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Welcome to Sherwood Forest, Er, Wal-Mart
By DANIEL AKST
Published: March 6, 2005
THE recent bankruptcy filing of Winn-Dixie Stores, the supermarket chain, would seem to be the latest evidence that Wal-Mart, dreaded by competitors as retailing's 24-hour-a-day death star, has lost none of its price-cutting potency. The company's apparent invincibility is part of what galls its critics, whose opposition led to the cancellation of a proposed Wal-Mart in Queens.
The conventional criticism of Wal-Mart is that it's an insatiable capitalist juggernaut, reaping private benefit at the expense of the public good. The view retains some currency, I suspect, because many of Wal-Mart's critics haven't really shopped there.
The funny thing is that, for quite a while, this view has had the situation almost exactly backward. Instead of producing private benefit at public expense, Wal-Mart has been producing public benefit at private expense. And the equation is likely to become ever more lopsided.
Like the airlines, whose investors generously provide low fares and convenient service while forgoing gains for themselves, Wal-Mart has kindly mustered considerable capital from investors with the goal of providing all kinds of basic goods under one roof at convenient locations and amazingly low prices. These investors must be charitably minded because they aren't the main beneficiaries of Wal-Mart's business.
For several years now, the shareholders, who have more than $200 billion tied up in the company, have not done especially well. Since the end of 1999, Wal-Mart stock is off 23 percent, while Target is up 43 percent and Lowe's is up 95 percent.
The big winners during this period were the juggernaut's customers, who gained by having Wal-Mart drive down the price of consumer goods. Assuming that Wal-Mart investors are more affluent than its shoppers, the system offers a progressive transfer from rich to poor - from capital owners to less prosperous American consumers and hard-working Chinese factory hands. It's like Robin Hood, only with parking.
It's tempting to say that some of the benefits to shoppers come at the expense of Wal-Mart's roughly 1.2 million employees, but it's a tough case to make. Many Wal-Mart employees presumably can't get better jobs; if they could, they would. By continuing to work at the chain, they are showing that they prefer the jobs they have to no jobs at all. If Wal-Mart vanished, in fact, they would be in big trouble indeed.
For Wal-Mart shoppers, the good news is that, for a variety of reasons, they can expect the investors' largess to continue. If you shop at Wal-Mart or its Sam's Club unit, you know that the company cannot afford to raise prices much, because prices are almost the only reason to go to these places. I shop at Wal-Mart stores occasionally, and the ones I visit are poorly lit, poorly organized and unenthusiastically staffed. The clothing is mostly relentlessly unfashionable, and the groceries far from tempting when compared with those of a first-class supermarket chain like Wegmans, based in Rochester; that chain is a perennial on Fortune magazine's list of best places to work. If Wal-Mart does improve its stores, it's hard to see how customers will be made to pay for it without the risk of sending them elsewhere.
WAL-MART'S low cost of labor, meanwhile, appears to be under pressure. Sooner or later, union organizers may succeed at some of its stores, and in any event, the company may have to spend more on wages, benefits and working conditions, if only to improve its public image and to keep the unions at bay. Then there is sheer arithmetic: Wal-Mart is already so big that it simply will not be able to match the hypergrowth of its own past unless it soon employs everyone in the world.
If you don't have much money, Wal-Mart is a godsend, and, in a way, that's the trouble. Wal-Mart's hold on its shoppers is largely mercenary, and therefore tenuous. To me, shopping at Wal-Mart feels like a chore, and Sam's Club is better only if there's no Costco nearby. In other words, I think the juggernaut is vulnerable. It may well be, for the foreseeable future, that it's smarter to buy stuff at Wal-Mart than to buy stock in Wal-Mart. The stock may or may not be a good deal. The stuff is a sure thing.
krisy said:Well,I for one love Wal Mart. It doesn't really,matter ro me what the stock is doing ,or if they have a union. All I know is,I can go in there and afford to shop. I think probably most Americans feel this way. Target isn't a bad store,but a little more expensive than Wal Mart,and I don't like some of their decisions about different charity issues and such in the past. Wal Mart has everything!!!
http://www.fastcompany.com/magazine/77/walmart.html
Levi's launch into Wal-Mart came the same summer the clothes maker celebrated its 150th birthday. For a century and a half, one of the most recognizable names in American commerce had survived without Wal-Mart. But in October 2002, when Levi Strauss and Wal-Mart announced their engagement, Levi was shrinking rapidly. The pressure on Levi goes back 25 years--well before Wal-Mart was an influence. Between 1981 and 1990, Levi closed 58 U.S. manufacturing plants, sending 25% of its sewing overseas.
