HOW THE WAL-MART DRAMA SHAPES SN'S ANNUAL LIST

David Orgel

SN's Power 50 roster, in this week's issue, contains the cast of influential actors driving the industry's most important plotlines. There is no more important story than the Wal-Mart saga.

You can argue about what to call the 2005 chapter of this story ("The Waltons"? "The Accused"? "Citizen Sam"? "Much Ado About Nothing"?), but you can't dispute that the Power 50 is rich with people on all sides of this pivotal drama.

You'd have to start with Wal-Mart CEO H. Lee Scott, who certainly deserves his ranking of No. 2 on our power list (behind only the consumer). Scott runs a goliath, $284 billion company that has transformed the global retail sector. Wal-Mart continues to roll out supercenters across the land, forcing supermarkets to develop new survival strategies. While Scott's power is not in question, his formidable ship has run somewhat off course lately. The retailer has run into some financial performance challenges, and its former vice chairman resigned from the board in March after accusations of misusing funds.

Meanwhile, the company and Scott have moved into damage-control mode to stanch the negative publicity focused on everything from its compensation practices to its impact on communities.

Scott deserves credit for launching a major media campaign to battle the bad publicity, but the outcome is still in question.

One of the many forces arrayed against Wal-Mart is the labor movement, which has battled to organize this non-union operator. On this year's Power 50 list is Joe Hansen, president of the United Food & Commercial Workers Union, who assumed his post last year and immediately began to restructure the organization. One of his surprising moves is pulling some resources away from battling Wal-Mart in order to organize non-union, conventional supermarkets. His strategy is based on the assumption that other unions and groups have joined the fight against Wal-Mart so that the UFCW doesn't have to go it alone.

The Power 50 list contains many retail executives who compete with Wal-Mart, at least some of whom can be credited with keeping the Arkansas-based retailer at bay. One of those is Loblaw Cos. President John Lederer. Many observers cite Loblaw's aggressive expansion of its discount supercenter format as the reason Wal-Mart has not introduced supercenters into Canada so far. This strategy embraces cost-saving efficiencies, sharp prices and a tougher attitude toward labor, all of which bear some resemblance to Wal-Mart's own approach.

Other supermarket retailers are pursuing separate game plans to battle Wal-Mart, and wholesalers are helping their retail customers differentiate themselves from the king of supercenters. Alternative format retailers, meanwhile, are targeting niches they hope will set them apart from the mainstream pack. Top executives from all of these types of operators are represented on the SN Power 50 list.

The most important actor in the Wal-Mart drama is the consumer, who appears as No. 1 on our power list. Consumers are responsible for Wal-Mart's stunning success but can be swayed by the retailer's critics. Scott's image campaign this year recognizes, possibly late, that low prices aren't the only thing on the consumer's mind.