January 24, 2008

The Greenbox Effect: Wal-Mart Changing Its Ways – or Playing Divide and Conquer?

“We live in a time when people are losing confidence in the ability of government to solve problems… Wal-Mart does not wait for someone else to solve problems.”
– Wal-Mart Stores CEO H. Lee Scott Jr.

I have to admit it: Wal-Mart is brilliant…

Now, I’m no fan of the big box behemoth. The list of Wal-Mart misdeeds is extensive, from underpaying and underinsuring their employees, to driving mom-and-pop stores out of business, to ignoring the wishes of communities who don’t want the hideous boxes in their backyards, to generally being tacky and dull – just to name a few crimes against coolness. My POV is summed up by this acerbically funny Jib-Jab video.

In short, they made “everyday low prices” their highest value – which is a sad statement for America’s largest company.

Then a wonderful thing happened: Wal-Mart hit a wall. They ran out of small towns to pave over, so they moved into big cities. And to their horror, outside of their rural cud-chewing homebase, Wal-Mart encountered scary alien beings like union organizers and leftist intellectuals. Not only did these aliens refuse to drink Wal-Mart’s Kool-Aid, they had the gall to fight against them. The result: Wal-Mart’s growth and stock price flatlined. And the negativity from Jib-Jabbers and documentarians and other pinkos kept intensifying, including Obama’s recent slam of Hillary for serving on Wal-Mart’s board.

The Target Factor

Meanwhile, Wal-Mart’s arch-rival Target opted for the fashionable upscale route – and grew. True, Target is guilty of many of the same crimes: it’s also a concrete-and-asphalt monstrosity, and its employees are not exactly living the good life. But Target did hire Isaac Mizrahi and other name designers to spruce up its wares. Its commercials are creative and fashionable, and its prices aren’t that much higher than Wal-Mart’s. For the image-conscious, Target became the acceptable substitute. Left coast yuppies had no problem telling their friends they bought something from “Tar-zhay,” but would never be caught dead carrying a Wal-Mart shopping bag. Target’s profits and stock soared.

Seething with envy, Wal-Mart tried to steal Target’s yup-scale profits. They assigned their ad agency GSD&M the unenviable task of repositioning Wal-Mart as “fashionable.” The laughably disastrous campaign that ensued resulted in the agency getting fired after years of loyal service. But it wasn’t entirely GSD&M’s fault. Wal-Mart forgot a couple of rules of marketing:

1. It’s the consumers who determine your position. You can call yourself fashionable or upscale or hip or trendy all you want, but if the consumers don’t buy it, you’re just wasting your breath – and ad dollars.

2. Once you establish a position, it’s very expensive and most likely impossible to change it. Wal-Mart spent decades promoting themselves as the no-frills everyday low prices Mecca – no chance in hell could they become fashionable with just an ad campaign. In order to change that perception and their position, they would have to do something drastic.

And they did…

Pure Diabolical Genius

Wal-Mart went from simply being green with envy over Target’s success to simply being green. It began by making its stores more energy efficient and by selling compact fluorescent lightbulbs by the truckload, then trumpeting these moves through the media. It wasn’t exactly selfless. With fuel prices going through the big box roof, these tactics also lowered Wal-Mart’s energy bills – and sold a lot of bulbs.

From a strategic perspective, the greening of Wal-Mart did something even better: it divided the enemy.

Liberals and other big-box haters found themselves forced to grudgingly applaud these moves. “They’re still unacceptably anti-union,” you could hear the granola munchers saying. “But hey, they’re green so they can’t be all bad…” And all those moderate suburbanites and soccer moms who felt guilty about shopping at the evil empire exhaled in relief. Lo and behold, Wal-Mart’s sales started to increase again.

Now, with a recession on the horizon (or, more likely, already here), it’s time to go for the kill.

On Wednesday, Wal-Mart’s CEO announced a whole series of measures and policies “to cut the energy used by many of its products 25 percent, to force the chain’s suppliers to meet stricter ethical standards and to apply its legendary cost-cutting skills to help other companies deliver health care for their employees.” (New York Times, 1/23/08) CEO Scott even suggested erecting windmills in Wal-Mart parking lots!

This announcement should appall and confuse liberals, almost as badly as the sight of Hillary and Obama eviscerating each other with Republicans watching.

By going green, Wal-Mart picked a strategy that mollifies some on the left while actually being politically neutral. Again, green energy is smart economically in the long run, and it taps into the growing public concern over the greenhouse effect and America’s bellicose dependence on foreign oil. It also gets left-leaning publications like the New York Times to give it some positive coverage for once.

And suddenly, Wal-Mart has splintered its opposition. The tree huggers can’t help but applaud this move, and since many tree huggers don’t have Al Gore’s wealth, they will maybe perhaps possibly (if no one is looking) shop at Wal-Mart. You know, just for compact fluorescent lightbulbs. And maybe some 10% post-consumer recycled paper towels while they’re there. After all, unions have been on decline in America since the 1980’s, so it’s not like Wal-Mart is going against the tide, and the company is going to make their suppliers meet stricter ethical standards, and hey times are tough! Have you seen the price of paper towels lately?!

But liberals and other Wal-Mart bashers shouldn’t feel so chagrined. Indeed, I see this latest Wal-Mart move as proof of victory by the opposition. Getting the world’s largest corporation to change its ways has never been easy. Not even Hillary could do it. But here Wal-Mart is poised to make a greater positive impact on consumption and production than all the laws of the past seven years put together.

So while Wal-Mart advocates may scoff at Wal-Mart critics, the truth is that the criticism worked when combined with economic pressure. That’s critical. When waging a moral campaign, it also helps to hit the target when it’s feeling some economic pain. Wal-Mart felt that hit, and now it’s the empire’s turn to strike back.

Related Article: A Mismatch Made In Heaven: Apple Does Wal-Mart

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Freddy is the Founder & Creative Strategist of Atomic Tango. He also teaches at the University of Southern California (go Trojans!), shoots pool somewhat adequately, and herds cats. Freddy received his BA from Harvard and his MBA from USC.

One Response

  1. Going green is a new trend that is very powerful and works very well in both cost cutting and building a customer base. Companies that ignore this for too long will find themselves far behind the times very quickly. Its pretty quick and easy to at least look like you’re taking some steps in this direction. Of course its the companies that make a lot of noise about it that will benefit the most but no one stands to lose for making a green move right now.

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