Sales for Levi peaked in 1996 at $7.1 billion. By last year, they had spiraled down six years in a row, to $4.1 billion; through the first six months of 2003, sales dropped another 3%. This one account--selling jeans to Wal-Mart--could almost instantly revive Levi.
Last year, Wal-Mart sold more clothing than any other retailer in the country. It also sold more pairs of jeans than any other store. Wal-Mart's own inexpensive house brand of jeans, Faded Glory, is estimated to do $3 billion in sales a year, a house brand nearly the size of Levi Strauss. Perhaps most revealing in terms of Levi's strategic blunders: In 2002, half the jeans sold in the United States cost less than $20 a pair. That same year, Levi didn't offer jeans for less than $30.
For much of the last decade, Levi couldn't have qualified to sell to Wal-Mart. Its computer systems were antiquated, and it was notorious for delivering clothes late to retailers. Levi admitted its on-time delivery rate was 65%. When it announced the deal with Wal-Mart last year, one fashion-industry analyst bluntly predicted Levi would simply fail to deliver the jeans.
But Levi Strauss has taken to the Wal-Mart Way with the intensity of a near-death religious conversion--and Levi's executives were happy to talk about their experience getting ready to sell at Wal-Mart. One hundred people at Levi's headquarters are devoted to the new business; another 12 have set up in an office in Bentonville, near Wal-Mart's headquarters, where the company has hired a respected veteran Wal-Mart sales account manager.
Getting ready for Wal-Mart has been like putting Levi on the Atkins diet. It has helped everything--customer focus, inventory management, speed to market. It has even helped other retailers that buy Levis, because Wal-Mart has forced the company to replenish stores within two days instead of Levi's previous five-day cycle.
And so, Wal-Mart might rescue Levi Strauss. Except for one thing.
Levi didn't actually have any clothes it could sell at Wal-Mart. Everything was too expensive. It had to develop a fresh line for mass retailers: the Levi Strauss Signature brand, featuring Levi Strauss's name on the back of the jeans.
Two months after the launch, Levi basked in the honeymoon glow. Overall sales, after falling for the first six months of 2003, rose 6% in the third quarter; profits in the summer quarter nearly doubled. All, Levi's CEO said, because of Signature.
"They are all very rational people. And they had a good point. Everyone was willing to pay more for a Master Lock. But how much more can they justify?" But the low-end business isn't a business Levi is known for, or one it had been particularly interested in. It's also a business in which Levi will find itself competing with lean, experienced players such as VF and Faded Glory. Levi's makeover might so improve its performance with its non-Wal-Mart suppliers that its established business will thrive, too. It is just as likely that any gains will be offset by the competitive pressures already dissolving Levi's premium brands, and by the cannibalization of its own sales. "It's hard to see how this relationship will boost Levi's higher-end business," says Paul Farris, a professor at the University of Virginia's Darden Graduate School of Business Administration. "It's easy to see how this will hurt the higher-end business."
If Levi clothing is a runaway hit at Wal-Mart, that may indeed rescue Levi as a business. But what will have been rescued? The Signature line--it includes clothing for girls, boys, men, and women--is an odd departure for a company whose brand has long been an American icon. Some of the jeans have the look, the fingertip feel, of pricier Levis. But much of the clothing has the look and feel it must have, given its price (around $23 for adult pants): cheap. Cheap and disappointing to find labeled with Levi Strauss's name. And just five days before the cheery profit news, Levi had another announcement: It is closing its last two U.S. factories, both in San Antonio, and laying off more than 2,500 workers, or 21% of its workforce. A company that 22 years ago had 60 clothing plants in the United States--and that was known as one of the most socially reponsible corporations on the planet--will, by 2004, not make any clothes at all. It will just import them.
http://www.larouchepub.com/other/2003/3044wal-mart.html
Wal-Mart Is Not a Business, It's an Economic Disease
by Richard Freeman and Arthur Ticknor
(See also ``Wal-Mart Collapses U.S. Cities and Towns,'' Nov. 14, 2003; ``Wal-Mart Eats More Manufacturers, Jobs,'' Nov. 21, 2003; Wal-Mart Family Trust--The Real Beast of Bentonville, Ark., Jan. 23, 2004.)
