Wal-Mart (WMT), the world’s number one retailer, is finding itself in hot water once again with the general public, this time due to bribery allegations among the firm’s Mexican operations. It has been alleged that the giant was engaged in a scheme over multiple years which may have totaled more than $24 million to government officials in order to smoothly build the company’s business in the populous Latin American country.

While the bribes are certainly a problem, the real concern appears to be how extensive the knowledge of the payments were with some speculating that even the CEO and CFO of Wal-Mart were aware of the program. Additionally, there is also conjecture that the payments could violate both the Foreign Corrupt Practices Act and some Sarbanes Oxley rules and could thus result in severe penalties for the retailer.

Beyond this issue, Wal-Mart has several other problems which are not going away anytime soon. The firm is running out of growth opportunities in the U.S. thanks to hostile city governments and a populace that is uncertain over the costs and benefits of welcoming the company inside their borders.

Furthermore, profit margins remain razor thin while a slowly improving economy could push more consumers into higher-end retailers, especially if job growth continues to come in a modest pace (see Top Three Consumer Staples ETFs).

Yet these domestic problems pale in comparison to the damage that the bribery issue could do to the firm’s international operations. The mess could make other emerging markets less welcome to Wal-Mart in the near future as well, possibly curtailing growth rates in countries looking to promote more of a corruption fighting image.

“Entering additional countries is a cornerstone of Wal-Mart’s growth strategy,” Consumer Edge Research analyst Faye Landes wrote in a research note. “We can foresee the authorities in some key countries, notably India, becoming dramatically less welcoming to Wal-Mart following the release of the allegations.”

Furthermore, the company’s stock has had severe difficulty breaking through the $62.5/share level which appears to be the top for the company, at least in the short-term. In fact, WMT has failed to close above $62.5 before retreating heavily on two separate occasions so far in 2012 suggesting that this could be the peak price for the firm unless the fundamentals change.

Thanks to these issues, some investors may want to avoid WMT, at least in the short-term while these problems play out. However, for ETF investors, this can be difficult to do in the fund world, especially when looking at consumer or retail ETFs (read Play A Consumer Recovery With These Discretionary ETFs).

This is largely due to the impressive size of Wal-Mart from a market capitalization perspective; the firm is currently in the top ten globally for market cap and is more than five times bigger than rival Target. As a result, many of the top ETFs in the sector have huge holdings in WMT including an 11.9% allocation to the firm in the Market Vectors Retail ETF (RTH).

Beyond this, the Consumer Staples Select Sector SPDR (XLP) and the Vanguard Consumer Staples Fund (VDC) also allocate at least 7% to WMT while a few others also give the company at least a 5% weight.

Fortunately, there are still a number of ETFs beyond these listed above that can offer great exposure to the retail or consumer spaces but can do so without putting so much into WMT. This could be ideal given the uncertainty surrounding Wal-Mart and the company’s uncertain path to growth in the domestic market going forward.

For investors subscribing to this idea, any of the following three consumer ETFs could make for better choices at this time:

SPDR S&P Retail ETF (XRT)

For a focused play on the retail space, investors could consider XRT for their exposure. The fund holds 95 components in its basket and puts just 1.07% of its allocation to WMT (See more in the Zacks ETF Center).

This low level of holdings in the retail giant comes about due to XRT’s weighting strategy. Unlike many funds in the space which utilize a market capitalization weighted approach, XRT uses an equal-weight technique. This ensures that small companies receive as much in holdings as their large cap counterparts, skewing the fund towards pint sized companies.

For investors seeking to make a play on retail but to keep WMT’s holding in check this could be an ideal way to go. Not only does the product limit WMT’s influence, but the retail ETF sees high levels of volume and AUM suggesting tight bid ask spreads as well.

Guggenheim S&P Equal Weight Consumer Staples ETF (RHS)

For a look at the broad consumer staples market instead, RHS could be an intriguing choice for many investors looking to limit their WMT exposure. The fund puts a very reasonable 2.3% of its assets in the company, a level that is comparable to the other 42 stocks in this consumer ETF.

Once again, this is accomplished by using an equal weight technique, following the S&P Equal Weight Consumer Staples Index. With this approach, the fund has roughly 36% of its portfolio in companies that are mid caps or smaller, while food companies dominate the holdings from an industry perspective (read Alternative ETF Weighting Methodologies 101).

Despite the fund’s broad focus on the consumer staples segment, it hasn’t really caught on with investors so far. Volume is generally below 10,000 shares a day while AUM is still trending under $40 million. This suggests that the bid ask spreads will be wider than other products on the list while the expense ratio of 50 basis points could only further add to the total cost of the fund.

PowerShares Dynamic Consumer Staples Sector ETF (PSL)

If one wants a more fundamental approach, PowerShares’ Consumer Staples ETF could be a better pick. The ETF doesn’t use a market cap weighting system either, instead weighting equally after narrowing down the field to about 60 stocks. This is done by taking into account various investment criteria including growth, value, investment timeliness, and risk metrics (also see Three Great ETFs For Your IRA).

With this process, the fund gives Wal-Mart an allocation of about 2.6%, far below what market cap weighted funds usually assign to WMT. Instead, a variety of food, food retailer, and tobacco firms dominate the ETF from an industry perspective, giving the product a retail tilt from a different perspective.

However, investors should note that the ETF, much like RHS, has failed to obtain high levels traction in terms of AUM or volume. Volume is below 5,000 shares a day and the market cap comes in under $40 million, promoting wide bid ask spreads.

Additionally, the expense ratio is rather high–65 basis points–thanks to the equal weighting and fundamental approach, suggesting it may not be the cheapest way to play consumers without too much focus on Wal-Mart.

To read this article on Zacks.com click here.

Zacks Investment Research