The Chinafication of Walmart

We think of Walmart as ultra-American, but its business relationship with China has fundamentally changed how American retail operates. In this episode, how one retailer helped turn China into the world’s factory, eventually becoming the single largest U. S. importer of Chinese consumer goods. Guest: Eileen Otis, Associate Professor of Sociology at Northeastern University and author of Walmart: Made in China Support shows like Throughline with NPR+. Sign up today atplus.npr.org http://plus.npr.org. See pcm.adswizz.com https://pcm.adswizz.com for information about our collection and use of personal data for sponsorship and to manage your podcast sponsorship preferences. NPR Privacy Policy https://www.npr.org/about-npr/179878450/privacy-policy

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  This is America in Pursuit, a limited run series from NPR and Throughline. I'm Randa Abdelfatah. Each week, we bring you stories about life, liberty, and the pursuit of happiness in the US that began 250 years ago. Today, we're looking at a company as American as apple pie: Walmart.

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  Walmart, where kids love our toys and parents love our low prices. Walmart's super inflation buster sale blasted through the inflation barrier with big discount savings. Just look for the happy face. Always low prices, always Walmart.

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  The virtues of Walmart are hard to miss: low prices, endless options, super friendly employees. You can buy a lawnmower, a week's worth of groceries, motor oil, and apparently, in some stores, get your haircut. Today, there is at least one Walmart in every state. But back in 2007, Eileen Otis had never been inside one until she went to China.

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  It was just nothing like what I expected.

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  Eileen is a sociologist and author of Walmart Made in China. And the irony in the title is apt. While Walmart might seem out of place in China, the company has been operating there for decades. Although it had the hallmark Walmart features of the stores back in the US...

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  Like low prices and the Walmart colors and the smiley faces.

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  This Walmart she visited was really different.

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  In the aisles, I saw, it just struck me. I saw a monk in saffron robes and a People's Liberation Officer shopping.

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  On the sales floor, a frenzied retail scene unfolded like a rowdy auction.

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  Totally lively, like you have the sales workers, young women on the sales floor, like pounding drums, yelling the day's discounts in like these tinny loudspeakers.

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  The room is loud. Hundreds of sales workers shout, "Deals, deals, more deals."

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  In Chinese, what they call this is ruo now, like hot noise, this really lively, festive environment that didn't look anything like the ghostly, empty aisles of Walmart that I had heard about in the United States.

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  The sizzle of meat in a stir fry mixes with the voices of employees giving speeches about laundry detergent.

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  It just really piqued my curiosity. Like, how did this happen? What's the story behind Walmart in China?

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  That's the show we've got for you today. The story of how one retailer helped turn China into the world's factory, eventually becoming the single largest US importer of Chinese consumer goods, surpassing the trade volume of entire countries. And while we think of Walmart as ultra-American, its relationship with China fundamentally changed the way American retail functions. We'll get into that story after a quick break.

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  If you'll come in and help me for, or I want to learn the business for a while, I'll pay you 35 cents an hour.

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  Long before Walmart became one of the biggest retailers in the world, a guy in the Ozarks had an idea: to cut prices and offer goods to regular people. His name was Sam Walton, and he began building his retail empire when he opened his first five-and-dime store in Arkansas.

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  We got Stewart Thaddeus started, didn't we? Right. And he became very successful.

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  About a decade later is where this story begins.

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  He started his first Walmart in 1962 in Rogers, Arkansas.

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  In the 1960s, American manufacturing was core to the American economy, accounting for one out of every three non-farming jobs. Think assembly lines, Bethlehem Steel, General Motors. Discount stores gained popularity with the growing American working class. Sam Walton called his Walmart. His name literally baked into the store's DNA. Its name was short, so few letters meant Sam could save some money on the store's sign. From its earliest days, Sam's project with Walmart was crystal clear.

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  To cut every expense that was not central to offering the lowest prices possible.

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  The store's mottos were plastered on big posters inside the store. "We sell for less" and "Satisfaction guaranteed." Soon, another store came, then another. Walmart stores popped up across rural areas in Missouri and Oklahoma, often driving smaller store competitors out of business. Walmart was a visionary retail company for a couple of big reasons. It built discount stores in rural areas where everyday low prices would appeal to customers living in small towns. And Sam was ruthless about how to sustain those low prices, cutting down on operational costs.