The Wal-Mart department store chain, which employs 1.3 million people at 4,700 stores worldwide, and in 2002 became the largest corporation in the world, is levelling economies of the U.S., industrial nations, and the Third World.
Wal-Mart is a driving force behind the decadent Imperial Roman model of the United States. Unable any longer to reproduce its own population's existence through its own physical economy, the United States has, for the past two decades, used an over-valued dollar to suck in physical goods from around the globe for its survival. Wal-Mart is both the public face and working sinews of that policy. It brings in cheap pants from Bangladesh, cheap shirts from China, cheap food from Mexico, etc. Workers who produce these things are paid next to nothing.
Not since the days of the British East India Company as the cornerstone of the British imperial system, has one single corporate entity been responsible for so much misery. At the core of its policy, Wal-Mart demands of its suppliers that they sell goods to Wal-Mart at such a low price, that they can only do so by outsourcing their work to low-wage factories overseas. This causes the exodus of millions of production jobs from the United States and the setting up of slave-labor concentration camps around the globe. Wal-Mart's policy includes crushing living standards in America, forbidding its workers from unionizing, bringing in workers illegally from abroad, and bankrupting tens of thousands of stores and outlets on Main Street, ripping apart communities and their tax bases.
On Nov. 1, 2004, Presidential candidate Lyndon LaRouche declared that Wal-Mart and its destructive policy must be stopped. LaRouche declared a boycott against Wal-Mart, to expose it and take it down. LaRouche told a cadre school gathering of the LaRouche Youth Movement in Philadelphia, "Wal-Mart is not a company, it's an epidemic disease. Wal-Mart is one of the biggest factors in causing unemployment in the United States.... Wal-Mart is your enemy.... It's destroying our community; it represents globalization; it represents an institutionalization of the values which stink."
http://www.motherjones.com/news/feature/2003/03/ma_276_01.html
Given its staggering size and rapid expansion, Wal-Mart increasingly sets the standard for wages and benefits throughout the U.S. economy. "Americans can't live on a Wal-Mart paycheck," says Greg Denier, communications director for the United Food and Commercial Workers International Union (UFCW). "Yet it's the dominant employer, and what they pay will be the future of working America." The average hourly worker at Wal-Mart earns barely $18,000 a year at a company that pocketed $6.6 billion in profits last year. Forty percent of employees opt not to receive coverage under the company's medical plan, which costs up to $2,844 a year, plus a deductible. As Jennifer McLaughlin puts it, "They're on top of the Fortune 500, and I can't get health insurance for my kid."
Angered by the disparity between profits and wages, thousands of former and current employees like McLaughlin have started to fight the company on a variety of fronts. Workers in 27 states are suing Wal-Mart for violating wage-and-hour laws; in the first of the cases to go to trial, an Oregon jury found the company guilty in December of systematically forcing employees to work overtime without pay. The retailer also faces a sex-discrimination lawsuit that accuses it of wrongly denying promotions and equal pay to 700,000 women. And across the country, workers have launched a massive drive to organize a union at Wal-Mart, demanding better wages and working conditions. Employees at more than 100 stores in 25 states -- including Supercenter #148 in Paris -- are currently trying to unionize the company, and in July the UFCW launched an organizing blitz in the Midwest, hoping to mobilize nearly 120,000 workers in Michigan, Kentucky, Ohio, and Indiana.
