[Image of: RetailWire Logo and Tagline (for print)]

BUSINESS TIPS

IRI:
Shopper-Centric Execution
ChannelAdvisor:
Online Selling Strategies
RR Donnelley:
In-Store Marketing
LoyaltyOne:
Enriching Customer Relationships
 
[13 comments]

Walmart needs food stamps

March 27, 2014

Walmart has too often found itself caught up in simplistic red versus blue state political debates. For many of these discussions, conservatives have held up the chain as a shining example of the American dream while liberals have vilified the company for its labor practices. The reality is undoubtedly much more complex than the stereotypes suggest as made clear by Walmart's recent 10-K filing. The document lists factors that affect its results including cuts to the Supplement Nutrition Assistance Program (SNAP), or food stamps, as well as other forms of government assistance.

The company's 10-K filing is not a surprise. Back in January, the retailer said cuts to SNAP were a major factor in its negative same-store sales for the last quarter. Per the Los Angeles Times, Congress cut assistance to families of three participating in SNAP by $29 a month in November and in January it cut assistance to 850,000 families by an average of $90 a month.

Today, Walmart drives more than half its sales from groceries. It follows that cuts to public programs used by its customers have real consequences for the chain's top and bottom lines. The chain is not alone, however, as traditional grocery stores as well as dollar outlets and others face the same issue. So what are these companies to do? Should they increase lobbying efforts to get Congress to change its position on SNAP and other programs or accept the reality of the cuts and look to attract shoppers who don't have to rely on the government safety nets?

FINANCIALS:     [NYSE:WMT] [ ]

Discussion Questions:

What would you do if you were in charge of running Walmart or another retailer that serves customers affected by cuts to programs such as SNAP? Would it be healthier for the company, in the long run, to lobby against cuts to government assistance?

While we value unfettered opinion, we urge you to show respect and courtesy for people or companies about whom you comment. Keep in mind that this is a public, professional business discussion. RetailWire reserves the right to edit or refuse the publication of remarks that we deem unsuitable. We may also correct for unintended spelling and grammatical errors.

Instant Poll:

What would you do if you were running a retail operator whose results were hurt by cuts to government programs such as SNAP?

Comments:

Make this simple. Take the politics out of this. If programs such as SNAP help my business, I am for it. Unfortunately, the business of America is lobbying. All businesses with any power are lobbying for benefits to their own organization. GE famously influenced federal tax policy to avoid over $4 Billion in taxes. Bravo for GE. Is this any different?

[Image of: View Braintrust Panelist button]
Gene Detroyer, Professor, Independent

Would it be healthier, in the long run, to just move straight to crony capitalist socialism, where everyone in the middle class either moves up to become a direct beneficiary of crony capitalism government, or down to become a welfare client of the same government? That is exactly what has been going on for the last few years, with disparity skyrocketing, and the small businesses that largely support the middle being slaughtered.

So should Walmart abandon the basic principles of America and become a BIG slave to government, chasing the little slaves of government? Sam Walton must be turning in his grave.

[Image of: View Braintrust Panelist button]
Herb Sorensen, Ph.D., Scientific Advisor TNS Global Retail & Shopper, Shopper Scientist LLC

This cut hurts all of our sales, not just Walmart, let me make that clear. The struggle is universal for retailers, and sales are down around 8-10% since the first of the year. Cutting SNAP is a start, and the government as a whole is so wasteful across the board, there is likely $500-$600 billion more they can cut, but forget about it.

It is easy to cut SNAP, as it stirs up the electorate so they can blame each other how cruel we are to the poor. How is this economy ever going to grow, if 1/4 of the population is receiving never ending entitlements? Instead of fighting for saving the cuts, we as business people should be fighting to get rid of waste, which would stimulate the entire economy, and grow jobs.
That, my friends is the crux of the matter, but change will not happen in D.C., as both parties fight for power and votes.

In all my years of business, I have never been more frustrated just trying to run my store, and not have to fear who is going to fine me for not having followed one of the the trillion mandates that have been forced upon us, by politicians who couldn't run a lemonade stand.

Go ahead and think of this as folly or frustration, but this is my life, and the life of thousands of small businesses across this great country, who shake their collective heads every day wondering how they can continue to serve their community, without going broke. I'm sure Walmart will survive this, and my concern is for the rest of us, who do not have the huge capital to comply with all of this crazy stuff, and you know what? Most of the new mandates do absolutely nothing to grow our business, as just the opposite is true.

For those reading this, I am not crazy (well maybe a little), and I would love to continue running my business for many more years. The reality is that many of us will not survive this onslaught, not because we aren't good at what we do, but rather we can not afford it anymore.

Thanks and have a nice day.

[Image of: View Braintrust Panelist button]
Tony Orlando, Owner, Tony O's Supermarket & Catering

 
13

This begs an even more basic question: How should the "haves" help the "have nots"? Should there be hungry people in our country? The question of food stamps needs to go hand in hand with the question of a living wage.

Walmart buried this announcement in their 10-K. The retailer needs people with food stamps to buy its groceries, yet Walmart, through its low wage structure, is responsible for many of its employees being on public assistance. The same can be said for many other retailers that pay minimum wage salaries.

Many people would not need programs like SNAP if they were paid a living wage.

