Image by Sheryl C.S. Johnson, https://commons.wikimedia.org/wiki/File:Emoticon_Face_Frown_GE.png

Walmart’s Consumer Redlining

When Walmart opened its first two stores in Washington D.C. in late 2013, Mayor Vincent Gray said that the massive retailer would help to solve the problem of “food deserts” in the city. Muriel Bowser, then a city council member and now the city’s mayor, gushed, “I’m just glad there is another option for fresh food, another option for goods in neighborhoods where people may not be able to hop in their Lexus and go out to Alexandria to shop.” In early 2016, when Walmart reversed its promise to build two additional supercenters in the city’s poorest neighborhoods—part of the deal that allowed the first two stores to open—the same politicians were outraged: “I’m blood mad,” Bowser said. “It’s an outrage,” echoed Gray.

But what, exactly, does Walmart bring when it arrives in underserved communities like those in the nation’s capital? We know it brings low prices: Walmart’s innovations in lean inventory and logistics have let it economize on warehouse space and distribution costs, and they have passed these gains along to U.S. consumers. Research has documented the negative effect Walmart has had on prices; some authors argue that the effect of Walmart is so enormous that the Consumer Price Index should be modified to account for it.

However, other research has shown that the opening of a Walmart in a community leads to job loss and lower wages in the surrounding retail market, thus offsetting some of the effects on prices.

Most of the popular debate concerning the net impact of Walmart for working families concerns an assumed tradeoff between these two types of effects: Do the cost savings it provides for consumers outweigh the downward pressure on wages and working conditions it places on retail workers and workers across the supply chain?

But low prices, while important, are not the only consideration for consumers. The ever-expanding service sector is distinct from manufacturing in that workers and customers interact directly on the shop floor. When companies in the service sector underinvest in their workers, whether in the form of understaffing, irregular scheduling, or low-pay and poor benefits, this has consequences for consumers in the form of wait times and lower-quality interactions with staff. The monetary costs of these things are difficult to measure, but an extra fifteen minutes in line for a customer may translate into more spending on a babysitter; empty shelves or rotting produce may mean that an entire shopping trip is wasted time. In the aggregate, the price of waiting certainly adds up: some estimate that Americans spend 37 billion hours waiting in line every year, or 115 hours per person.

Walmart is distinctive in the retail world for the low ratings it gets for customer service. A recent survey by Marketforce found that Walmart was ranked the lowest across all grocery stores in virtually every dimension of customer preference, from cleanliness to checkout speed. As Figure 1 illustrates, the American Customer Satisfaction Index gives Wal-Mart 68/100, the lowest of all retailers. Consumer Affairs gives it a 1.2 stars out of 5. Understaffing at Walmart is widely recognized as a large and growing problem for the company; between 2005 and 2015 the company increased its retail footprint by 45% while its workforce grew by only 8%.

I conducted an analysis of the full population of Yelp reviews about Walmart (approximately 35,000 reviews across 2,840 stores). Yelp has approximately 142 million unique visitors per month. A Harvard Business School study published in 2011 found that each “star” in a Yelp rating affects a business’s sales by between 5-9%.

I found a troubling pattern: Poor customer service is unevenly distributed across Walmart stores in ways that reproduce racial and socioeconomic disadvantage. The racial composition and average income of the neighborhood in which a Walmart is located is strongly associated with the kind of service customers can expect to receive there. Figure 2 illustrates the relationship between characteristics of a zip code in which a Walmart is located and the average Yelp ratings of that Walmart, after controlling for the broader region (three digit zip) in which the store is located, as well as the number of reviews the store has received. Each point on the graph represents the averaged values of approximately 150 stores located in neighborhoods with similar race or SES profiles.

walmart-f2

Walmart stores situated in low-income communities of color consistently get lower Yelp scores than those situated in wealthier, whiter communities. Moreover, when I conduct a similar analysis but work to untangle race from SES (by studying the impact of each controlling for the other), I find that race is more strongly related to low ratings than class. Figure 3 shows the relationship between race and ratings after controlling for income (and the relationship between income and ratings after controlling for race). The higher the percentage of Black or Latino residents in a zip code, the worse Walmart service becomes, regardless of whether this zip code is poor or wealthy.

walmart-f3

I also conducted a text analysis of the Yelp reviews, examining the adjectives used in the reviews most associated with stores in different communities. These analyses provide more descriptive support for the idea that Walmart engages in consumer redlining, systematically neglecting its stores in communities of color. For example, as shown in Figure 4, in stores in predominantly African American zip codes, reviewers are likely to use words like “worst,” “unorganized,” and “nasty” to describe their experiences. In contrast, in stores located in white communities, reviewers were likely to use words like “typical,” “friendly,” and “smaller.”

