PRNewswire-FirstCall

BusinessWeek

By Ronald Grover
AUGUST 31, 2006                       [back to top] 

The retail behemoth isn't happy about the iPod maker's plans to offer movie downloads through iTunes. Has Wal-Mart met its match?

The guy from Bentonville, Ark., surely isn't on any of Hollywood's leading man lists. A 23-year Wal-Mart Stores (WMT ) veteran, David Porter is the person at the retail giant who orders DVDs and slashes prices to move them. But this summer, Porter has been one of Hollywood's hottest acts, taking meetings with top studio brass like a producer with a hot script. His pitch: Wal-Mart isn't happy.

That prospect tends to send shivers through Hollywood's Gucci-toed corner offices. As the largest seller of DVDs, Wal-Mart accounts for roughly 40% of the $17 billion in DVDs that will be sold this year, a financial lifeline to big-spending studios. But now Wal-Mart's video business faces a potential threat by Steve Jobs and Apple Computer (AAPL ), which in mid-September, sources tell BusinessWeek, plans to announce it will start offering movie downloads from its iTunes store.

The notion of kids running around with full-length movies on new, wider-screen iPods that Apple is expected to unveil as well is causing grief in Bentonville, according to Hollywood executives. The $312 billion a year retailer, they say, wants concessions that could include lower DVD wholesale prices.

PLAYING THE HEAVY. With Wal-Mart CEO H. Lee Scott assigning his point man Porter to roam the halls of major studios, skittish executives have for months delayed giving Jobs the rights to distribute their movies through his new service. The price Apple hopes to charge, now set at $14.99 for new releases and $9.99 for older movies, has risen from Jobs's initial plan to offer new flicks for $9.99, say industry insiders.

So far, Apple only has one studio signed on: Walt Disney (DIS ), where Jobs is the largest shareholder following the entertainment giant's purchase of his Pixar Animation Studios. News Corp.'s (NWS ) Fox Entertainment Group may join in later, as might independent Lions Gate Entertainment (LGF ), say Hollywood sources, but only if other studios come along, too. So far, other large studios have taken a pass, especially after Wal-Mart earlier this year threatened not to sell Disney's High School Musical for a time after Disney released it initially only on iTunes.

What does Wal-Mart want this time to play nice? Executives who have met with Porter say it wants marketing help when it launches its own planned download site. And it wants Hollywood to trim the current $17 wholesale price for DVDs. That would let Wal-Mart slash its own prices to the same $15 or so that Apple would charge. (The plan is for Apple to pay a $14 wholesale price for new releases, say sources, although negotiations continue.) A large wholesale cut for Wal-Mart, of course, would amount to hundreds of millions in lost studio revenues each year at a time when DVD sales are slowing.

LOSING PATIENCE. Wal-Mart isn't the only issue that's giving some studios pause. Several are concerned about Apple's rules for using iTunes, which let users watch a film on up to five different devices. And others worry about letting Jobs set a download price they can't change, as he has done in music. Still, studios have embraced the digital concept and accept some "burning" of movies to DVDs. In addition to Apple, the studios are negotiating potential download deals with Amazon.com (AMZN ), AT&T (T ), and cable giant Comcast (CMCSA ).

No doubt Steve Jobs knows how to turn tiny digital media niches into a mainstream phenomenon. That's what he did in the music biz. But his patience for all this tiptoeing is wearing thin. Jobs recently hopped aboard his corporate jet for a little politicking of his own in Hollywood, and insiders say he called Scott to express the concern of a vendor who sells tons of iPods and Macs through Wal-Mart stores.

Jobs would not comment for this story nor would any studios. Wal-Mart acknowledged that it's talking with studios about starting its own download service but disputed that it is "dissuading studios from conducting business with other providers," according to Wal-Mart spokeswoman Jolanda Stewart.

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Wal-Mart looks beyond the aisle

By Jonathan Birchall
Financial Times
Aug 31, 2006                        [back to top] 

At Wal-Mart's new supercentre in Plano, Texas, shoppers can buy upmarket wines and sushi and surf the web in a Wi-Fi-connected café as part of an experiment by the mass discount retailer to test its ability to extend its appeal to higher income customers.

