The CSR Newsletters are a freely-available resource generated as a dynamic complement to the textbook, Strategic Corporate Social Responsibility: Sustainable Value Creation.

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Wednesday, November 2, 2011

Strategic CSR - Walmart

The article in the url below discusses the layaway scheme re-introduced by Walmart for this year’s holiday season. While initially appearing to be a means for less affluent customers to avoid excessive credit and spread the costs of their purchases over a number of weeks, the article highlights a more sinister side to the policy:

… as a financing option, layaway is decidedly worse than most credit cards. Imagine a mother going to Wal-Mart on Oct. 17 and buying $100 worth of Christmas toys. She makes a down payment of $10 and pays a $5 service fee. Over the next two months she pays off the rest. In effect, she is paying $5 in interest for a $90 loan for two months: the equivalent of a credit card with a 44 percent annual percentage rate, a level most of us would consider predatory. … Then consider what would happen if she couldn’t finish all the payments. Wal-Mart would give her the money back, less $10. If she borrowed that $90 and paid $15 in interest for two months, she would have the equivalent of a jaw-dropping interest rate of 131 percent. These numbers assume she borrowed for the maximum amount of time, two months, and put double the minimum required amount on layaway. But if that period were shortened or the shopper put the minimum amount on layaway, those rates would go up proportionately.

Walmart has made great strides in recent years integrating a strategic CSR perspective throughout all aspects of operations. Largely, however, the focus has been on sustainability policies designed to lower costs through reduced resource use. The questions raised about this layaway scheme [see also the recent announcement about scaling back the firm’s health insurance for part-time employees: http://www.nytimes.com/2011/10/21/business/wal-mart-cuts-some-health-care-benefits.html] indicate Walmart still has a long way to go to satisfy critics who remain skeptical of the firm’s overall commitment to CSR:

Retailers talk about the plans as a way to give consumers more choice, but in fact it’s the result of the opposite: the desperation arising from many Americans’ inability to borrow, save and, most important, earn.