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  But also really eliminating wholesalers, eliminating distributors, eliminating anyone who got in the way of the relationship between the retail store and the factory.

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  We've kept our prices lower than our competitors' prices. We've led the nation in cost of doing business and sales per square foot and all the measurements you can imagine.

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  And while he was tough with business partners, he took a different approach with those who worked in his stores. Sam was known as a kind of down-home guy. He drove a pickup truck around to say hi to employees.

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  Our company's built on people. The success we've had is because of our people.

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  He was really trying to create, you know, something like a kind of populist culture. Everybody uses first names. There is no honorifics, no titles, all the badges.

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  Including Sam himself, right?

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  Including Sam himself. So if you see pictures of Sam, you'll see he's wearing a badge like every other worker, and on his badge, it says Sam.

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  Sam's Walmart embraced something called the inverted pyramid. Hourly employees and customers were at the top of the store hierarchy, and managers were at the bottom. The idea was to communicate to the workers that they mattered. Managers acted more like coaches or mentors. At a Walmart, a worker was, in Sam's words, "an associate," not merely an employee.

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  All of our associates believe it. We've made partners out of our folks rather than employees.

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  There was even a Walmart mantra: look each customer within 10 feet in the eye, greet them, and pledge, quote, "So help me, Sam."

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  We here at our store and all the Walmarts, we treat people how we want to be treated. And if you go out of your way a little bit, it comes back. Hey, what's up? There's a reason for me to be here.

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  This allegiance to Sam's ethos may sound similar to the ideology taking hold in Communist China in the 60s and early 70s.

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  A colleague of mine, who did some research on Walmart managers, they believe that Sam Walton had actually read Mao Zedong thought. That the works of Mao Zedong.

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  Interesting.

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  And that because the Walmart culture seems so resonant with elements of Mao's thought and Mao's egalitarianism.

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  Walmart went public in 1970. To keep growing, Sam needed a different way to supply his expanding retail empire without raising prices.

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  But there were a lot of obstacles, infrastructural and organizational obstacles in his way.

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  So Sam encouraged American manufacturers to cut their costs, which was easier said than done.

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  American manufacturers are not able to offer the low-cost goods that are available.

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  By the late 1970s, the American manufacturing industry was having a huge identity crisis. Unable to compete with the low wages abroad, American manufacturing jobs began migrating east. China and East Asia became a hub, and a lot of American companies start moving over.

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  Nike is an important importer. Atari, those original video consoles. Americans were losing their jobs as manufacturing was moving from the United States to South Korea and, of course, to China. So with this concern, its shoppers were especially, I mean, Walmart was offering low prices. And so its shoppers were mostly working class. These were the people who were losing their jobs.

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  As the supply chain and manufacturing continued to move overseas in the 1980s, Sam knew this was a major problem for his business. His customer base was hurting financially.

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  What are we looking at? $149 billion as a deficit this year in trade? $149 billion, up from $123 billion. I wonder how many jobs that would represent in this country.

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  So in 1985, Walmart launched something called the Buy American Initiative.

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  Jim Von Grim is Walmart's head of corporate affairs, and he says Sam Walton's Buy America program is really a simple concept.

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  We should contact all of our vendors and make sure that they knew that we had an active interest in buying American-made products where we could.

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  Newly minted as the richest man in America by Forbes by the mid-'80s, Sam wrote long letters to thousands of manufacturers in the US.

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  Sam Walton and his firm began to negotiate with these American manufacturers to try to lower their costs as much as possible.

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  He wanted Walmart to sell American-made products, but there was a catch. These American manufacturers had to match competitor prices and improve their productivity, something increasingly difficult with the competition building abroad.

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  So he's really trying to, what we call, squeeze these manufacturers and, at the same time, benefit symbolically in terms of its branding, in terms of its promotional materials from this work, in the part of this working-class constituency, kind of associate itself with American workers.

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  It's a terrible thing to see a plant die. It can take a whole community with it. It's happening all too often in America today. At Walmart, we want to do something about it. As one of America's leading retailers, we've made it our policy to seek out well-made American products. And when there is one of equal value, we'll put it on sale.

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  But for all the Buy American Initiative did to appeal to American workers and customers who had lost their jobs, and as hard as they tried to align themselves with this 100% American-made project, Sam and Walmart had been seduced by a new cost-cutting strategy: imports. Long before they launched the Buy American campaign, Walmart, too, had quietly begun sourcing more of its merchandise from China.

