How Did Walmart Get Cleaner Stores and Higher Sales? It Paid Its People More

Can the answer to what ails the global
economy be found in the people in blue
vests at your neighborhood Walmart?

What most store employees probably didn’t know was that Mr. McMillon and his executive team, who had been promoted into their jobs a year earlier, were under extraordinary pressure from investors. They needed to reverse a slide in business and fight off threats in all directions — dollar discounters on the low end, Amazon online, direct competitors like Target

.. “Walmart U.S.’s relentless focus on costs does seem to have taken some toll on in-store conditions and stock levels,” they wrote. The analysts wryly added: “If an item is not on the shelf, you cannot sell it.”

.. The company had been busy raising profits by cutting labor costs. The number of employees in the United States fell by 7 percent from early 2008 to early 2013, for example, a span in which the square footage of stores rose 13 percent.

.. Walmart had become viewed as a last-ditch option for employment — not the place that ambitious people might want to work. They were under such pressure to keep labor costs low that the employees they hired showed little loyalty or career-building devotion to their jobs.

.. To macroeconomists, it suggested that a falling unemployment rate was finally creating the response that theory suggests it should: employers raising wages to attract the workers they need.

.. And executives really had concluded that customer service woes and slumping sales were because of underinvestment in employees.

.. And the actions far well short of what Zeynep Ton, an associate professor of operations at the Sloan School of Business at M.I.T., calls a “good jobs strategy,” in which a retailer builds its entire operating philosophy around better-compensated staff members who are empowered to make decisions.

.. An employee making more than the market rate, after all, is likely to work harder and show greater loyalty

.. What is interesting about this is that, if you look at what’s ailing the broader United States economy, it looks a lot like what you would expect if employers were, en masse, failing to understand the possibility of efficiency wages.

.. Individually, employers may think they are making rational decisions to pay people as little as possible. But that may be collectively shortsighted, if the unintended result is less demand for the goods and services they are all trying to sell to these same people.

.. “Out of the gate, they’ve seen some improvement, but I think that’s because they were doing Retail 101 so poorly,” said Brian Yarbrough, a retail analyst at Edward Jones & Company. “The better question is what happens next year and the following year. The low-hanging fruit has been harvested.”

How Walmart Keeps an Eye on Its Massive Workforce

Internally, however, Walmart considered the group enough of a threat that it hired an intelligence-gathering service from Lockheed Martin, contacted the FBI, staffed up its labor hotline, ranked stores by labor activity, and kept eyes on employees (and activists) prominent in the group. During that time, about 100 workers were actively involved in recruiting for OUR Walmart, but employees (or associates, as they’re called at Walmart) across the company were watched; the briefest conversations were reported to the “home office,” as Walmart calls its headquarters in Bentonville, Ark.

.. OUR Walmart made its claims public in June 2011, when 97 employees and their supporters arrived in Bentonville with a 12-point declaration that asked for wages and benefits sufficient to ensure that no worker would have to rely on government assistance. They also called for dependable schedules, expanded health-care coverage, and the freedom to speak up without facing retaliation. In the parking lot, they presented the document to Casey and asked to speak with her inside.

.. Lockheed Martin is one of the biggest defense contractors in the world. Although it’s best known for making fighter jets and missile systems, it also has an information technology division that offers cybersecurity and data analytics services. Tucked into that is a little-known operation called LM Wisdom, which has been around since 2011. LM Wisdom is described on Lockheed’s website as a tool “that monitors and analyzes rapidly changing open source intelligence data … [that] has the power to incite organized movements, riots and sway political outcomes.”

.. Employers can send people to open meetings or rallies or demonstrations. But there’s little labor law regarding companies’ monitoring of their employees’ own social media accounts.

.. Williamson, the former Walmart associate who became an OUR Walmart organizer, knew she was being monitored in Bentonville. “I sent a couple of fake tweets about where we would be or what we were doing. I don’t know if it worked,” she says. “I wonder how people feel about Walmart wasting money by hiring Lockheed Martin to read my tweets.

Walmart Chief Defends Investments in Labor, Stores and the Web

In the last year, Walmart has stopped selling Confederate-flag merchandise as well as assault rifles, has publicly supported gay rights and, after years of criticism, has raised its minimum starting wage to $9 an hour.

Now, progressives may be cheering, but Wall Street is not. Investors fear that Walmart’s heavy investments in labor, in the Internet and in discounts will weigh on the retailer’s short-term earnings — and many are running the other way.

“Walmart expects a return from these wagers,” Michael Lasser, a retail analyst at UBS, wrote in a note. Still, “it’s unclear if its investment of $1.5 billion in labor and ‘several billion dollars’ in pricing will push it ahead of others, or just keep pace.”

..  Walmart.com is set to offer 10 million products by the end of the year. That is impressive, until you consider that a shopper will find an estimated 300 million items for sale on Amazon.com.

.. Last year, Amazon sold almost $90 billion worth of products online, compared with just $12.2 billion Walmart sold through its website. E-commerce still makes up only about 2.5 percent of Walmart’s annual sales, and its growth online is slowing.