Plano shoppers might notice that the staff are wearing smart dark blue T-shirts, instead of the usual Wal-Mart nylon smocks. But they might not be conscious of the fact that the store's most popular departments – the grocery and health and beauty sections – have been repositioned next to each other rather than on opposite sides of the 200,000sq ft store, more than 100 yards apart.

The move, at odds with retail industry's traditional "get 'em in and keep 'em in" approach, reflects research done not just by Wal-Mart itself, but by Saatchi & Saatchi X, its "in-store" marketing agency.

"The core thing we're trying to do is for the customer to spend less time searching and more time shopping," says Andy Murray, chief executive of Saatchi X, based in Springdale, Arkansas, a few miles from Wal-Mart's Bentonville headquarters.

"In Plano, we really tried to understand the total store experience, and to look at things such as adjacencies, how intuitive is the navigation, can it communicate more quickly, and can it make areas of the store feel different – if you're in the baby department, and it feels like the laundry detergent section, that's not good."

Wal-Mart has worked before with Saatchi X and its predecessor, Thompson­Murray, which the advertising agency Saatchi & Saatchi bought in 2004 in a move that illustrated the growing interest of the marketing industry and its clients in in-store, or "at retail", ­marketing.

The retailer has now reinforced its relationship with Saatchi X by declaring it to be its "agency of record" for "shopper, in-store and associate [employee] communications" – the first time a retailer has awarded an in-store agency this status, which gives it involvement in higher-level strategic marketing decisions.

Saatchi X focuses on everything from store layout to product packaging, shelving and the creation of in-store promotions – an area of increasing importance for consumer goods marketing as the ­traditional mass media channels of television and ­newspapers decline.

"It's a recognition from Wal-Mart's point of view that the store is a focal point for the shopping experience," says Mr Murray. "Most other retailers don't have the in-store shopping environment brought together at a strategic level. So it's a recognition for Wal-Mart that this space is important."

Under John Fleming, who took over as marketing officer last year, the retailer has stepped up its efforts to improve the look and feel of its stores.

"The new paradigm for retail is that the store is a brand," Stephen Quinn, Wal-Mart's senior vice-president of marketing told investors this year, laying out the focus on reducing store clutter and making shopping at the retailer easier.

Laura Davis-Taylor, founder and principal of Atlanta-based Retail Media Consulting, says the elevation of Saatchi X reflects one of the biggest challenges facing retailers as they strive to manage the proliferating opportunities created by the expansion of interest in in-store media.

"The biggest challenge is that no one owns the store; someone in marketing owns the internet, and someone else owns the external marketing. But no one owns the store, so it's very difficult to act upon this whole idea of customer-centricity."

But Ms Davis-Taylor also points out the challenges facing Wal-Mart as it seeks to co-ordinate the competing demands of its store department managers, who have traditionally arranged in-store promotions directly with the brand suppliers – often without input from the marketing department.

Mr Murray argues that being nominated as agency of record gives the Saatchi X more influence in the decision-making process – the appointment of his agency also reflects the influence of Mr Fleming's marketing team.

The rise of Saatchi X is also emblematic of the impact of in-store marketing on the relationship between the two giants of the consumer universe – Wal-Mart and Procter & Gamble.

Mr Murray himself worked for nine years at P&G, including three years at its Wal-Mart liaison office in Springdale, Arkansas, before he went off on his own and eventually set up ThompsonMurray.

Saatchi & Saatchi itself numbers several P&G brands among its most important clients, including its Pampers childcare line. Mr Murray's team has worked with other companies, too – including Novartis, the pharmaceutical company, and American Express.

The agency's stress on the importance of winning the attention of a customer in the store, and creating an overall store experience that helps shape customer decisions, synchronises with P&G's focus on what it calls the "first moment of truth" – winning a consumer's attention in store within an ­estimated three to seven ­seconds.

Saatchi X argues that there might be even less time than that. Using proprietary eye-tracking technology, it estimates that shoppers only notice 50 per cent of what they look at, even standing in front of a shelf, and that the retailer has a mere two-and-a-half seconds to make an impact.

