Apparel Sourcing Intelligence - Worldwide

How insular can a global retailer be?

As businesses get more global, it seems self-evident they need to understand the nuances of global markets better. From their dogmatic fundamentalism in attacking the Bangladesh Accord, many US retailers are displaying an insularity that questions their ability to run businesses elsewhere.

Most US retailers decided not to sign the AFBSB. Their explanations aren’t always coherent or even useful (Gap on May 22 just said “the proposal at present does not make sense” for Gap), and we think mostly come down to:
         Either they’ve got real worries about their liability to be sued if they scale down Bangladeshi operations, or
         They’re simply uncomfortable running part of  their business in a different way from how they want to run things in Peoria, Illinois
But that’s not how they’re putting it. They’re not even expressing the dozens of reservations about the workings of the Accord retailers who’ve signed it are expressing on and off the record. Instead, several are couching their worries in narrow simplicities about how to run a business that just don’t stand up to scrutiny.
Walmart claimed the AFBSB “introduces requirements, including governance and dispute resolution mechanisms, for supply chain matters that are appropriately left to retailers, suppliers and government, and are unnecessary to achieve fire and safety goals.” America’s National Retail Federation (NRF) claims the AFBSB exposes “American companies to a legally questionable binding arbitration provision, a process that serves only the unions, not the workers they represent,”
Sez who?
Walmart might think supply chain matters are most appropriately left to “retailers, suppliers and government”. But shareholders think they’ve got just the teeniest amount to contribute to this. So do customers, and so do workers. Walmart might think its managers are too grand to listen to shareholders (never a wise view), and trying to keep workers and customers out of businesses is never a sensible move either. And such sweeping dogmatism isn’t shared by businesses like Tesco and Arcadia (neither exactly pussies in negotiation or industrial relations). Or by American businesses like PVH or Abercrombie and Fitch
The NRF’s stance clearly doesn’t represent NRF members Abercrombie & Fitch and H&M. But it’s more dogmatism to claim a binding arbitration is “a process that serves only the unions, not the workers they represent”.
What both dogmatisms share is a belief that there’s only one way of running businesses. And as companies like Walmart and Gap keep on telling us how important overseas expansion is going to be, such insistence makes them look increasingly unable to operate on a global basis.
Let’s take my microtown of Charlbury, Oxfordshire. For most of us, three things are especially important:
         Access to good health. Which in Charlbury is almost entirely government –provided, free at the point of access, and paid for by our taxes. Far better provided, we all agree, in France (where it’s partly paid for out of tax, but provided almost entirely by free-market businesses, or not-for-profits). We’ll ignore America’s system – but it’s clear that there just isn’t one global model for providing healthcare
         Access to daily basics. In our microtown, mostly provided by shops run by the Cooperative Movement, entirely owned by its customers. If we want a bigger selection, we go to our nearest bigger town and – like the Queen – buy our groceries from Waitrose, owned by its workers.
         Access to news and entertainment. Which we start the day by getting from the BBC – a government owned broadcasting system which is generally accepted as the global standard by which objectivity and depth of expertise is judged. Not everyone would agree that it ranks supreme – but compare it to its global competitors and you have to concede that, properly managed, government ownership can be a surprisingly effective way of running a news and  entertainment business
It’s a pretty good rule in life that anyone talking about “stakeholders” is about to churn out a ton of vacuous platitudes. But, like all such rules, it’s not universally true. All businesses have at least six sets of stakeholders – workers, customers, shareholders, management, government and neighbours – and any business ignoring any one of those six is going to have a short life. Ignoring the multiplicity of a business’ stakeholders is a recipe for failure: discussion about them descends into meaningless waffle only if it pretends all stakeholders matter as much in every decision, every time, or that it’s possible to meet the needs of workers, customers, management, government and neighbours if you don’t consistently keep making enough money to stay in business.
It may well be that rejecting systems of arbitration, for example, is right for an all-American business: unlike Walmart or the NRF I’m not trying to tell foreigners how to run themselves.
But Walmart’s not just lecturing us on how to run a business in America. Its simple certainties, it seems to be asserting, apply to all businesses. Shareholders, in Walmart’s world, have no business taking an interest in how Walmart runs its supply chain anywhere, ever. Nor, apparently do its workers or customers –or even its neighbours. If a distribution centre next to a housing estate wants to run, noisily, 24 hours a day tough on the residents. Their views matter, it seems, only if the law says so.
In practice, I suspect that’s not what Walmart thinks: I doubt it really does believe that “supply chain matters are appropriately left to retailers, suppliers and government”, and I suspect most AFBSB signatories are convinced it, alone, will not solve the problems it’s meant to deal with – or disagree with many of Walmart’s concerns. But it’s easier to churn out a trite slogan than to think about how to run a global business.
If Walmart really does believe what it says, it won’t be a global business for long. Follow such silly advice in China, for example, and Walmart China will soon be going the way of Walmart Germany