Wal-Mart Attempts to “Cheat” on Its Reputation and Gets Caught?Gail Heriot

Well, that’s my interpretation anyway….

For years, Wal-Mart had a reputation for its zero tolerance policy toward shoplifting.  If a shoplifter was caught, Wal-Mart would call in the police.  Period (or almost period … I understand an exception was made for things worth less than $3.)  If I were a store, I can’t imagine a reputation that I would more like to have.  It means shoplifters with half a brain will go elsewhere to do their shoplifting rather risk getting caught at Wal-Mart and thus facing certain prosecution.  “Shrinkage,” as it is called in the retailing industry, is a major problem; a lot of what the consumer pays for is the cost of of shrinkage.

A tough reputation like that comes at a cost.  It means that Wal-Mart employees have to spend more time processing complaints at the local police department than employees at other stores.  It also means that Wal-Mart employees must testify in more criminal trials than employees at other stores.  But Sam Walton thought it was worth it.  In his book, “Sam Walton:  Made in America,” he pointed out that theft rates at Wal-Mart were half the retailing industry’s average.  That’s quite an accomplishment. 

Of course, even better would be to have the reputation for a zero tolerance policy, but not actually to follow through with it.  That would get the deterrence effect of a zero tolerance policy without having to incur the costs–so long as nobody figured out that the policy was just a bluff.

Wal-Mart evidently tried recently to go that route (at least that’s what I assume they were trying to do).  They quietly changed their policy to be more lenient.  Big mistake.  Wal-Mart has very well-financed enemies–from WalMartWatch.com (financed by the Service Employees International Union) to WakeUpWalmart.com (financed by the United Food and Commercial Workers Union)–that spend enormous funds trying to tarnish Wal-Mart’s reputation.  It’s really remarkable how much unfair bad publicity Wal-Mart gets as a result. (Wal-Mart has recently started fighting back with a web site called paidcritics.com.)  Anyway, some of these critics (specifically those at WakeUpWalMart.com, leaked the internal documents that lay out Wal-Mart’s new, more lenient policy to the New York TImes, which was only too happy to print the story.

Wal-Mart’s new policy is that thieves under the age of 18 or over the age of 65 will not be prosecuted unless they are caught twice, no matter how valuable the merchandise they were caught stealing.  Those between the ages of 18 and 65 will not be prosecuted their first time unless the merchandise is worth more than $25.  According to the New York Times, this brings Wal-Mart’s policies more in line with other stores.

The folks at WakeUpWalMart.com evidently told the Times that they disagreed with the new Wal-Mart policy.  But in the past, the same folks criticized the zero tolerance policy as too harsh and wasteful and pressed for exactly the kind of policy Wal-Mart has now adopted.  It seems clear that the leak was motivated by a malicious desire to expose the new policy so as to eliminate any benefit Wal-Mart might be getting from its (now-unearned) reputation for zero tolerance.  They are trying to tell the shoplifters about the change.  Not pretty.

But Wal-Mart ought to have known better.  No, its spokesmen don’t admit that they were hoping to take advantage of the store’s reputation for zero tolerance for as long as possible, but I’m willing to bet they were.  That’s why the policies like this aren’t publicized (while get-tough policies usually are).  I also suspect that Wal-Mart would have been better off continuing the zero tolerance policy.  It will be difficult to go back now.