Wal-Mart's Wily Ways

Pelted by bad press and needing some image wax, Wal-Mart last week broke with company tradition by bringing journalists to its headquarters in Bentonville, Arkansas for the company's first-ever media event.

The unusual openness is part of Wal-Mart's image-enhancing PR push involving newspaper ads in major markets, television commercials, support for public broadcasting, grants to major journalism schools and sponsorship of an ABC news program segment about American values.

So far the campaign has drawn fire from trade groups, politicians and activists. And it has added insult to injury for community newspapers, a Wal-Mart casualty the company now badly needs to spread its gospel locally. Wal-Mart's CEO H. Lee Scott said in a January interview with USA Today that the megastore was taking its proactive media campaign to "the very local level," something that undoubtedly will require making friends out of miffed local editors.

Community papers are typically small papers that are independently owned by families or smaller chains, and tend to cover local news. For years, community papers have suffered as Wal-Mart, an infrequent newspaper advertiser, pushes out traditional department stores, the bread and butter of local papers. Department stores accounted for 5.5 percent of non-auto retail sales in 1990 but only 3.3 percent by 2002, according to the Newspaper Association of America. That number is expected to decline to 2.1 percent by 2010. What's more, many retailers went from offering occasional sales that needed to be advertised, to mimicking Wal-Mart's "everyday low prices" model.

Another hit came when Wal-Mart moved into provider groceries, which cut into newspapers' grocery insert revenues. Also, experts say changes in the retail industry, many caused by the giant retailer, are making penny pinchers of surviving retail advertisers who see declining newspaper readerships and high ad prices as reasons to use alternatives like data-based and direct-to-consumer marketing.

"Wal-Mart is a strong user of television, not newspaper advertising," says Len Kubas of Kubas Consulting, a Canadian market analysis company that studies U.S. newspaper markets. "If they do sometimes use print it is primarily for preprints or inserts or circulars that would be distributed by daily or community papers in areas where they have stores."

Ad Nauseum

While the woes of local rags can't all be traced to Bentonville, anecdotal evidence suggests the impact is big. A report co-authored by the Project for Excellence in Journalism and citing statistics by Deutsche Bank Securities, shows superstores' chunk of the general merchandise market went from 16 percent in 1992 to 50 percent in 2004. From 1991 to 2004, retail ad growth at newspapers shrunk from 4 percent to 1 percent.

Such statistics make for cool relations with local papers like Suffolk Life, a community newspaper in New Jersey that took Wal-Mart to editorial task for having "killed off the small retailers ... [and] strangling yet another key member of the community -- the local newspapers." The Business Ledger, a monthly business journal in Delaware, noting the fact that Wal-Mart's managers often lacked the "community involvement skills of their predecessors," has written that "it is no surprise that the community press -- to this day still heavily represented by hard-working family owners -- grew to quietly despise the company, as even the discretionary budgets dried up and the company continued to drive down costs."

Against this backdrop, Wal-Mart bought ads in January in more than 100 major market newspapers across the country, including USA Today, the Wall Street Journal and The New York Times. The ad was a direct letter from CEO Scott, who wrote that it was time for the public to hear the "unfiltered truth" about Wal-Mart. He took issue with "urban legends" about the company and said it was time to set the record straight.

Yet at the same time, Hill & Knowlton, Wal-Mart's blue chip PR agency, was pitching an identical message to community editors as news, offering small market papers interviews with corporate executives who were primed to polish Wal-Mart's image to a high sheen.

"I took it as an affront," says Mike Buffington, publisher of four community newspapers and president of the National Newspaper Association. "Basically they had gone to the larger papers and bought a one-page ad extolling the virtues of the company and answering their critics. They then pitched the same information to community papers to run it as bluff PR."

After a PR rep called him, Buffington, wearing his NNA hat, fired off a letter to H. Lee Scott:

As both a newspaper publisher and as a spokesman for several thousand community newspapers in America, I want to let you know that I, and many of my fellow publishers, are insulted by this Wal-Mart PR effort. Wal-Mart built its foundation of stores in many of our rural and suburban communities, the places where I, and many of my fellow publishers, operate newspapers. Yet community newspapers across the nation are all but invisible to Wal-Mart unless the company is looking for some free PR in our pages. Wal-Mart has a fairly standard policy of doing little to no local newspaper advertising.

Hill and Knowlton referred interview requests to Wal-Mart officials who did not respond to requests made by phone and email.

Break Up to Make Up?

But evidence suggests that Wal-Mart may have its hat in hand. Buffington says a Wal-Mart official is coming to his association's next conference to explain how Wal-Mart views community papers. And Kubas said one of his staffers recently attended a major newspaper conference where Wal-Mart representatives were using conciliatory tones.

Buffington, who says he would never let a paper's advertising considerations dictate news coverage, added that he doesn't think Wal-Mart tries to hurt community newspapers intentionally and that his papers will cover legitimate news stories relating to the company. "The point was they are willing to pay for it in major newspapers," he said in a telephone interview, "while thinking that we in the community newspaper business would not see it as bluff PR. We know the difference. We are a little more sophisticated than what they give us credit for."

If Wal-Mart's PR hacks bury the hatchet with local papers (ad money would no doubt help), it will still have plenty of fence-mending to do. The United Food and Commercial Worker's Union as well as some members of Congress are upset over Wal-Mart's sponsorship of an ABC News segment that features everyday, patriotic Americans.

"With this sponsorship, ABC News provides Wal-Mart both a format and visual framing to perpetuate a long-term myth--that Wal-Mart possesses a unique American patriotism manifested in practices that promote American values, respect workers, and privilege American-made products," the UFCA says on its website. "There could be no greater distance between 'Only in America' and the reality behind Wal-Mart's image machinery."

That theme was echoed by 21 congressmembers who in March sent a letter to ABC asking the network to pull the sponsorship -- something ABC's vice-president Jeffrey Schneider said in a media interview the company had no plans to do.

Wal-Mart is trolling for friendly media faces in other ways.

The New York Times has reported that in 2004 Wal-Mart for the first time become a sponsor of National Public Radio, landing it the right to have recorded messages promote its stores on air. Also for the first time, it unveiled a plan to give $500,000 in minority scholarships to journalism schools at Columbia University, Howard University and others.

It has also set up a new website (www.walmartfacts.com) that plays up its community giving and offers up company facts.

Headline Hopeful

Why, after so many years, the proactive PR?

The company is moving from saturated rural markets to suburban and urban markets where developmental tensions and critical news coverage are causing problems. In some cases, the bad press is even blocking new projects, as happened recently in Inglewood, Calif., where voters nixed a Wal-Mart development in a highly publicized referendum. And company executives have admitted that bad headlines may be keeping Wal-Mart stock prices flat.

And the bad publicity seems to be getting deeper. Wal-Mart recently announced a settlement on federal charges that it let underage workers operate dangerous machinery, and the company agreed to cough up $11 million to settle charges that it hired illegal immigrants as cleaners in many of its stores. The litany of allegations doesn't stop there but includes union busting, labor law violations, shipping jobs overseas, artificially suppressing wages, financial improprieties by a top corporate officer and links to a powerful Chinese businessman allegedly involved in the weapons-trading arm of the People's Liberation Army.

At the end of the day, claims of malfeasance, crime and plain old unabated greed exacerbate Wal-Mart's inherent problem of casting itself as the embodiment of small-town American values while relying on low wages and global sourcing as the foundations of its business model.

A job, no doubt, for everyday low public relations.