of four who used to depend on layaway for her children's school uniforms and holiday gifts. "I just can't believe that they would get rid of layaway and say, 'Here, well, here's a credit card.'"

The layaway change was portrayed as one piece of a larger movement away from Wal-Mart's traditional clientele. Shoppers also remarked on recent changes in Wal-Mart's image through new marketing items within the stores and with the merchandise itself. According to the article, one Wal-Mart customer and stockholder noted that the abandonment of layaway "hasn't helped reputationally, and it hasn't helped especially with their core (low-income) customers."

It's difficult to say how well these comments represent the feelings of the typical Wal-Mart customer or stockholder nationwide, but anyone who has seen recent Wal-Mart ads has certainly seen the change they've noticed.

Recent ads have clearly been focusing more on a younger, wealthier, and more stylish crowd than the traditionally themed ad of five to ten years ago:

Note the change in visual style and the fact that the ads now feature people who live in nice houses and buy high-end electronics. Note also that Wal-Mart has recently changed its motto from "Always Low Prices. Always," to "Save Money. Live Better," which sounds a lot like Target's motto of "Expect More. Pay Less."

It's not clear to what extent Wal-Mart's decision to change its marketing is directly tied to its government relations strategy, but it is clear that Wal-Mart is moving away from its traditional strategy and target demographic. Given that Wal-Mart has recently begun to pay attention to its government relations and public relations with a much more keen eye, it isn't outlandish to see its recent moves as an attempt to combat the traditional image which has produced so little sympathy among those with money and power.

If Wal-Mart does in the long run cease paying attention to its low-income customers, that will indeed be unfortunate, and all the more so if the change was motivated by political pressure. Historically, Wal-Mart marketing has been all about the low prices. And its low prices have made many goods available to many households that could not afford such goods before. Wal-Mart has set the standard for all large discount stores. All seek now to price themselves as close as possible to Wal-Mart's prices, and even those consumers who don't shop at Wal-Mart end up benefiting from the price competition.

In spite of what any pundit or city councilperson says, Wal-Mart has long served its low-income customers well, and it has improved the lives of many by making food, toys, tools, and clothing more affordable for millions. Being hated by the wealthy and powerful is perhaps the high cost of serving those with low incomes, and Wal-Mart will no doubt continue to encounter resistance from those who don't need its services for some time to come.



Contact Ryan McMaken

Ryan McMaken (@ryanmcmaken) is a senior editor at the Mises Institute. Send him your article submissions for the Mises Wire and Power and Market, but read article guidelines first. Ryan has a bachelor's degree in economics and a master's degree in public policy and international relations from the University of Colorado. He was a housing economist for the State of Colorado. He is the author of Commie Cowboys: The Bourgeoisie and the Nation-State in the Western Genre.