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  In 1992, NBC, I think it was Dateline, produced a new segment reporting that a number of Walmart goods in its stores that said "made in America" were actually made in other countries.

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  The move fit the bill for Sam's cost-cutting priorities: lower taxes, but above all, cheap labor. The '80s were a period of dramatic economic transformation for China. Up to this point, it wasn't really doing business with the world. Now, its leader, Deng Xiaoping, was clamoring for Americans to invest. Communist China was ready to collaborate with American capitalism and begin opening up to the world.

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  China experienced the fastest growth of any economy on Earth. As the world opens up and offers its inexpensive labor up, its inexpensive, docile, un-unionized labor that is under the control of authoritarian regimes and banned from unionizing, everybody is moving abroad. If a company wants to survive, it is absolutely imperative for it to move its manufacturing offshore. It has really no other choice. It's offshore or, you know, go out of business.

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  As China's economy was booming, Walmart also soared. In 1981, Walmart opened its first buying office in Hong Kong. And by 1988, it was the most profitable American retailer. In 1996, Walmart opened its first brick-and-mortar store in China.

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  This is when the global supply chain really begins to get its start.

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  By the 1990s, China was one of the cheapest places for foreign countries to do business. Sam Walton's successor even encouraged business students to learn Chinese. By 2000, Walmart had become one of the largest companies in the world, with over $150 billion in sales. The "buy cheap and sell cheap" approach became Walmart's marquee strategy. It set the standard for other American companies to move overseas as well.

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  Walmart, by the 2000s, Walmart is importing, like, you know, it's about 10% of all imports into the US from China is Walmart, is Walmart's imports.

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  Behind that curtain of enormous success were tough working conditions in those Chinese factories. Long working hours, aggressive anti-union efforts, many who worked in the factories were migrant workers from rural villages.

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  Who are migrating, sometimes very, very far, by train, a couple of days to these factories. A disproportionate number are women. There's a lot of young, very young women, leaving, 16, 15, and going to these factories to earn money that they can send home.

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  They often lived in dormitories next to the factory.

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  They are on demand. They are forced to perform overtime. This is just cruel. It's cruel, the work.

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  How aware were they of these conditions? And did they care?

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  Well, activists were telling them. They were raising awareness. There was no shortage of information about conditions in these factories. Convenient part of this outsourcing system of manufacturing is that Walmart can claim a distance. They can claim they don't know what's going on in Chinese factories because they're so far away.

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  Walmart stores unionized in China in 2006, but the union has significant management involvement. Still, Walmart has remained in China. It has a $1.2 billion investment in supply chain infrastructure through 2029. There are now nearly 280 Walmart stores in China. In response to this episode, a Walmart spokesperson said in a statement, quote, "We work with suppliers around the world and hold them to rigorous standards. Across China, we believe working conditions have improved over time, including since Walmart entered the market. We expect our suppliers to follow the law and our responsible sourcing standards related

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  to wages, hours, and safe working conditions, which help us collectively respect workers and serve our customers," end quote.

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  The Walmart story began in northwest Arkansas. Its next phase was the Pearl River Delta. The distance between those two places is a story about the relationship between the US and China, close in some ways, distant in others.

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  The truth is, the US is very deeply dependent on China, and China is deeply dependent on the US as a market, as a consumer market, right?

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  Yeah, I mean, it's a good issue to puzzle over. You have political rivals, but capitalist allies.

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  And that's it for today's show. I'm Randa Abdelfatah. This episode was produced by me and... Amy Padula. Jasmine Romero. Sarah Wyman. Kiana Mulchatem.

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  Julia Redpath.

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  Skylar Swenson. Leanna Simstrom.

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  Devin Kadyama.

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  Irene Noguchi. Thank you to Yohanna Sturgie and Cheyenne Butler. Fact-checking for this episode was done by Kevin Vogel. This episode was mixed by Robert Rodriguez. Music for this episode was composed by Ramtin and his band, Drop Electric, which includes...

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  Navid Marvi. Cho Fujiwara.

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  Anya Mizani. Join us next week when we hear stories about signature humor in America with NPR's ongoing AP 250 series. That's next week. Thanks for listening. Stay tuned for the following announcements and messages from our sponsors.

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  We investigate a group that supplies mall skincare stores that left customers with thousands of dollars in bills. And listen now on Consider This from NPR.