Winnipeg Free Press - PRINT EDITION

Empty shelves plague U.S. Walmarts

Customers, employees disappearing

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Margaret Hancock has long considered the local Walmart superstore her one-stop shopping destination. No longer.

During recent visits, the retired accountant from Newark, Del., says she failed to find more than a dozen basic items, including certain types of face cream, cold medicine, bandages, mouthwash, hangers, lamps and fabrics.

The cosmetics section "looked like someone raided it," said Hancock, 63.

Walmart's loss was a gain for Costco, Safeway, Target and Walgreen -- the chains Hancock hit for the items she couldn't find at Walmart.

"If it's not on the shelf, I can't buy it," she said. "You hate to see a company self-destruct, but there are other places to go."

It's not as though the merchandise isn't there. It's piling up in aisles and in the back of stores because Walmart doesn't have enough bodies to restock the shelves, according to interviews with store workers. In the past five years, the world's largest retailer added 455 U.S. Walmart stores, a 13 per cent increase, according to filings and the company's website. At the same time, its total U.S. workforce, including Sam's Club employees, dropped by about 20,000, or 1.4 per cent. Walmart employs about 1.4 million U.S. workers.

A thinly spread workforce has other consequences: longer checkout lines, less help with electronics and jewelry and more disorganized stores, according to Hancock, other shoppers and store workers. Last month, Walmart placed last among department and discount stores in the American Customer Satisfaction Index, the sixth year in a row the company either tied or took the last spot. The dwindling level of customer service comes as Walmart has touted its in-store experience to lure shoppers and counter rival Amazon.com.

Walmart traded at a 1.4 per cent discount to Target last week on a price-to-earnings basis after averaging a 5.9 per cent premium to its smaller rival the past two years. Walmart traded as high as a 22 per cent premium to Target in January 2012.

"Our in-stock levels are up significantly in the last few years, so the premise of this story, which is based on the comments of a handful of people, is inaccurate and not representative of what is happening in our stores across the country," Brooke Buchanan, a Walmart spokeswoman, said in an email. "Two-thirds of Americans shop in our stores each month because they know they can find the products they are looking for at low prices."

Last month, Bloomberg News reported Walmart was "getting worse" at stocking shelves, according to minutes of an officers' meeting. An executive vice-president had been appointed to work on the problem, according to the document.

At the super-centre across the street from Walmart's Bentonville, Ark., home office, salespeople on March 14 handed out samples of Chobani yogurt and Clif Bars. Thirteen of 20 registers were staffed, with no lines, and shelves were fully stocked.

Three days earlier, about 10 people waited in a customer service line at a Walmart in Secaucus, N.J., across the Hudson River from New York, the nation's largest city. Twelve of 30 registers were open and the lines were about five deep. There were empty spaces on shelves large enough for a grown man to lie down, and a woman wandered around vainly seeking a frying pan.

Walmart's restocking challenge coincides with slowing sales growth. Same-store sales in the U.S. for the 13 weeks ending April 26 will be little changed, Bill Simon, the company's U.S. chief executive officer, said in a Feb. 21 earnings call.

"When times were good and people were still shopping, the lack of excellence was OK," said Zeynep Ton, a retail researcher and associate professor of operations management at the MIT Sloan School of Management in Cambridge, Mass. "Their view has been that they have the lowest prices, so customers keep coming anyway. You don't see that so much anymore."

Shoppers are "so sick of this," said Ton, whose research, published in the Harvard Business Review, examines how retailers benefit from offering good wages and benefits to all employees. "They're mad about the way they were treated or how much time they wasted looking for items that aren't there."

Retailers consider labour, usually their largest controllable expense, an easy cost-cutting target, Ton said. That's what happened at Home Depot in the early 2000s, when Robert Nardelli, then chief executive officer, cut staff and increased the per centage of part-time workers to trim expenses and boost profit. Eventually, customer service and customer satisfaction deteriorated and same-store sales growth dropped, Ton said.

"When you tell retailers they have to invest in people, the typical response is: 'It's just too expensive,' " Ton said.

Adding five full-time employees to Walmart's U.S. super-centres and discount stores would add about a half percentage point to selling, general and administrative expenses, according to an analysis by Poonam Goyal, a Bloomberg Industries senior analyst based in Skillman, N.J. Assuming the workers earned the federal minimum wage and industry standards for health benefits, the added costs would amount to about $448 million a year, she said. In the year ended Jan. 31, Walmart generated $17 billion in profit on revenue of $469.2 billion.

At the Kenosha, Wis., Walmart, where Mary Pat Tifft has worked for nearly a quarter-century, merchandise ready for the sales floor remains on pallets and in steel bins lining the floor of the back room -- an area so full that "no passable aisles" remain, she said. Meanwhile, the front of the store is increasingly barren. That landscape has worsened over the past several years as workers who leave aren't replaced, she said.

"There's a lot of voids out there, a lot of voids," said Tifft, 58, who oversees grocery deliveries and is a member of OUR Walmart, a union-backed group seeking to improve working conditions at the discount chain.

At the Walmart store in Erie, Pa., meat and dairy stocker Anthony Falletta faces a similar predicament.

"The merchandise is in the store, it just can't make the jump from the shelf in the back to the one in the front," said Falletta, 26, who works the second shift. "There's not the people to do it."

In both stores, departments have merged, leaving some areas with limited or no staff, they said, and workers rarely have time to finish all their tasks by the end of the day. Employees scramble to set out new merchandise, put returns back on shelves and handle customer inquiries, they said.

"There is definitely some links broken in the chain, and I don't know how long they're going to go on like this," Tifft said.

-- Bloomberg News

Republished from the Winnipeg Free Press print edition April 3, 2013 B6

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