Sam's Successors Share Blame for Wal-Mart Shame

The Review Rollback Is Just the Latest Stumble -- Is Anyone Left Untainted?

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CINCINNATI (AdAge.com) -- Sam Walton must be rolling in his grave. The big question is what his son, Rob Walton, chairman of Wal-Mart Stores, will do about it.
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Wal-Mart CEO Lee Scott initiated the hiring of new people to fix Wal-Mart's marketing and merchandising problems.

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More specifically, can CEO Lee Scott -- and the people he hired to fix Wal-Mart's marketing and merchandising problems -- survive?

Wal-Mart culture
Almost nothing could be more contrary to Wal-Mart's culture and heritage than a high-profile marketing executive seen taking rides in high-priced cars with current and potential vendors or accused in the press of accepting expensive entertainment and gratuities from them.

The man known affectionately as Mr. Sam to this day within Wal-Mart put in place what may be the strictest vendor-buyer ethics code in history. "Wal-Mart's drive to avoid even the appearance of impropriety has made the entire consumer universe among the most ethical business sectors anywhere," said Bradford C. Kirk, now chief operating officer of hair-care marketer Marc Anthony, in his 2003 book "Lessons from a Chief Marketing Officer." A veteran of 20th Century Fox and major package-goods marketers, he has basis for comparison.

Of course, that was before former Wal-Mart No. 2 executive Tom Coughlin pleaded guilty to wire fraud and tax evasion earlier this year in a scandal heavily laden with vendor gratuities.

Multiple incidents
The scandalous fall of Julie Roehm is just the most recent embarrassing incident in a drumbeat of bad news this year for Wal-Mart. That's included shrinking same-store sales in November; a fake blog from independent PR shop Edelman; embarrassing leaks of internal personnel memos; and a resilient political opposition that, far from being neutralized by Wal-Mart's spin machine, is attracting support from possible Democratic presidential hopefuls and running a hard-hitting holiday ad featuring highly critical Wal-Mart employees.
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John Fleming became Wal-Mart's CMO in 2005.



Ms. Roehm's firing is also the latest abrupt reversal in a marketing strategy that has looked rudderless, seeming to list from upscale suburban sushi eaters one week to smiley-faced rollbacks on canned tuna the next.

A senior executive at one Wal-Mart supplier said the retailer's growing crisis was a major subject of conversation among senior retail and package-goods executives at a gathering last week. He compared Lee Scott to George W. Bush and suggested Mr. Scott needs to appoint his own equivalent of the Iraq Study Group -- this one made up of respected business executives, experts and high-profile critics -- to recommend a way out of his own quagmire. "If he doesn't, he should be replaced immediately."

Strategic and cultural malaise
Strong words, but he said it's hard to overstate Wal-Mart's strategic and cultural malaise. "They have an identity crisis," he said. "I don't think they understand who their shopper is. Or if they do, they're not satisfied with who their shopper is."

In past years, when Wal-Mart's holiday sales disappointed, other senior executives departed by the following spring. VP-General Merchandise Don Harris left in early 2004. The following year, it was Chief Marketing Officer Bob Connolly -- just before scandal engulfed Mr. Coughlin.

But while Mr. Coughlin was long seen as a rival of Mr. Scott's, Ms. Roehm was clearly part of his team. Mr. Scott publicly criticized Wal-Mart's past marketing after bringing in John Fleming from Walmart.com as chief marketing officer in 2005 to help fix the bricks-and-mortar operation. Mr. Scott authorized Mr. Fleming to staff up Wal-Mart's marketing department for what he said would be a world-class effort.

Leslie Dach from Edelman
He also brought in former Democratic operative and Edelman public-relations executive Leslie Dach as exec VP-government relations and corporate affairs to help Wal-Mart neutralize critics on the left. Now it faces growing criticism from the right, too, from the likes of the American Family Association.

One factor that could keep Mr. Scott and other top executives in place despite the problems they face is that seemingly all potential successors also are tainted by performance issues or association with discredited executives.

Vice Chairman John Menzer, long seen as the leading candidate to succeed Mr. Scott, heads the struggling U.S. operations. His fast-rising deputy, Eduardo Castro-Wright, runs the troubled Wal-Mart Stores division.

Mr. Menzer left behind an international division that Vice Chairman Michael Duke has had to fix . But Mr. Menzer also inherited a slowing U.S. operation from Mr. Duke.

Top merchandising officer
Beneath them, Doug Degn, the top merchandising officer, widely respected by suppliers, has been hampered by a close past association with Mr. Coughlin, one supplier executive said. Claire Watts, exec VP-product development, apparel and home furnishings, has the now-discredited national Metro 7 rollout on her resume.

It may say something about how removed Ms. Roehm was from the local culture that her departure and its circumstances haven't been the subject of much local gossip, despite the national attention, one Bentonville sales rep said. But he expects Wal-Mart buyers-always cautious about avoiding the least appearance of impropriety -- to be even more so for the next several months. When they get a bottled water out of his refrigerator, he said, they'll probably leave a quarter or two on his desk.
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