P&G's current focus on the in-store experience also reflects its collaborative relationship with Wal-Mart. The two companies have been sharing shopping data since the late 1980s, and Dina Howell, the head of P&G's global "first moment of truth" team, headed the company's Wal-Mart research and marketing office in Springdale from 1996 to 2004. She was also one of Mr Murray's first major clients after he set up on his own in 1997.

Much of the agency's work at Wal-Mart, however, has concentrated on trying to make shopping more convenient – helping the retailer to pursue its goal of focusing on offering "solutions" and "value", in place of its previous focus on selling the cheapest items.

"A shopper might spend 21 minutes in a store on average, but of that only six minutes involves shopping, and the rest of the time she's trying to find stuff, and that is really not driving the value of the shopping basket," he says. "Most in-store experiences have ignored the factor of time."

That has led to in-store "multibrand" efforts co-ordinated by Saatchi X, in which the objective is to provide single-location groupings of disparate products – such as a promotion last year presenting a range of products linked to the annual ritual of the US high school senior year prom dance.

"Typical retailers concentrate on product placement – such as putting the bananas near the cereal, rather than trying to inspire, through multibrand campaigns that are really connected to consumers," says Mr Murray.

He also argues that retailers need to change their approach to in-store marketing – away from the traditional focus on design, point-of-sale promotions or navigating around the store, towards a more holistic approach that looks at the store from the point of view of the customer.

"Our centre of gravity is the shopper, and not the retail space. We need to understand the shopping cycle that starts at home and then goes on through to the store."

Intimacy, mystery and sensuality

Andy Murray, head of Saatchi & Saatchi X, believes successful retailers should try to address three aspects of customers' experience in stores. In The Lovemarks Effect , a book to be published in November, he describes three "attention zones": one associated with the need to create an air of "mystery", another "intimacy" and a third "sensuality".

The first attention zone operates at a distance of 30ft from the shopper, and requires the retailer to use "a combination of sound, colour, scent and motion" to attract potential buyers – ideally by creating a sense of mystery and delight.

At 10ft the retailer's task changes, as "placement on the shelf and the ability of the brand to stand out from its competitors is at stake".

At 3ft the consumer is either holding their potential choice or reaching out for it. "It is the look, feel, and design of the object that will turn her from shopper to buyer."

The agency also identifies three layers of shopping communication within a store – navigation, inspiration and education – and notes that most retailers spend most of their time on navigation, guiding customers around their stores.

In spite of the current enthusiasm for in-store television and digital signage, Mr Murray argues that the biggest technological revolution in stores will come through mobile phones: customers will use mobiles to compare prices or download recipes, film clips or product ingredients.

"The screens are going to be on the shoppers as much as on the shelves . . . that's the place where things are going to move really fast," he says.

© 2006 MSNBC.com

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Marubeni eyeing linkup with Aeon or Wal-Mart

By Business Desk
The Daily Yomiuri
31-08-2006                            [back to top] 

Marubeni Corp, the largest shareholder in Daiei Inc, will soon enter into separate negotiations with Aeon Co and Wal-Mart Stores Inc, the U.S. retail chain operator that has Seiyu Co under its umbrella, to choose a partner to assist in the rehabilitation of Daiei, industry sources said on Wednesday (August 30).

Marubeni plans to make a final decision following negotiations with other major retail chain operators, but Aeon is seen as a prime candidate because of its expertise in developing goods and outlets, the sources said.

If Daiei and Aeon join hands it would create the nation's largest retail business alliance, with more than 6 trillion yen (US$51.1 billion) in sales.

Marubeni, currently holding a 44.6 per cent stake in Daiei, will sell up to 20 percentage points of its ownership to the rehabilitation partner, forming a partnership in October.

The partner will become Daiei's third-largest shareholder after Marubeni and Advantage Partners LLP, an investment fund holding a 23.5 percent stake.

Aeon President Motoya Okada told reporters: "We're interested in Daiei. We'll talk with them after collecting information for two or three days."