Walmart workers understand perhaps better than anyone the obstacles to providing good customer service at the company. In the summer of 2014 I led a team of undergraduate students that conducted interviews with eighty-nine Walmart workers in five different regions of the country (Los Angeles, Dallas, Chicago, Cincinnati, and Central Florida). In these interviews workers expressed how difficult it was to take care of their customers in the face of short staffing and poor working conditions. This was true across sites, although the difficulty seemed particularly acute for those who worked at stores in low-income communities of color. A worker from a store on the South Side of Chicago [Walmart Store #5965] said, “They’d have me working in two or three different departments. If you’re working in all these departments, how are you going to get your department straight? You can’t… That means the customers don’t get help. When they ask for some help, there’s nobody there.” A second worker from the same store said, ““Folks come to the store, they can’t get four things on their list and they only have five things on the list.” The sentiment was shared by a worker from a store in Miami, Florida [#3397], who said, “Customer come in, everything a mess, what you going to do? He cannot buy nothing.” A worker from Cincinnati [#4609] said that her store “never [has] enough workers.” She continued, “Have you ever went in Walmart and had to stand in a long line, or went to get some food from the deli, and there was nobody behind the counter to wait on you? This is going on all the time.” A worker from Franklin, Ohio [#3784], said that “customers come in to get help, they want you to help them.” Putting herself in the shoes of her customers, she continued, “I come in to get something, I want it right then and there. I don’t want it like an hour later. I’ve got a time limit, I’ve got a budget, I’ve got stuff to do. I’ve got to get the girls to bed because of school or something, you know?”

Underinvestments in staffing lead to low morale among workers in addition to low customer service ratings. It does not feel good to be the target of customer ire. As a worker from Cincinnati [#4609] put it, customers “look at you like you’re doing something wrong, but it ain’t us, it’s the company not having enough workers.” Another worker from Chicago [#5781] said, “I take pride in doing retail work” but “[Walmart] sinks that.” A third worker, from Orlando, Florida [#1084], said that due to low staffing the “customers are getting on your case, and it’s not your fault.” Asked how that made him feel he answered, “Horrible! You feel like you’re being attacked. And it’s not your fault.” For some workers, this pressure is enough to drive them out the door. One worker from Chicago [#1814] described how he reached breaking point: “One day I woke up and I just felt miserable. I felt miserable because I had to go in there, and just having to deal with the pressure of it being so understaffed…. I woke up and I said, enough.” It was impossible to feel a sense of pride in one’s work without being given the resources to do one’s job well. A worker from Cincinnati [#1521] described how customers call her store the “Ghetto Walmart,” because of its low customer service. “It kind of hurts my feelings,” she says. The single word most highly correlated with reviews of Walmarts in communities of color is “ghetto.”

If Walmart were operating in an efficient market, one might argue that any increase in customer service—from more staffing to higher wages—would need to be passed on to customers in the form of higher prices. But Walmart’s poor and differentiated service is consistent with a story in which Walmart’s lower-cost distribution network allows it to enter a market and establish a local monopoly. The technical term for market power in the labor market is “monopsony”, and it operates exactly like monopoly in reverse: instead of raising prices and lowering product quality and quantity to increase profits, profits are increased by lowering wages and staffing levels, worker effort, and employee retention. All companies trade-off lower turnover and effort for lower wages; Walmart is distinct for the extent to which it has chosen a strategy in which low-wage workers do not stay very long, do not invest much effort, but are paid such low wages that Walmart is still making a profit.

Market power and increasing monopoly has become an increasing concern in recent years. The increasing concentration of business has been documented in virtually every sector, and is partially responsible for the pattern of increasing corporate profits, a larger capital share, and lower productivity since 2001. A poster child for this concentration has been the airline industry, cartelized by horizontal shareholding among institutional investors like BlackRock. Recent work finds that institutional investors increased airline fares by between 3 and 10%. As anyone who has flown on a US airline or called a cable company knows, customer service is often the margin that companies with market power use to cut costs at the expense of customers.

When Walmart enters underserved neighborhoods like those in Washington D.C., then, it does not do much in the way of enhancing customers’ options. Rather, it chases the lowest common denominator, exploiting the lack of other options in the neighborhood for customers and workers, and creating a shopping (and working) environment that is just marginally above what was there (or wasn’t there) before.

