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Business Strategies and Employment Practices of Wal-Mart and other Mass Retailers. Annette Bernhardt Brennan Center for Justice at NYU School of Law Prepared for the 56th Annual Meetings of the Industrial Relations Research Association, 2004. Backdrop. Economic pressures on employers

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Business strategies and employment practices of wal mart and other mass retailers

Business Strategies and Employment Practices of Wal-Mart and other Mass Retailers

Annette Bernhardt

Brennan Center for Justice at NYU School of Law

Prepared for the 56th Annual Meetings of the Industrial Relations Research Association, 2004

Backdrop other Mass Retailers

  • Economic pressures on employers

    • Globalization of capital markets and production

    • Advances in information technology

    • Changes in financial markets

  • Institutional changes

    • Deregulation of industries

    • Decline in unions

    • Decline in minimum wage

      Have resulted in:

  • Reorganization of work and production

  • On net, deterioration of front-line jobs

  • Growing wage inequality
    Growing wage inequality other Mass Retailers

    Retail trade
    Retail trade other Mass Retailers

    • 18% of workforce (23.3 million workers)

    • Low wages, few hours, few benefits, little training

    • Major segments are:

      • Hard goods: department stores, specialty stores, mass discounters

      • Food: supermarkets, upscale grocers, mass discounters

    Upheaval in the industry
    Upheaval in the industry other Mass Retailers

    • Strong increase in competitionhas led to an intense focus on cost-reduction

      • Industry maturation: “the overstoring of America”

      • Two new market entrants: “category killers” (Toys-R-US) and mass discounters (Wal-Mart)

      • Rapid consolidation of the industry – no more mom-and-pop stores

      • Increased power of shareholders in the stock market

    The wal mart model
    The Wal-Mart model other Mass Retailers

    • Immense coordination problem:

      • Tens of thousands of products

      • Shipped to more than 3,000 stores via 103 distribution centers

      • Stores manned by a million workers serving more than 100 million customers weekly (domestic)

    • The answer: “Just-in-time” linking of:

      • buying products from manufacturers

      • distributing them to the retail stores

      • selling them to customers

    Three keys to success
    Three keys to success other Mass Retailers

    • Technology: Integrated inventory management

      • Barcode at cash register

      • Real time inventory updates

      • Linked back to warehouses and suppliers

      • Automatic replenishment

  • Relationship with suppliers

    • Focus on core set of manufacturers

    • Cut out middle men

    • Relentless pressure for bigger discounts

    • Require help in delivery and stocking products

    • Require integration into Wal-Mart’s IT systems

  • Keys to success continued
    Keys to success, continued…. other Mass Retailers

    3) No investment in front-line workers

    • Starting wages $6-$7 per hour; yearly raises 25 to 30 cents an hour

    • Even department heads start at only $8/$9 an hour

    • Chronic understaffing

    • Full-time is defined as 28 hours/week: allows Wal-Mart to increase the hours without hitting up against the mandatory over-time limit

    • Health benefits: workers must contribute 40%

    • There is no pension plan; stock options plan hollow

    • Virulently anti-union: growing evidence of wage & hour and labor law violations

    Upshot other Mass Retailers

    • Wal-Mart emphasizes reengineering process, not the workplace

    • The model is extremely efficient, productive, profitable

      • Wal-Mart outperforms other retailers on almost every measure of productivity, sales, and profits

      • Has had profound impact on industry practice, throughout the supplier chain

      • Now the biggest private employer in the country

      • Near monopoly status in hard goods

    Wages graph
    Wages graph other Mass Retailers

    Lack of career ladders
    Lack of career ladders other Mass Retailers

    • Lean hierarchy:

      • Typical Wal-Mart store: one store manager, four assistant managers, 200 hourly workers

      • In 2002, general merchandise stores had:

        • 6% Managers and professionals

        • 6% Front-line supervisors

        • 52% Sales workers

        • 22% Office and administrative support

    • Increasing external hiring of managers

    • Retailers train workers an average of seven hours, putting the industry last among 14 business sectors

    Can quality service help
    Can quality service help? other Mass Retailers

    • High quality customer service requires skilled workers (Nordstrom’s, Home Depot)

    • But there is also growing demand for fast, no-frills service and cheap products (McDonald’s, Wal-Mart)

    • These two definitions of “good service” have led to segmentation of industry and job quality – and this is unlikely to change

    Can new technology help
    Can new technology help? other Mass Retailers

    • Technology has had a major impact on industry

    • But effect has primarily been on back-end of retail operation

    • Has not affected the actual work that sales workers do, has not increased demand for skill

      • Store workers still ring up sales, stock and neaten shelves, and handle lay-aways

    Top ten occupations job growth 2000 2010
    Top ten occupations, other Mass Retailersjob growth 2000-2010

    Job growth

    Quartile rank of wages

    Skill requirements

    Food preparation and serving workers, including fast food



    Short-term on-the-job training

    Customer service representatives



    Moderate-term on-the-job training

    Registered nurses



    Associate degree

    Retail salespersons



    Short-term on-the-job training

    Computer support specialists



    Associate degree

    Cashiers, except gaming



    Short-term on-the-job training

    Office clerks, general



    Short-term on-the-job training

    Security guards



    Short-term on-the-job training

    Computer software engineers, applications



    Bachelor’s degree

    Waiters and waitresses



    Short-term on-the-job training

    The lesson
    The lesson other Mass Retailers

    • The absence of “high-performance” does not mean lack of performance

    • Alternative strategies have emerged, which do not emphasize human resources but which are nevertheless highly efficient and profitable

    • Non-market intervention will be needed to shift retailers and other service firms away from the Wal-Mart model

    Need two pronged approach
    Need two-pronged approach other Mass Retailers

    • Policies to shut off the low road:

      • (Re)create the legal structures that set the ground rules for what employers can and cannot do – i.e. wage floors, right to organize, “pay or play” health insurance, etc.

    • Policies to pave the high road:

      • At industry level, create intermediary institutions that simultaneously address issues of productivity and workforce training

        Different industries need different mixes of these

        strategies. Retail in particular will need an

        emphasis on #1.