May 20th, 2012

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May 19th, 2012

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May 18th, 2012

Citation of Statistics Used in the Film

WAL-MART Drives Down Retail Wages $3 BILLION Every Year

“A recent study by researchers at UC Berkeley’s Labor Center has quantified what happened to retail wages when Wal-Mart set up shop, drawing on 15 years of data on actual store openings. The study found that Wal-Mart drives down wages in urban areas, with an annual loss of at least $3 billion dollars in earnings for retail workers.”

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UPDATE: Since the completion of our film, the study has been finalized and published, and the published findings produced a different number for the annual loss in retail earnings than the preliminary figure we used in the film. The published study ultimately found that Wal-Mart actually reduced the take-home pay of retail workers by $4.7 BILLION dollars annually. Unfortunately for the retail workers this statistic concerns, Wal-Mart’s effect on retail wages turns out to be worse than we had anticipated.

Source: Arindrajit Dube, “Impact of Wal-Mart Growth on Earnings throughout the Retail Sector in Urban and Rural Counties” [ PDF File ], UC Berkeley Labor Center, November 2005.

$86 MILLION a Year to California Taxpayers

In 2004, a study released the UC Berkeley Labor Center found that “reliance by Wal-Mart workers on public assistance programs in California comes at a cost to taxpayers of an estimated $86 million annually; this is comprised of $32 million in health related expenses and $54 million in other assistance.”

Source: Ken Jacobs and Arindrajit Dube, “Hidden Costs of Wal-Mart Jobs” [PDF file], UC Berkeley Labor Center, August 2, 2004.

Wal-Mart dismisses the findings of the UC Berkeley study, “Hidden Costs of Wal-Mart Jobs,” as a “union hit piece.” However, text from Wal-Mart’s own internal memo substantially corroborates their findings.

An excerpt from the memo states:

“We also have a significant number of Associates and their children who receive health insurance through public-assistance programs. Five percent of our Associates are on Medicaid compared to an average for national employers of 4 percent. Twenty-seven percent of Associates’ children are on such programs, compared to a national average of 22 percent (Exhibit 5). In total, 46 percent of Associates’ children are either on Medicaid or are uninsured.”

Source: Wal-Mart Internal Memo [ PDF File ], via New York Times

The researchers from the UC Berkeley Labor Center recently re-visited the situation, using Wal-Mart’s own findings as a basis for their analysis. This is what they have found:

Applying Wal-Mart’s reported percentages of workers and children enrolled in Medicaid/SCHIP implies Wal-Mart workers and children cost $456 million to taxpayers nationally through their use of public health programs. This does not include the costs of adult dependents. (See Table 3)

Adding in the cost of adult dependents, the number approaches the original estimate reported in the Labor Center report.

Also, the original report did not include costs to the public for Wal-Mart employees who are uninsured. Information from the Wal-Mart memo also points to the possibility of additional taxpayer costs incurred from uninsured employees, as analyzed by the Labor Center:

The memo further reports that 19% of Wal-Mart employees lack health insurance. The cost of uncompensated care for those workers adds an estimated $202 million in taxpayer costs nationally, and $10 million in California. These costs were not quantified in the original report (see Table 4).

Source: The updated analysis, with additional references to primary source material, can be found on the UC Berkeley Labor Center website (see: “Internal Wal-Mart Memo Validates Findings of UC Berkeley Study,” November 2005)

In addition to these new findings, a paper presented at the recent Wal-Mart sponsored conference by Michael J. Hicks of the Air Force Institute of Technology and Marshall University, finds that “Wal-Mart does increase Medicaid expenditures by roughly $898 per worker, which is consistent with other studies of the Medicaid costs per low wage worker across the United States.”

Source: Michael Hicks, “Does Wal-Mart Cause an Increase in Anti-Poverty Program Expenditures?” [ PDF File ], via Business Week, October 26, 2005.

HEALTHCARE STATISTICS

An up-to-date compilation of states’ reporting of employers whose workers are enrolled in Medicaid or state health programs is being maintained by Good Jobs First, a non-profit research group based in Washington, DC. The film does not list all 15 states that report such data. Philip Mattera, research director for Good Jobs First, has also given testimony on this healthcare data before the Maryland Senate. That testimony can be found on the Good Jobs First website [ PDF file ].

ALABAMA: 3,864 Children of WAL-MART Employees are Enrolled in Medicaid

“Retail giant Wal-Mart tops the list of companies in Alabama whose employees have children on Medicaid, the [Montgomery] Advertiser reported, citing state records. Wal-Mart workers’ children account for 3,864 children on the Medicaid rolls at a cost between $5.8 million and $8.2 million.”

