Wal-Mart Opens Its Mouth in Response to China CCTV Accusations

Source: http://www.flickr.com/photos/nsub1/

State-owned China Central Television has been known to criticize international firms, issuing potentially damaging reports about the world’s largest retailers and consumer electronics groups like Starbucks (NASDAQ:SBUX), Apple (NASDAQ:AAPL), Samsung (SSNLF.PK), and Yum! Brands Inc (NYSE:YUM). Some companies have taken the TV station’s allegations seriously while others have ignored it, but the latest blast from CCTV targeted Wal-Mart Stores (NYSE:WMT), and now the world’s No. 1 retailer is responding.

CCTV last week accused Wal-Mart of sidestepping its quality control process and advancing its products with higher profit margins. The interview CCTV based its report on was one it conducted with an anonymous former Wal-Mart employee, who said in the interview that the retailer uses a “special approval process” that can reportedly be backed by more than 200 documents from 2006.

CCTV also charged the retailer with having alcohol suppliers that do not have production permits. As of Friday, Wal-Mart didn’t comment on the allegations, but now it is opening its mouth: Reuters reported Wednesday that the retailer issued a statement midweek, saying Wal-Mart will “ensure the correct documents and other required items are in place before the products are sold in our stores.”

Reuters reports that the Bentonville, Arkansas-based company is providing documentation that includes labels that reflect ingredients, government test reports, China Compulsory Certifications, sample products or photographs, copies of manufacturing permits, details substantiating health claims and claims such as “organic” and “world-famous,” official barcodes, and papers on intellectual property.

Wal-Mart is even going so far as to invest in a computer-based system that facilitates the upload of all required legal documents from vendors. The retailer tested the system in September, and it is now ready for use.

Wal-Mart can’t take any chances in China because the country is now at the top of the retailer’s to-do list. Thanks to a growing middle class, the company has an increased demand for its services, and Wal-Mart plans to open 110 stores in China over the next three years.

The retailer currently operates more than 400 stores and warehouses in China and promised Wednesday that it keeps a close watch over its supply chain there. The retailer even agreed to mitigate any lingering anxiety by agreeing to take additional steps to address supply chain concern.

Wal-Mart has to keep a close eye on Chinese consumer sentiment because the retailer’s reputation is at risk, and it could suffer consequences if Chinese consumers heed CCTV’s warning, especially after earlier this month, when the company was forced to recall its donkey meat snacks after tests confirmed they were contaminated with fox DNA.