This preliminary analysis cannot tell us the extent to which the patterns we observe at Walmart are true across other major retailers, and cannot explain why we observe the patterns we do. Nevertheless, Walmart is the largest retailer and largest employer in the world; moreover, it has consciously branded itself as a champion of and boon for disadvantaged communities. Its underinvestment in these communities is thus particularly notable.

While businesses might normally be averse to a reputation for poor customer service, it is important to remember that shareholders tend not to care about image per-se, only image insofar as it is worth the costs and investment. Walmart has decided that its path to profitability involves exploiting its local market power over both workers and consumers. Yet investors interested in maintaining long-term brand value may be concerned about Walmart’s understaffing, low-wage, high-turnover human resource strategy. Given the rise of online retail, which allows consumers to shop from the comfort of their couches, Walmart’s local monopolies are likely to be short-lived.

For Walmart and other retailers, providing a pleasant customer service experience seems likely to be increasingly important to corporate profitability. For its own sake, then, Walmart should hire more employees, particularly at stores in low-income communities of color, and give all Walmart employees more reasons to smile through better wages and working conditions.

 

Adam Reich is in the sociology department at Columbia University. He is the author, most recently, of Selling Our Souls: The Commodification of Hospital Care in the United States.

Special thanks to Meghan Lambert for creating the graphics.

Comments 22

Bob Harrington

May 27, 2016

Adam, thank you for assembling and analyzing this data. When working with center-city hospitals and Federally Qualified Health Centers, we sometimes see the impacts you describe and have wondered if Walmart store policies might be a factor.


Karen

August 31, 2016

Very interesting research. I am a white middle age woman who one christmas went to the low income latino area in Van Nuys California to go to a Walmart. They had a special Christmas package on the WII (it was the same price as competitors but contained two extra games). The sales person was not properly trained, could not ring up my order, no manager came and i waited for at least an hour. I went to take my purchase to another counter and the sales associate grabbed it from me and we got in a tug of war over it. The associate let the WII go on purpose and i landed flat on my butt and back. I now have sever pain in my hip joint. Everyday I wake up i think about Walmart and that associate. I cannot walk for long periods of time, cannot run or ski have now developed Arthritis in my left hip. I sued Walmart and stated in my deposition that after this encounter i felt sorry for the people in that area. I live on the predominately white west Los Angeles and we have Targets. This kind of conduct would never occur in a Target. It was really a crazy experience.


Dan Vignau

August 31, 2016

When taking advantage of actual sales, I have found that Walmart is not worth the trouble to ever visit. Maybe you can save a few cents here and there, but by buying when there are twofers, I ind I save more money by avoiding this hellhole of wasted humanity.


Anon Comment

August 31, 2016

I have a sneaking suspicion that Walmarts in "nicer" areas are nicer for the same reason that public schools in "nicer" areas are nicer -- The quality of the other customers drives the quality of the experience.

You don't buy a house in a nice school district merely for your kids, you do it so you don't have to deal with parents who have kids in less "nice" districts.


suvi

August 31, 2016

Super interesting research that I've observed anecdotally in a variety of different stores, but is most striking when it comes to a nationwide, big brand. We often joke about the Atlantic Terminal Target in Brooklyn being the worst Target on the planet (as well as the TJ Maxx and other stores there and a Macy's out towards Flatbush). It's an incredibly busy store, but always understaffed, with long waits and empty shelves. It's customer base has typically been black, but has changed over the last few years due to gentrification. In the last year, that Target has also changed... in order to be more appealing to the new customer base. Is it white privilege to expect good customer service? What a horrible example of systemic racism. Shame on Wal-mart and all other stores with corporate leaders who think this is an okay way to offer an inferior product to consumers.


gloria

September 2, 2016

One thing missing from the analysis is any mention of the 154 stores they closed late last year and early this year. No store in any 'affluent' area was closed, but they slashed and burned as many as they could out of poorer neighborhoods.

One they closed basically devastated the downtown area in the city of Long Beach. The downtown is a ghost town now where it had been bustling with Walmart open. Buses and trains were much busier with Walmart open. Even all the surrounding stores were much busier with Walmart open vs what is there now.

As far as yelp reviews of Walmarts in different areas, while the reviews might read differently, the reality between stores was the same - nobody has enough staff or was restocked appropriately so I have no idea how they could be rated so differently. I see it here comparing the stores that were closed vs the ones left open; the only real difference is the neighborhood.