Source: Associated Press, “Wal-Mart No. 1 in Employee Medicaid,” The Decatur Daily, February 23, 2005

ARIZONA: 2,700 WAL-MART Workers on Medicaid

According to state data provided to Capitol Media Services and reported by the Arizona Daily Star, “Close to one of every 10 Wal-Mart employees is getting health insurance paid for by Arizona taxpayers, according to figures obtained Friday from the state…In the Arizona statistics, nearly 2,700 people listed their employer as Wal-Mart out of more than 28,000 company employees in the state…The numbers came as a surprise to state Sen. Richard Miranda, D-Phoenix, who tried earlier this year to get a law requiring the DES [Department of Economic Security] to disclose the employers of people on AHCCCS. That measure was defeated amid opposition from corporate lobbyists, including Rip Wilson representing Wal-Mart.”

Source: Howard Fischer, “Wal-Mart 1st in State Aid Enrollees,” Arizona Daily Star, July 30, 2005

ARKANSAS: 3971 WAL-MART Workers on Public Assistance

“Nearly 10,000 workers with Arkansas’ nine largest employers receive public welfare for themselves and their families, according to the state Department of Human Services. Wal-Mart Stores Inc., with 3,971 of its 45,106 employees on public assistance, topped the list.”

Source: Brian Baskin, “Top 9 Employers in State Have 9,698 Getting Public Aid,” Arkansas Democrat-Gazette, March 17, 2005.

CONNECTICUT: 824 WAL-MART Workers Have Children in a State Heath Care Program

According to a report prepared by the Connecticut Office of Legislative Research examining enrollment data for the HUSKY (Healthcare for UninSured Kids and Youth) program for children of low-income families, “The same employers account for the highest number of employed parents of HUSKY A [traditional Medicaid] and B [state CHIP] children. For example, Wal Mart employed the highest number of HUSKY A parents (824 in September 2004) and the second highest number of HUSKY B parents (79 in December 2004).”

Source: Robin K. Cohen, “HUSKY A and B – Enrollment and Employer Data,” Connecticut Office of Legislative Research Report 2005-R-0017, January 10, 2005.

FLORIDA: 12,300 WAL-MART Workers and their Dependents on Medicaid

“Wal-Mart Corp., which is getting millions of dollars in state incentives to create jobs in Florida, has more employees and family members enrolled in Medicaid than any company in the state. …The giant retailer, which has 91,000 full-time and part-time employees in Florida, has about 12,300 workers or dependents eligible for Medicaid, the growing health care program for the poor and the elderly…According to figures released Thursday by Florida’s Department of Children and Families, Wal-Mart and four other large companies that receive state incentives have an estimated 29,900 employees or their family members enrolled in Medicaid…The figures suggest taxpayers may be double-subsidizing low-wage employment by paying companies to create jobs and by paying for the health care of some of those companies’ employees.”

Source: Sydney P. Freedberg and Connie Humburg, “Lured Employers Now Tax Medicaid,” St. Petersburg Times, March 25, 2005.

GEORGIA: 10,261 Children of WAL-MART Employees are Enrolled in PeachCare for Kids

“A state survey found 10,261 of the 166,000 children covered by Georgia’s Peach Care? for Kids health insurance in September 2002 had a parent working for Wal-Mart Stores…Wal-Mart is the state’s largest private employer. But when the top four companies on the list are measured by number of PeachCare children per the number of employees in Georgia, Wal-Mart still dominates.”

Source: Andy Miller, “Wal-Mart Stands Out On Rolls Of PeachCare,” Atlanta Journal-Constitution, February 27, 2004.

MASSACHUSETTS: 4,172 WAL-MART Workers and Dependents on State Health Care

“Section 304 of Chapter 149 of the Acts of 2004 requires the Executive Office of Health and Human Services to produce a list of employers who have 50 or more employees using public health assistance each year.” As a result, the Division of Health Care Finance and Policy, in collaboration with staff from the Office of Medicaid, compiled a report of employers who had 50 or more employees on MassHealth and the Uncompensated Care Pool (UCP). The report found that in 2004, Wal-Mart had 1,258 employees participating in UCP and 823 employees participating in MassHealth.

Source: Executive Office of Health and Human Services Division of Health Care Finance and Policy, “Employers Who Have 50 or More Employees Using Public Health Assistance,” February 1, 2005 (an additional data spreadsheet can be found here )

TENNESSEE: 9,617 WAL-MART Workers on TennCare

“Wal-Mart, with about 25 percent of the company’s 37,000 workers on TennCare, tops the list of businesses with employees on the expanded Medicaid program. Wal-Mart is the state’s largest private employer.”

Source: Associated Press, “Study Shows Thousands of Wal-Mart Employees on TennCare,” WKRN-TV Nashville, January 20, 2005.