Wal-Mart has responded to the union drive by trying to stop workers from organizing -- sometimes in violation of federal labor law. In 10 separate cases, the National Labor Relations Board has ruled that Wal-Mart repeatedly broke the law by interrogating workers, confiscating union literature, and firing union supporters. At the first sign of organizing in a store, Wal-Mart dispatches a team of union busters from its headquarters in Bentonville, Arkansas, sometimes setting up surveillance cameras to monitor workers. "In my 35 years in labor relations, I've never seen a company that will go to the lengths that Wal-Mart goes to, to avoid a union," says Martin Levitt, a management consultant who helped the company develop its anti-union tactics before writing a book called Confessions of a Union Buster. "They have zero tolerance."
The retaliation can be extreme. In February 2000, the meat-cutting department at a Wal-Mart in Jacksonville, Texas, voted to join the UFCW -- the only Wal-Mart in the nation where workers successfully organized a union. Two weeks after the vote, the company announced it was eliminating its meat-cutting departments in all of its stores nationwide. It also fired four workers who voted for the union. "They held a meeting and said there was nothing we could do," recalls Dotty Jones, a former meat cutter in Jacksonville. "No matter which way the election went, they would hold it up in court until we were old and gray."
fuzzykitten99 said:the old walmart rant, huh?
try this site for facts that are proveable rather than just rhetoric:
http://www.walmartfacts.com/doyouknow/
krisy said:Well, I don't really know what to say after Merlins post!!! To be honest,I don't really know a lot about the backgrounds of the stores where I shop. I have two kids, a husband and a job, and that keeps me pretty busy. I agree Wal Mart doesn't always sell the highest quality clothing,but if you have a hundred bucks to go get the kids a few things,and that's all you have right now-then I have to go where I can afford to go.
Kathianne said:Merlin, it seems to me that Levi's, Vlasic, etc., made deals they thought would bring them higher profit. They should have done their homework.
Kathianne said:Sear's definately carried on the same types of practices as Walmart through the 50's-early 80's, then they got too diversified and have been playing catch up ever since.
Kathianne said:Individuals shop for their own reasons, budget, quality, even political beliefs. I've never thought of a store as my 'friend' or 'enemy', rather a place I buy or don't based on my own considerations. I say that it's best to let the marketplace work.
Merlin1047 said:Krisy, my post wasn't meant as a criticism of your shopping habits. We all do what we have to in order to make ends meet, and that's just fine.
I was simply trying to point out that everything comes at a price - and that includes the low prices at Wal Mart.
Sear's made a habit of getting local entrepreneurs to contract with them, (fencing, roofing, windows, appliance installers/repairs), then give them too much work-at which point they would put them out of business. Granted wasn't 'jobbed overseas' but cost many their businesses, then they went hourly for Sear's, putting their employees out of work.Merlin1047 said:Sears has tried to stay with "Made in America" as much as possible and that has cost them.
I agree. For a few years Penny's looked on the ropes, but has come back strong.merlin said:One retailer that continues to surprise me is JC Penneys. Their merchandise is generally of decent quality and although they cannot compete with Wal Mart on the issue of price, JC Penneys continues to be a viable chain.
I do not disagree with your take, on the contrary does seem to be their MO. At the same time, it's up to the small businesses to find a way to try and stand up and compete. When Walmart hits an area, it's not just the immediate town impacted, but a radius. Small business has not risen to the challenge.merlin said:...I see Wal Mart as an avaricious predator corporation which seeks to insinuate itself into every community in the world. They do not come into a town to compete and to carve out a niche for themselves - they come in intent on destroying any competition. That's what has me turned off on Wal Mart.
I live in a small town in the southeast. Although I avoid shopping at Wal Mart as much as possible, there are some items where I have no practical choice. Wal Mart has driven numerous small retailers and grocery stores out of business. So I tend to resent their impact on my community because we have lost diversity and choices in the process.
Wolfe said:Merlin,
Are Walmart's actions not the logical outcome of capitalism? Is it not the intent of any company to drive other out of business? Perhaps what happened to Standard Oil will happen to Walmart.
Kathianne said:I do not disagree with your take, on the contrary does seem to be their MO. At the same time, it's up to the small businesses to find a way to try and stand up and compete. When Walmart hits an area, it's not just the immediate town impacted, but a radius. Small business has not risen to the challenge.