[Image of: View Braintrust Panelist button]
Max Goldberg, President, Max Goldberg & Associates

 
10

It may be healthier in the short term to the bottom line, but is it healthier for the country? Companies need to stand by their values.

[Image of: View Braintrust Panelist button]
Mel Kleiman, President, Humetrics

Tony once again "nails it." Here is a man in the thick of the battle trying to survive; but the focus is on Walmart, who will survive with or without government cuts. If you did not read what Tony has to say, you should.

[Image of: View Braintrust Panelist button]
Ed Rosenbaum, CEO, The Customer Service Rainmaker, Rainmaker Solutions

Quarterbacking Walmart's present playbook, focused as it is with being the largest retailer in the world, must appeal to every economic, social and politically-beneficial segment of population to retain its current position. Cuts in the SNAP and similar programs have to hurt WM just as does with competing retailers.

If I were running WM today, I would look into my crystal ball to see if its current "virtues" were tuned toward the company's future. WM may be trying to do that today as it tells the marketplace they are rolling back thousands of prices ... which they also claim are already the lowest in town. Is that conflict or confusion...or concern?

Is being the "biggest" in conflict with the "best." Did Kmart do that soul-searching 21 years ago when they were bigger than Bentonville's best?

As for lobbying against cuts in government assistance to solve its problems, it would seem greater intellects are skeptical.

[Image of: View Braintrust Panelist button]
Gene Hoffman, President/CEO, Corporate Strategies International

There is a broader aspect to this question that always marvels me. I constantly hear people complain about the growth of the "welfare state." I hear them describe the stereotype welfare recipient who is lazy and unwilling to support themselves. Then I ask who really benefits from welfare payments? Is the individual scratching out an existence on welfare payments building a personal empire? Most likely these individuals are spending every cent they get on rent, food, and clothing and it is the businesses and individuals who supply these services who are receiving the "aid." Seventy percent of the US economy depends on consumer spending. If 47% of the population is dependent on government payments, then there is a huge impact on all sorts of businesses if the government payments are reduced.

Government spending is an important part of the economy. That's why it is so much fun to watch congressman try to decide which post offices to close or where to cut back services. Whenever government mentions spending cutbacks you can be sure there is a lobby representing the businesses that supply those goods and services that will fight against the changes. The most obvious is the defense industry, so why shouldn't businesses that cater to welfare recipients also lobby?

I don't know how "politically correct" it might be, but it seems at least some back office activism would make sense for businesses that cater to welfare recipients. But we must also realized that in some ways, everyone benefits from government spending.

[Image of: View Braintrust Panelist button]
Bill Bittner, Principal, BWH Consulting

Is it really in Walmart's economic self interest, and the interests of their shareholders, for the government to increase SNAP? Sure it increases sales, but Walmart paid nearly $8B in Federal Income Tax. And since the government borrows about 40% of what it spends, there is another $5B plus interest that Walmart will eventually pay to support this year's Federal spending. Of course, SNAP was just part of Federal spending, but the fact remains that there is always a cost to whatever the government hands out.

'EDG'

Tony said it best!

Lee Kent, Brings Retail Executives Together to Meet.Learn.Profit, RetailConnections

I agree with Bill. Show me a company or industry, and I will show you how it benefits from government subsidies in some way, either directly or indirectly. Walmart is simply being upfront about it. Food is hardly the only area, either -- their pharmacies benefit from Medicare and Medicaid spending, for example.

Furthermore, having been in the grocery business myself, I can state that many grocers besides Walmart benefit from programs such as SNAP to varying degrees, and food companies get in on the action too (i.e. timing funding for promotional activity around the distribution of SNAP funds to take advantage of the sales dollars). They've just been the most transparent about the impact, as it obviously affects them to a greater degree than other grocers. It's not coincidental that they also support a minimum wage increase.

As far as their commitment to values goes, Walmart could very easily frame their support of the programs as simple empathy and advocacy for the needs of their customers. There are plenty of vulnerable populations that rely on things like SNAP -- hundreds of thousands of veterans use it, for example.

'RetAnalyst'

Arguing with politicians, religious and community leaders, or anyone for that matter, is a losing business proposition even before it begins. Walmart needs to find more and more A-B velocity profitable product and new customers to buy them. This little mix of objectives is plenty to do for everyone in the company.

'gjarnoldjr'

I have a client that operates supermarkets with a similar pricing structure as Walmart. Their sales have increased with cuts in SNAP benefits. The way they view this is people on Food Stamps have previously not been very price conscious since their food bill was being subsidized by the taxpayer. Now with the cuts, they must be more concerned and responsible with regards to grocery purchases. Therefore SNAP users will gravitate to stores like my clients or to Walmart.

In my opinion, the real victims could be the higher-priced conventional stores. I believe Walmart has a tremendous opportunity to take a run at the conventional stores and make the cuts in SNAP work for them.

David Livingston, Principal, DJL Research

Search RetailWire
Follow Us...
[Image of:  Twitter Icon] [Image of:  Facebook Icon] [Image of:  LinkedIn Icon] [Image of:  RSS Icon]

RetailWire's
Getting Started video!

View this quick tutorial and learn all the essentials...

RetailWire Newsletters