On August 4, Marubeni gained an additional 33.6 per cent stake in Daiei for 69.8 billion yen (US$595 billion) from the Industrial Revitalisation Corporation of Japan, and thus became the largest shareholder in Daiei.

Copyright @ 2002 ASIA NEWS NETWORK All rights reserved.

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Tell Wal-Mart to Stick to Low Prices, Not Homosexual Activism

Family Research Council
August 30, 2006                           [back to top] 

It is certainly not news that Wal-Mart has a history of providing American consumers with good products for reasonable prices. But what you may not know is that for some time Wal-Mart has come under assault from the far left questioning how they provide such an affordable service to the American public. Even Hillary Clinton - former Wal-Mart board member and 2008 presidential hopeful - has turned against the company by returning $5,000 in political contributions.

In an apparent concession to the heat from the radical left, Wal-Mart has entered into a new partnership with the National Gay and Lesbian Chamber of Commerce (NGLCC). While the NGLCC professes to promote the "interests of the LGBT business community," this is not all they have done. Recently, they described efforts to defend traditional marriage as an attempt to "write discrimination into the Constitution..." The NGLCC also advocated attaching a pro-homosexual "hate crimes" amendment to legislation intended to protect children from violent sex offenders. Their advocacy delayed the legislation for several months.

It is unfortunate that Wal-Mart has joined forces with an organization whose mission opposes many of the values shared by rural and small-town America. It is precisely the interests of average Americans that Wal-Mart has prided itself in promoting. Now, by surrendering to the radical homosexual lobby, Wal-Mart has entered the political arena with no economic benefit to their company or their customers.

While it appears to be a done deal, it's never too late to express your disappointment with this recent decision by Wal-Mart executives. Please download the flier and deliver it to your local Wal-Mart Customer Service Desk. Doing so will allow you, a patron of their stores, to convey your desire that Wal-Mart stick to business, not politics.

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Wal-Mart's 'Gay' Partnership Risks Conservative 'Rollback'

By Randy Hall
CNSNews.com 
August 29, 2006                                     [back to top] 

(CNSNews.com) - After months of criticism from union-backed groups over its employee pay and health care practices, Wal-Mart now faces a potential "rollback" of support from conservatives because of the retail giant's partnership with a homosexual business coalition.

"I don't think this is something that will sell on Main Street America, where most Wal-Mart stores are located," said Tony Perkins, president of the conservative Family Research Council (FRC). "I don't think cheap prices on goods from China will be enough to stop a rollback in their customer base if they choose to go down this aisle."

Joining the FRC in criticizing Wal-Mart's new alliance with the National Gay and Lesbian Chamber of Commerce (NGLCC) is Americans for Truth, which describes itself as "the only national organization devoted exclusively to exposing and countering the homosexual activist agenda."

"Wal-Mart has always been a favorite of God-fearing Middle American customers who hold traditional family values," said Peter LaBarbera, the group's founder and president. "I'm very surprised that Wal-Mart would now bite the hand that feeds it and thumb its nose at those very customers.

"It seems to me that Wal-Mart should reconsider its unsavory alliance with these extremist homosexual activists in today's heated and polarizing culture war," LaBarbera added.

However, Bob McAdam, vice president of corporate affairs with Wal-Mart, told Cybercast News Service that the world's largest retail company joined the NGLCC "just like we have joined a number of other groups representing all parts of the spectrum of our customers" - including women's organizations and minority groups.

The conflict began on Aug. 21, when the NGLCC issued a news release announcing "a partnership with Wal-Mart Stores, Inc., as part of the company's ongoing commitment to advancing diversity among all of its associate, supplier and customer bases."

As part of that agreement, Wal-Mart will pay $25,000 to NGLCC - "the largest LGBT [Lesbian, Gay, Bisexual and Transgender] business development and economic advocacy organization in the world" - and has agreed to sponsor two of NGLCC's annual conferences.

"We are honored to have Wal-Mart's support of the NGLCC," said the group's co-founder and president, Justin Nelson. "Our partnership will not only provide more opportunities for the Chamber, but the business community as a whole."

