In 2012, Erica Davidson, a Walmart veteran and store manager, took on the daunting task of turning around a struggling store on the outskirts of Greensboro, North Carolina. The store had run through its share of managers, Davidson said, and she viewed it as the sort of challenge that could make or break a person’s career.
Davidson said that one of her primary tasks was to reduce the troubled store’s high rate of “shrinkage”—defined as the value of goods that are stolen or otherwise lost—to levels deemed acceptable by the company’s senior managers for the region. As a result of fierce competition, profit margins in retail can be razor thin, making shrinkage a potent—sometimes critical—factor in profitability.
Prior to her arrival, Davidson said, the Greensboro store could see annual shrinkage losses as high as $2 million or more—a sizable hit to its bottom line. There had even been talk of closing the store altogether, she recalled.
For years, Walmart’s senior management in North Carolina had been waging a war on shrinkage, Davidson said; it had become a central priority of the company’s local leadership and a source of constant strain for store managers. Though the unrelenting pressure weighed on her, Davidson said she became an asset in Walmart’s battle against shrinkage—so much so that, in 2011, the North Carolina regional team named her a “subject matter expert” on reducing shrinkage and would send her to meetings in the Walmart regional office in Charlotte. There, she recalled, she would train district managers on her practices in the presence of the company’s most senior officers for the state.
The only problem, Davidson said, was that her superiors’ preferred methods for improving this vital metric were not always aboveboard; they included an array of improper techniques to conceal shrinkage losses and make the inventory numbers—and profit margins—look better on paper than they were in reality.
According to Davidson, inventory results that “should have raised red flags” were actually lauded by those significantly higher in Walmart’s regional chain of command. One recently departed senior vice president, for instance, would send her handwritten notes commending such numbers, she said.
“Those things were just like money in the bank to them,” Davidson told The Nation. “It was like, oh, great job. There was never any accountability or any investigation that went into why—not just in my store but in any store throughout the region.”
Then, in late summer of 2013, all of that came screeching to a halt, Davidson said.
During the last days of August, Davidson’s annual inventory audit showed a massive reduction in her new store’s shrinkage rate that surprised even her: down to less than $350,000 from roughly $2.1 million the previous year, she said. In the days that followed, however, none of the usual praise for delivering spectacular numbers came showering down from her superiors. Davidson knew then that something was amiss: “There was none of that ‘rah-rah, congratulations’ stuff that I got the previous years,” she recalled.
Soon Davidson would learn that company fraud investigators had arrived in the state to examine allegations of irregular inventory accounting. In response to detailed questions from The Nation, Walmart spokeswoman Brooke Buchanan acknowledged for the first time that the company is conducting a “thorough review” of “store level processes,” though she didn’t elaborate on the scope or details of the review.