DECEMBER 2005 :: COVER STORY : BIG BUSINESS

How Wal-Mart Weathered the Storm

The Federal Emergency Management Agency could learn some things from Wal-Mart Stores.

On Aug. 24, when Hurricane Katrina began strengthening, Jason Jackson, Wal-Mart's director of business continuity, started camping out in the company's emergency command center. By the time the hurricane touched down in Florida two days later, he had been joined by 50 managers and support personnel, from trucking experts to loss-prevention specialists.

An Upscale Wal-Mart? Wal-Mart Stores grew enormous by cramming its shelves with merchandise at the lowest prices possible. Now, responding to big shifts it sees in the American economy, it is changing the way it does business to reach out to more upscale shoppers.

How Wal-Mart Weathered the Storm: Wal-Mart Stores grew enormous by cramming its shelves with merchandise at the lowest prices possible. Now, responding to big shifts it sees in the American economy, it is changing the way it does business to reach out to more upscale shoppers.

Against the Wal: When Wal-Mart Stores became the world's biggest public company, it also became one of the world's biggest targets.

The Wal-Mart Effect: Wal-Mart, itself one of the largest grocery chains in America, is changing the way food is sold at other supermarkets as well. Bowing to busy consumers who are less willing to spend time searching for deals, some traditional grocery stores are cutting back on promotional discounts and moving toward the everyday low prices of Wal-Mart and other discounters.

The Lucky 2% Getting into Wal-Mart is an entrepreneur's equivalent of making it to Broadway. Even a short run on the shelves there can help transform an invention from niche product to household name.

That weekend, before the storm made landfall on the Gulf Coast, Mr. Jackson ordered Wal-Mart warehouses to deliver a variety of emergency supplies, from generators to dry ice to bottled water, to designated staging areas so that company stores would be able to reopen quickly if disaster struck.

Then, when the hurricane knocked out Wal-Mart's computerized system for automatically updating store inventory levels in the area, he fielded phone calls from stores about what they needed. He also alerted a replenishment team to reorder essential products, such as mops and bleach. Within a few days, scores of Wal-Mart trucks, some escorted by police, were setting out to deliver 40 generators and tons of dry ice to company stores across the Gulf that had lost power.

Katrina was the biggest natural disaster Wal-Mart has ever had to confront. Initially, 126 of its stores, including 12 in the New Orleans area, and two distribution centers were shut because they were in Katrina's path. More than half ended up losing power, some were flooded, and 89 reported damage. But within a couple of weeks, all but 15 of the idled stores had reopened. From Boutte, La., to Pass Christian, Miss., Wal-Mart frequently beat FEMA by days in getting emergency supplies to relief workers and citizens.

Wal-Mart's speed in responding to Katrina underscores the extent to which it and other big retailers like Home Depot have become key players in responding to natural disasters. Whereas FEMA has to scramble for resources, Wal-Mart has it own trucks, distribution centers and dozens of stores in most areas of the country. It also has a specific procedure for responding to disasters, and it can activate an emergency command center to coordinate an immediate response.

"People know they can get what they need at Wal-Mart," says Richard Stinson, manager of the Wal-Mart supercenter in Laplace, La. "It's because of what we can supply, our ability to get the merchandise in the building, the associates to get it on the shelf."

In addition to refilling its stores, Wal-Mart donated $3 million in supplies like diapers and toothbrushes to relief centers in three states. The National Guard and relief agencies also "commandeered" 20 Wal-Mart trucks filled with water and other merchandise, according to a federal relief worker.

Sheriff Bob Buckley of Union Parish, La., has nothing but praise for Wal-Mart's role. When about 600 law-enforcement officers from around the state gathered in Gonzalez, La., to start rescue operations, he says, they found they had no supplies. They called Wal-Mart the day after the hurricane hit and two days later, they got two truckloads of flashlights, batteries, ready-to-eat meals, protective gear and ammunition.

And when did FEMA arrive? "Who?" Sheriff Buckley asks.

--Ann Zimmerman