When asked by reporters why Wal-Mart had not issued a statement on the new partnership, Nelson said that it's "normal procedure" for the NGLCC to handle such announcements.

Since then, conservative organizations have become increasingly vocal in their criticism of the new partnership.

Robert Knight, director of the Culture and Family Institute at Concerned Women for America, said that by joining forces with the NGLCC, Wal-Mart is "validating the idea that homosexual activists have the right to shake down corporations out of fear of being called bigots."

Perkins called the alliance "an odd new domestic partnership." He's asking FRC's supporters to download a flyer from the group's website that asks why the retail chain is supporting homosexual activism and place a copy of it at the customer service desk of the nearest Wal-Mart.

As Cybercast News Service previously reported, the retail giant has been no stranger to controversy over the past year when union-sponsored groups such as WakeUpWal-Mart.com and Wal-Mart Watch have charged the corporation with needing to meet "higher expectations" and being unsafe for shoppers.

McAdam said he expects the popularity of the company - which has about 3,900 outlets in the United States alone - will trump any criticism from either side of the political aisle, just as when Wal-Mart added homosexuals to its non-discrimination policy two years ago.

"I think our attraction to Americans in general speaks for itself, and that's why comments from either side of the political spectrum or whatever philosophical debate are less important than the daily approval we see from our customers," McAdam said.

"Wal-Mart continues to serve the vast majority of Americans regardless of their political persuasion or their personal beliefs," McAdam noted. "Last year, about 85 percent of Americans bought something at Wal-Mart. We have more than 138 million customers a week at Wal-Mart.

"With numbers of that size, we're dealing with just about everybody, and to that extent, we want to be as welcoming as we can to every part of the spectrum, and we will continue to be broad in our outreach," he added. "We welcome people of all persuasions and all philosophies."

Not all homosexual activists are pleased with the new arrangement, though.

"Our community is a smart community, and we can see a shameless marketing opportunity when it comes," Jeremy Bishop, program director of the "Pride at Work" subsidiary of the AFL-CIO, told Cox Newspapers.

"For us, it's a matter of social and economic justice," Bishop added, "and Wal-Mart has a long record of not treating its employees - gay or straight - with equity and dignity."

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New Wal-Mart TV Ads Promote Company Transformation

30 and 60 Second Spots Highlight Values, Health Care, Savings, and Philanthropy

PRNewswire-FirstCall                  [back to top] 

BENTONVILLE, Ark., Aug. 29  -- Wal-Mart today announced that it is airing two television advertisements as part of a continued effort to inform the public about the transformation underway at the company.

The spots highlight the company's positive impact on communities, including its core values, affordable health care, customer savings, and charitable contributions. The ads will initially be launched in two markets - - Tucson, Ariz. and Omaha, Neb.

"This is part of Wal-Mart's ongoing effort to talk about our commitment to the men and women who work for us, to the customers who shop at our stores, and to the communities we serve," said Bob McAdam, vice president of Corporate Affairs. "The more people learn about who we are and how we strive to do better every day, the more they know that we are good for America's working families."

Wal-Mart associates featured in the advertisements speak to the company's values and facts about its transformation:

* Wal-Mart's low prices save the average working family more than $2,300 a year; * Wal-Mart creates tens of thousands of jobs per year; * Wal-Mart offers eligible associates health insurance for less than a dollar a day ($23 per month); * Wal-Mart moved more than 150,000 uninsured Americans into a company- sponsored insurance plan; * Wal-Mart is one of the largest corporate contributors to local charities in America.

At the June shareholder's meeting, Wal-Mart CEO Lee Scott called the company's transformation, "Wal-Mart Out In Front." It is an effort to remain true to the values that built Wal-Mart over the last 44 years, while also changing to be an even stronger business and an even better company.

The new ads can be viewed online at http://www.walmartfacts.com .

About Wal-Mart Stores, Inc.