GEAH

September 4, 2016

The Walmarts in black areas have customers who are less respectful of the store than the customers in white areas. Obviously, it's not a race thing--it's a cultural issue.

I'm sure black customers in white areas know how to behave properly, as there's a reason they're living where they live.


Skeptic

September 5, 2016

This study is virtually useless as it fails to address several possibile alternative explanations for poor customer service ratings in minority area Walmarts.

Are all Walmarts understaffed regardless of location? If so, how does that explain the difference in service ratings?

Are Walmarts more understaffed in minority locations? If so, then WHY is this? Do they have trouble finding local help or recruiting from outside the immediate area?

Presumably, most of the shoppers at poor service minority locations are minorities themselves. So it's doubtful that the poor ratings are due to racial reasons.

A comparison study should be done with a chain that does not operate on the Walmart model. The problem is that few national chains operate in minority areas because of high costs due to crime, violence and incompetence.

The most straightforward explanation is that employees that are minorities tend to have poor customer service skills and that minorities themselves recognize this.


Phillip B.

September 6, 2016

Good lord, of the few comments so far atleast 3 of them were outright casually racist using stereotypes that have no foundation in reality but get repeated like a child learning new words. Are we that broken as a people that we can't take social research in hand and accept that it along with the thousands of other pieces makes it clear that these stereotypes are self-reinforcing?

If your community is of color Wal-Mart knows that politically you have less clout and are likely to be accepting of lower standards because of that. Go into any small business in a black or latino community, you're bound to get better service than nearly any chain store in that same area, why? Because they know the community, they have ties and reasons to provide. Nobody in Bentonville, AR gives a damn about about serving those communities because there is no added value in them.

This is going to be shown to my Political Science students and we'll discuss how private business behaves when Government isn't doing their job. The excessive control Wal-Mart exerts is deleterious to our society. They've shown themselves to not be good stewards of an economy and it's time to cut them down to size if they can't or won't do it.


Debra Mcconnell

September 6, 2016

I agree with geah. I work for a Walmart and if the workers do not know the difference between clean and Dirty because they are hired out of the community the store is located in. Then the store is Dirty too! If communities would go back to making children whom commit petty crimes work off their sentence as in picking up a broom and mop to clean the graffti and other things that are making communities look like slums, maybe children will grow up respecting property. Then they would want to live in a better community then live with garbage floating in their yards.


Peter

September 6, 2016

Is this really a Walmart issue or more of an issue of stores in poor, minority neighborhoods? I don't shop at Walmart but I will say definitively that in my area the grocery stores that are in poor, minority neighborhoods are dirtier and have more problems (goods in stock, customer service etc) than the ones in the white upper-middle class suburbs.


Yelp Research is Bogus Research

September 6, 2016

So is your assertion that Walmart deliberately makes a better store in other parts of town? I looked at your research and I find it somewhat misguided. You have far too many unknowns in play.

1. Yelp: First, utilizing Yelp for research is fine... using Yelp as the crux of your data is a bad idea. There's the unknown of who is writing the review. I've noticed in my casual use of Yelp that smaller towns are more forgiving of businesses (i.e. where my parents live every diner is a 5 star... but in higher populated area like Santa Monica, few are 5 star... people are more picky and critical.) The unknown here is who is doing the review. We aren't dealing with the same population doing reviews on two locations. We're taking people of pop 1 and looking at their reviews and people of pop2 and looking at their other reviews.
2. White/Non White: you use terms like "predominately African American Zip Codes" can you expose where you're getting this data? Where did you collect the data for that? Also, you seem to be making a specific case here of White vs. African American postal codes... yet your research seems to suggest White vs Non White... which is it? There's ambiguity here. Example: Did you also research Asian predominate postal codes, etc?
3. Other Considerations: Your research is focused on a dividing factor of one race vs. another - yet this may have nothing to do with race at all. You collect reviews from different populations about Walmart stores in their respective postal codes. From that you make analysis based on race alone. Did you also factor in population density? Example: Could it be that in dense population areas, we see more homeless , more crime, more of the stuff that would create a "negative" review? After all, if you have a population density that's very high, you'll have longer wait times. If you have a lower population density (say in the sticks) you'll have faster check out times.
Example 2: What if this relates to income and not race? Is the "white" postal codes you're pointing out really just higher education/income? While that may have a secondary factor of race, the real direct correlation to Walmart store qualities may not be race, but income or education levels.

In short, you've done yourself a disservice to create a yellow journalistic research paper based mostly on Yelp reviews (which has various layers of ambiguity - such as considering how different populations weight reviews different... smaller populations tend to rate local businesses higher in general and larger populations do the reverse and it usually isn't accurate at all) and lack ruling out any other circumstances (population density, etc.)


