Research: Crime Stats, Staffing Problems Plague Walmart

Walmart’s grip on the retail market may be slipping these days. Three unrelated reports just released suggest that America’s box store giant has some improvements to make both inside and outside of its stores.

Last week equity researchers at Wolfe Research (WR) in New York downchecked the superstore from a "market perform" to an “underperform” rating for its current staffing and stocking practices.

According to WR, several visits by researchers to the store “show a repeating pattern of stocking issues in many departments in the store.” It isn’t clear which outlets the research firm visited or how many locations it included in its report. While not all analysts agreed with last week’s assessment, it reflects a concern by some that Walmart may be outgrowing its image as America’s most popular department store.

According to Belus Capital Advisors analyst Brian Sozzi, Walmart’s disappointing fourth-quarter earnings in 2013 point to a need to make some significant changes in its stores, and not just in terms of stock availability. The superstore has blamed its slow Christmas sales on weather and an ill-timed decision by the federal government to slash food stamps. However, Sozzi suggests that the problem may well be related to operational procedures and a lack of perception about the country’s changing market trends. Walmart needs to make tough decisions about those stores that consistently underperform, and look at cutting some of its floor space, he says, if the retailer wants to avoid future losses. Sozzi also noted that Walmart’s size–at 4,177 stores across the nation–is adding to its difficulties during tough times, and that the company needs to trim back now.

And while it’s making changes to its décor, it may soon find itself under pressure to address some exterior concerns as well. According to a white paper just released by criminology researchers at University of South Carolina, and Sam Houston State University, in some locations the retail giant’s presence not only saw a rollback in prices for local communities, it witnessed a stall in crime rate reduction.

USC Assistant Professor Scott Wolfe (no known relation to Wolfe Reports owner Edward M. Wolfe) and SHSU Assistant Professor David Pyrooz tracked crime rates in 3,109 counties during the 1990s, and compared those where Walmart had stores with those that didn’t. The 1990s were characterized by a dramatic drop in crime rates across the nation. It was also a period of vibrant growth for Walmart, so it made sense for the researchers to concentrate on that economic period.

“The crime decline was stunted in counties where Walmart expanded in the 1990s,” Wolfe says. “If the corporation built a new store, there were 17 additional property crimes and two additional violent crimes for every 10,000 persons in a county.”

What is even more interesting, say the researchers, is that the already prevalent crime rate in a given community didn’t appear to deter the company from building there. Instead, results of the study suggest that Walmart may have actually sought out communities that showed certain sociological trends.

“Counties with more social capital--citizens able and willing to speak up about the best interests of the community--tend to have lower crime rates,” Pyrooz says. "Counties with more crime may have less social capital and, therefore, less ability to prevent Walmart from building.”

The “Walmart Effect,” say the researchers, points toward socioeconomic conditions that seem to typify the areas the company moves into. And contrary to what may be expected by increased growth and jobs, those problems--poverty, crime and depressed economy--don’t appear to always improve after the company has moved in. It's worth noting, however, that it is unclear whether the company continued those assumed building practices, or what (if any) steps the company has taken to improve or advocate for improvements in crime rates since the 1990s.

Each one of these studies, however, suggest that the labor and operational practices that virtually built Walmart’s concept of the self-serve superstore outlet in the 1990s may well be heading for a revamp. And so do new forecasts about the retail market in general, says Sozzi. Last Christmas season’s depressed sales suggest that we may be heading for across-the-board store closures in stores in all parts of the retail sector, and a focus on smaller, leaner stores with less floor space and a smaller inventory. The analyst is predicting a “tsunami of store closures” to herald this change.

It will be interesting to watch how Walmart addresses all of these impacts, and whether it can meet the needs of a changing retail market, the call for better wages for its workers and the scrutiny of local community improvement efforts, all of which stand in opposition to the practices that built its retail success.

Image credit: Nicholas Eckhart