Wal-Mart Stores, Inc. operates Wal-Mart discount stores, Supercenters, Neighborhood Markets and SAM'S CLUB locations in the United States. The company has operations in Argentina, Brazil, Canada, China, Costa Rica, El Salvador, Germany, Guatemala, Honduras, Japan, Mexico, Nicaragua, Puerto Rico, South Korea and the United Kingdom. The company's securities are listed on the New York Stock Exchange and NYSE Arca, formerly the Pacific Stock Exchange, under the symbol WMT.

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Judge dismisses racketeering counts in Wal-Mart lawsuit

By JEFFREY GOLD
AP Business 
August 29, 2006                      [back to top] 

NEWARK, N.J. -- A federal judge has dismissed two racketeering charges in a lawsuit brought by illegal immigrants who worked as Wal-Mart janitors, finding that they failed to explain how any violations of U.S. immigration law by the retailer caused them economic harm.

The lawsuit's other charges, including failure to pay overtime and minimum wages, still stand, but no trial has been scheduled.

"Obviously, the plaintiffs are disappointed in the ruling. We feel it's at odds with the law in the area and we are exploring options," a lawyer for the janitors, James L. Linsey, said Tuesday.

John Simley, a spokesman for Wal-Mart Stores Inc. at its headquarters in Bentonville, Ark., said the company was pleased with the decision.

The lawsuit, filed in Newark nearly three years ago, seeks class-action status for the janitors. It claimed that Wal-Mart conspired with contractors to violate the Racketeering Influenced Corrupt Organizations Act, known as RICO, by systematically depriving the workers of legal protections.

U.S. District Judge Joseph A. Greenaway Jr., however, found that the janitors failed to link any immigration violations by the company to their claimed injuries.

"As to the RICO claims for immigration violations and money laundering, the path from wrongdoing to injury is too indirect to meet the proximate cause requirement," Greenaway wrote in a 17-page opinion issued Monday.

As part of the litigation, the janitors obtained a 2003 affidavit by U.S. Immigration and Customs Enforcement. In the affidavit, investigators said testimony and taped conversations from 2003 showed two executives at Wal-Mart headquarters knew that contractors and subcontractors cleaning its stores in several states employed illegal immigrants from Eastern Europe and elsewhere.

The lawsuit charged that Wal-Mart executives conspired with several contractors to hire the illegal immigrants, who were paid $1,500 a month or less to clean stores seven days a week, with no overtime or benefits.

Wal-Mart agreed last year to pay $11 million to end a federal probe into the use of illegal immigrants at stores in 21 states, including New Jersey.

Shares in Wal-Mart rose 6 cents to close at $44.49 in trading Tuesday on the New York Stock Exchange. It has traded from $42.31 to $50.87 over the past year.

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New Wal-Mart opens Wednesday

By JOHN MORGAN
Star-Tribune 
Tuesday, August 29, 2006            [back to top] 

The new, west-side Wal-Mart store opens Wednesday morning, after a year and a half of planning, construction and debate.

"In every community, there are people who are anti-Wal-Mart," Mayor Renee Burgess said Monday. "I think it will balance Casper's growth and help to remind people that life is about choices. People can choose not to shop there.

"Not everybody has to support Wal-Mart," she said. "We don't all go to every new bar or every new restaurant in any community. This is the same thing, just on a much larger magnitude. For the most part, all the controversy has been greatly blown out of proportion."

Last fall, a citizens group tried to block the new store, but failed to get enough signatures in time to submit a referendum petition. Wal-Mart currently has a store on Casper's east side. The east side also has the mall and a bustling business community, while the west side has seen little growth until recently.

"Wal-Mart will provide a tremendous anchor on the west side and revitalize the business area," Burgess said. "It's been a real painful growth experience, but I think the community as a whole will support it."

The new store will open at 8 a.m. Wednesday. There will be a special ceremony at 7:30 a.m. to give $36,000 in donations to several area organizations.

The store is Wal-Mart's latest design, a supercenter that includes clothing, household products, lawn and garden supplies, jewelry, crafts, and expanded electronics and toy departments. The store will also feature a Tire & Lube Express station, a Subway restaurant, a family fun center, one-hour photo lab, a vision center, pharmacy, SmartStyle hair salon, Regal Nails salon, wireless phone center and a full-service liquor store.