Merlin1047 said:Kathianne, if you were playing on a local baseball team and suddenly the New York Yankees moved into your league, how would you go about competing?
I owned a trophy and gift business for over twenty years. The way I "competed" with Wal Mart was to avoid carrying any items which would require head-to-head competition. We specialized in providing products and services which Wal Mart chose not to offer. For that reason, I was successful in avoiding the fate which befell many others.
Had I owned a general merchandise store my fate would have been much the same as that hypothetical baseball team I signed you up for.
Kathianne said:Merlin, I didn't know this was personal. I'm sorry. I guess my take was all the Ace Hardwares from surrounding towns needed to band together, along with any independents for ordering and such. There is much to say for paying a 'bit extra' for the service and personal service. Problem is, selling a Stanley hammer for $1.00 over cost @ $12.00 v Walmart's Stanley @ $8.00.
Merlin1047 said:Oops - I didn't mean to infer that I had a personal axe to grind against Wal Mart. They never did me any harm personally or professionally.
Wal Mart has huge clout with suppliers that regular retailers, especially mom and pop operations, cannot hope to match. So many, if not most of the low prices which Wal Mart offers, are for like items. Take your example of a Stanley hammer. Wal Mart probably buys that hammer for around $4.00 each while Joe Smith's hardware has to pay at least $6.00 or more. That's just one part of the equation. Due to their volume, Wal Mart also has a much lower cost-of-sale on a per-item basis. So it might cost Joe Smith $.75 to $1.00 to sell that hammer while Wal Mart's cost is likely to be more on the order of $.25 or less. (I'm guessing here, since those figures are a well kept Wal Mart secret) If we finish the math, Joe Smith sell a hammer for $12.00 ($11.98, actually) and counting his in-store costs he clears between $5.75 and $5.50. Then Joe has to turn around and buy more hammers to replace the depleted stock.
Meantime Wal Mart paid $4.00, sold it for $8.00. Add their in-store cost and they clear $3.75 per item. Okay, that's less than Joe Smith cleared on that one hammer. But if you consider the profit as a percentage, Wal Mart's take is 46.8% while Joe's is around 45.8%.
Another way Wal Mart succeeds is by bamboozling the customer. One case which affected me specifically involved Dakin stuffed animals. You may remember the Garfield the Cat critter which had suction cups and you could stick the thing to the inside of your car window. These things were wildly popular. Matter of fact, I could not order them fast enough. I would alway be out before the next order would arrive because the factory was always backed up. Suddenly the sales stopped - and I do mean suddenly. It was like turning off a spigot. One day Garfield was blowing out of the store and the next day I couldn't give it away.
Turns out that Dakin had sold to Wal Mart despite their promises to small retailers like me that they wouldn't do that. Wal Mart was selling Garfield at retail for less than I could buy it wholesale. On closer inspection, it wasn't the same product. The Garfield we carried had a big piece of stitched leather for his teeth, Wal Mart's had just a line of thread stitched where his mouth should be. Our's had four suction cups, Wal Mart's had just one. Our's was stuffed with hypoallergenic filling, I don't know what Wal Mart's had - probably old newspaper. Wal Mart's was also smaller, had cheap eyes and the material which comprised the body seemed inferior to me.
But Wal Mart sold their's for ten bucks while I had to sell our's for twenty.
I was furious with Dakin, so I called their sales department and expressed my displeasure. They admitted that they had agreed not to sell Garfield to Wal Mart, their lame excuse was that "this isn't the same Garfield". Well I told them what I thought of that and never purchased anything from them ever again. Apparently many other retailers felt the same because Dakin nearly went out of business and I don't think they have recovered their market share to this day.
So the adverse effects of Wal Mart's business practices cascade throughout the marketplace. We have to decide if we want to have a wider choice of products and services, or if we are content with that which Wal Mart wants us to have.
merlin said:I was furious with Dakin, so I called their sales department and expressed my displeasure. They admitted that they had agreed not to sell Garfield to Wal Mart, their lame excuse was that "this isn't the same Garfield". Well I told them what I thought of that and never purchased anything from them ever again. Apparently many other retailers felt the same because Dakin nearly went out of business and I don't think they have recovered their market share to this day.