Laughable at best

September 6, 2016

Friend, this is a flawed study. You didn't even put up the yelp reviews from majority white neighborhoods based on zip income. So how can you make such an absurb statement when the read can't even compare blacks, latinos, and whites. You aren't providing the basic information.

Everything from "yelp research is bogus research" is spot on. Leave this page up to show students how to not conduct research


Eyran

September 6, 2016

All chain retailers are given budgets for labor, choices for inventory, and even store hours based on the money that store brings in. If one store makes a million dollars a year, and another only brings in $100k, why would you assume these stores would staffed, stocked, or cleaned equally?


Vito Danelli

September 6, 2016

Quite a simplistic article that really doesn't prove much. The author simply refuses, most likely out of political correctness, to acknowledge the poor social and customer service skills of the workers at the minority Walmarts. The author also ignores that Walmart type stores typically receive incentives like tax abatement/subsides, etc. to locate in minority neighborhoods. Add to that a subtle "requirement" to employ minorities in these stores and you can figure out the rest. Why are there more police arrests and brawls at Walmarts located in minority neighborhoods? Go on YouTube if you don't believe. Simply put, patrons in the white neighborhood just don't behave that way. As for under-staffing, come on now. It seems there are workers, no matter what race or ethnicity, have one speed - slow.


Disgusted

September 7, 2016

Well this is really a bad time to be passing this crap. Things are bad enough without this mostly untrue what you call a study.
The o my reason a Walmart may not measure up in any comunity is the management and employees. I have seen this on a personal level. Without naming any individual store, it is all about the émigrés and their work ethic. Their attitudes and energy level.
Shame on you, whoever you are. Thumbs down👎


Disgusted

September 7, 2016

Well this is really a bad time to be passing this crap. Things are bad enough without this mostly untrue what you call a study.
The only reason a Walmart may not measure up in any comunity is the management and employees. I have seen this on a personal level. Without naming any individual store, it is all about no the employees and their work ethic. Their attitudes and energy level.
Shame on you, whoever you are. Thumbs down 👎


Josh

September 7, 2016

It seems this study did not control for a myriad of factors that would provide explanations for the results (and thereby call into question the racial explanation). Moreover, I am inclined to doubt the quality of this study based on my own experience.

I have been to Walmarts in Small Towns and Big Cities. The Small Town Walmarts have nicer, have better service, and seem better stocked than the Big City Walmarts. I have noticed this pattern in other retailers as well including Target, BJs, Walgreens, Rite Aid, and all major fast-food restaurant franchises.

From my observation, the Big City Walmarts (and other retailers) experienced much, much more traffic than their Small Town counterparts. High traffic makes it difficult to keep a store properly cleaned, causes staff to be stretched thin, and increases the likelihood of running out of stock. Also, the high traffic made the shopping experience much less enjoyable (at least in my opinion). Thus, my anecdotal experience indicates that store traffic and population density should be among the controls. However, it appears that they were not included.

While racism is a problem in our society, we do ourselves no favors by making racism the explanation for every difficulty and circumstance faced.


S. Colson

September 7, 2016

Simply put...just about any store will reflect the local neighborhood, the primary source for its employees and shoppers.


James

September 7, 2016

The study is fine, but as previously noted, your conclusions are wholly unsupportable. As can be seen easily from the wording of the story, your conclusion was predetermined. You have issue with Walmart, and thus any differences in stores must be racist or classist. But the truth is, as others have said, there is a myriad of possible explanations for your data. You ignored ALL of them except the one that supports your preordained conclusion.

In short, this is not science. Your research is no better than that of creation "scientists" who ignore every shred of evidence of evolution because it does not fit their framework of the world.


Carnaque

September 7, 2016

Yelp reviews have long been acknowledged as an excellent source of primary research. Particularly at Columbia.


Denise

October 27, 2016

Even in poor areas there are much more white shoppers then blacks. You should see how bad they destroy the store. Even the bathrooms so filthy. Target dont allow trash its not a color thang its decrnt customer thang!! But the whites in walmart are horrific never seen so many disgusting low life dirty class of people. I watch them rip open closed package of underwears and throw yhings all over the store. Open everything snd too lazy to put back just tbrow it on floor. Sorry cant blame this on the blacks. Im a former employee who has watched the majority of dirty white shoppers destroy the store. Most blacks are not nasty. We are pretty clean.


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