The supercenter will include a grocery area with a bakery, deli, dry and frozen goods, and an organic food section.

"Our associates are very excited and looking forward to getting down to the day-to-day business," said store manager Ken Braun. "Having a new supercenter in this still underdeveloped area of town will help Casper to really flourish. I think the public is excited and will take advantage of not having to drive across town."

Despite having to halt construction briefly in March and again in May due to undocumented workers and struggling to find enough workers in Casper's tight job market, Braun said the store has been able to overcome difficulties and open on schedule.

"We have a large enough staff to make the store open," he said, adding that while not yet fully staffed, the store currently has more than 260 workers ready to start Wednesday. "We are still looking for good employees and are still interviewing people."

The Wyoming Department of Transportation will activate the new traffic signal on the highway in front of the store this afternoon, according to WyDOT public involvement specialist Jim Nations.

The 206,640-square-foot supercenter is located at 4255 CY Avenue and will be open 24 hours a day, seven days a week.

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After German Failure, Wal-Mart Is All Smiles In China

homeworldbusiness.com
Monday, August 28, 2006                   [back to top] 

NEW YORK— If you were surprised by Wal-Mart throwing in the towel and selling off its German stores, stranger still was its more recent decision to cooperate with China’s state-sanctioned labor group to create unions at its 60 stores in that country.

Actually, none of it is strange if you look inside these developments.

American pundits from the outside are performing flips trying to figure it out. I’ve read so many analyses of Wal-Mart’s German failure— some cite the company’s alleged human resources policies disallowing employee fraternization; others argue that German consumers didn’t like Wal-Mart clerks packaging their groceries.

But the most uninformed one yet was from a know-it-all who compared Wal-Mart’s failure to “invaders” in WWII and Germany proving to be a bridge too far.

Where do I start with that one? For starters, this analysis had the wrong country (operation Market Garden was in 1944 in Holland, not Germany). It compared a retailer’s multi-national expansion to invaders, when it was the Allies trying to liberate an occupied country from the Nazis. And, finally, I took this editor’s comparison as an insult to the brave allied soldiers in this daring raid who gave their lives for freedom.

Wal-Mart failed in Germany for a host of reasons, but insiders say a key element was out-of-stocks. This company’s strength always has been its efficient distribution system. Wal-Mart’s German competitor, Aldi, does a much better job of being in stock for advertised and off-the-shelf items.

Several insiders told me that the intolerance of German consumers to out-of-stocks was an important issue. If Wal-Mart advertised a product and it wasn’t on the shelf, German consumers were turned off. Some didn’t come back.

One anecdote I heard was that German logic and American retailing simply didn’t dovetail. For example, if one multi-pack of a product being promoted was out of stock, Germans simply couldn’t understand why they were not allowed to buy two lower-count packs instead as a substitute? Logically, two smaller count packs that added up to the larger one not available should be offered instead, right? Not according to a rigid Wal-Mart. And Germans couldn’t understand it.

Issues like this one seem small, but took their toll. How ironic that Wal-Mart strengths— distribution and

in-stock positioning— were part of its Achilles heel in Germany.

And, most intriguing, several vendors now report that just weeks after the announcement of the sell-off of the German stores, Wal-Mart in the U.S. notified suppliers that it was invoking sharp new penalties for companies that do not maintain 99% in stock positions of their goods at store level.

The vendors complained that maintaining this almost-perfect in-stock position level was difficult, considering the complexities of getting goods through the distribution network to the sales floor. And most shipments are precision-timed to distribution centers, not allowed too early or late.

What happens to these goods once they reach that far is really out of the vendor’s hands. But, evidently, 99% at store level it is. A lesson learned by Wal-Mart from failures in Germany? Or a closely timed coincidence?

In China, where Wal-Mart is betting much of its international expansion, it seems there is nothing this retailer wouldn’t do to keep it friendly and growing. Joe Hatfield, who’s been heading Wal-Mart’s operations there since the retailer landed there (invaded?) in 1996, said Wal-Mart is hoping its relationship with the All-China Federation of Trade Unions is “prosperous for our associates and for the growth of our business.” The ACFTU is seeking to organize some 28,000 Chinese employees of Wal-Mart.

Can you imagine what Sam Walton himself would have thought of all this? He was adamant in his stand against unionization of Wal-Mart stores. And his organization has carried that standard to this day, battling to break into New York City and Chicago, but against activists who seek unionization of stores in these urban centers.

So, while Wal-Mart resists union activity at home, it’s all smiles in Shenzhen and Beijing, where Wal-Mart says it now will be helpful with the ACFTU in helping to create worker unions at its already-open 60 stores and, presumably, for Wal-Mart stores to be opened in the future in China.

Wal-Mart really doesn’t have a choice in China. Either it cooperates, or China could become unfriendly very quickly to its expansion plans.

I once met with Hatfield in China in the company’s Shenzhen store, one of its first in China, and he took pains to explain to me floor-by-floor in this multilevel unit how Wal-Mart had adapted its product assortment to the Chinese culture.

A reason for its success in China was its elasticity in merchandising, its willingness to be a fast learner— and also to cooperate with local community groups.

Many of you have walked Wal-Mart stores in China and have seen firsthand just how unique they are in product selection and presentation. Now, if unions are going to be required, Wal-Mart is in no position to act like this is Chicago or New York City.

In China, Wal-Mart has to cooperate. With 60 units open and the promise of hundreds more to come in the future, Wal-Mart is in a preferred position in China retailing. It can’t close its doors or say no to growth.

But watch to see how far Wal-Mart will go in cooperating with union formations of its workers. I say, you’ll be surprised at how much more cooperative they’ll be in Shanghai than in a large American city.

Chinese officials know that Wal-Mart is in no position to be difficult or close stores when workers prefer the protection of organizations such as the ACFTU.

The upside for Wal-Mart in China is exciting. But as time progresses, and it opens more stores and generates a larger portion of its revenues from China, Wal-Mart will find itself in a weaker and not stronger bargaining position with Chinese authorities and labor groups.

In a flash moment, China could put up hurdles to Wal-Mart’s growth there or impose new fees to its profits there. So, Wal-Mart has every reason to keep it friendly in China.

Watch and see.

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Wal-Mart's next battlefield

MARINA STRAUSS
The Globe and Mail
Monday, August 28, 2006               [back to top] 

For more than a year, Wal-Mart has been trying to get into Port Elgin, a burgeoning Ontario town on the shores of Lake Huron.

The world's biggest retailer likes the spot and the wider community of Saugeen Shores, with its population of about 12,500 -- 7,000 in Port Elgin alone and up to 40,000 in summer when cottagers settle in. The local market is well-heeled, and its numbers are forecast to jump by about 55 per cent over the next two decades. The nearby Bruce Power nuclear station is being revived, attracting hundreds of workers and boosting demand for housing and retailing in the area.

Best of all, fast-growing Port Elgin is home to only one supermarket, a Your Independent Grocer owned by Loblaw Cos. Ltd.

But for Wal-Mart and its Canadian real estate partner, SmartCentres, that's just where the challenge begins: Loblaw is opposing SmartCentres' rezoning application, joining a number of local groups to run its rival out of town.

The company may not be able to keep Wal-Mart out of Port Elgin forever, but it seems to know that in the competitive retail market, a battle delayed is a battle not lost.

"The longer the delay, the more the benefits," says Dennis Wood, a lawyer for SmartCentres. Welcome to the front lines of Canada's testiest retail war, where Wal-Mart, Loblaw and Zellers are duking it out over small communities and growing suburbs. But instead of using price cuts and two-for-one coupons, they're attacking each other with phalanxes of lawyers, planners and consultants.

In a handful of towns across Canada, Wal-Mart's latest ambitious expansion plans -- especially to add grocery aisles -- have met opposition from the entrenched players who say there isn't room for more.

"Everyone is trying to protect their turf, which is a natural thing to do," says John Gray, Mayor of Oshawa, Ont. where a proposed Wal-Mart expansion is under attack. "If you're in a good competitive position, why undermine it by letting somebody else come in?"

For Lo