TEXAS: 4,363 Children of WAL-MART Employees on CHIP

“The Center for Public Policy Priorities, a non-partisan research center based in Austin, has obtained data on the 20 employers in the state with the largest number of employees whose dependents participate in the Children’s Health Insurance Program. (Employer data for Medicaid are not available.) The data for February 2005 show Wal-Mart at the top of the list, with 2,333 employee families in CHIP, with an estimated 4,363 individual children enrolled.”

Source: Good Jobs First [ PDF file ], with data provided by the Center for Public Policy Priorities .

WISCONSIN: 1,252 WAL-MART Employees and Dependents on BadgerCare

“The biggest employer of BadgerCare recipients was Wal-Mart, which had 809 of its employees and 443 of employee dependents enrolled in the state program in April. Providing health care for those 1,252 people costs Wisconsin about $2.7 million a year; Wal-Mart turned a profit of $10.3 billion in 2004.”

Source: Stacy Forster, “Big Companies Fill BadgerCare Rolls,” Milwaukee Journal Sentinel, May 24, 2005

WAL-MART Costs Taxpayers $1,557,000,000,00 to Support its Employees

“The Democratic Staff of the Committee on Education and the Workforce estimates that one 200-person Wal-Mart store may result in a cost to federal taxpayers of $420,750 per year – about $2,103 per employee. Specifically, the low wages result in the following additional public costs being passed along to taxpayers:

$36,000 a year for free and reduced lunches for just 50 qualifying Wal-Mart families.

$42,000 a year for Section 8 housing assistance, assuming 3 percent of the store employees qualify for such assistance, at $6,700 per family.

$125,000 a year for federal tax credits and deductions for low-income families, assuming 50 employees are heads of household with a child and 50 are married with two children.

$100,000 a year for the additional Title I expenses, assuming 50 Wal-Mart families qualify with an average of 2 children.

$108,000 a year for the additional federal health care costs of moving into state children’s health insurance programs (S-CHIP), assuming 30 employees with an average of two children qualify.

$9,750 a year for the additional costs for low income energy assistance.”

The total figure is based on the average $420,750 per-store figure, multiplied by 3700 (the approximate number of stores currently in the United States).

Source: Rep. George Miller / Democratic Staff of the Committee on Education and the Workforce, “Everyday Low Wages: The Hidden Price We All Pay for Wal-Mart”, February 16, 2004.

WAL-MART and Full Time Status

In the film, a former Wal-Mart co-manager claims that store managers are told to “Keep the number of associates from being full time, as many as you can, keep many of them part time, as much as you can.” A paragraph in a recently released internal memo from Wal-Mart corroborates the co-manager’s statement:

5. Capture savings from current initiatives to improve labor productivity. These initiatives include reducing the number of labor hours per store, increasing the percentage of part-time Associates in stores, and increasing the number of hours per Associate.

Source: Wal-Mart Internal Memo [ PDF File ], via New York Times

Wal-Mart says that “Wal-Mart’s ‘full time’ status begins at 34 hours per week, not 28, for associates hired after 2002.” Before 2002, however, Wal-Mart’s definition of full-time WAS 28 hours per week, and was raised in 2002 to 34 hours per week in order to raise the bar for healthcare eligibility for their employees – as the raise in hours coincided with the increase in eligibility requirements for healthcare. According to Wikipedia , “In 2002, Wal-Mart increased the waiting period for enrollment eligibility from 90 days to 6 months for full-time employees. Part-time employees must wait 2 years before they may enroll in the plan, and they may not purchase coverage for their spouses or children. The definition of part-time was changed from 28 hours or less per week to less than 34 hours per week.” The change was not done to benefit more full-time employees, but to discourage more employees from being eligible for Wal-Mart’s healthcare plan.

Suppose we accepted this correction. The 34-hour per week full-time definition still is not the 40-hour definition employed by most businesses in America. Also, at Wal-Mart’s stated average hourly wage of $9.68 per hour (source: WalmartFacts.com ), a 34-hour week results in an annual wage of only $17,114 STILL below the poverty line for a family of four.

$7,000 ANTI-UNION CAMERA PACKAGE per store

$30,000 UNDERCOVER SPY VAN per store

$100,000 24 hour ANTI-UNION HOTLINE

$7,000,000 Rapid response team with CORPORATE JET

Source: Data provided to the producers by Stan Fortune, former manager and 17-year employee of Wal-Mart

According to a recent report issued by American Rights At Work ( “Wal-Mart: Rolling Back Wages, Workers’ Rights, and the American Dream” ), at least 59 complaints have been issued by the National Labor Relations Board on the basis that Wal-Mart uses illegal surveillance techniques to monitor union activity inside and outside their stores. These include the following claims:

“Following a NLRB investigation of worker charges in Denver, Colorado; Paris, Texas; and Orlando, Florida, the government has charged Wal-Mart with illegal surveillance, threats and intimidation of its associates.”

“Wal-Mart will face trial on February 10, 2003 for illegal surveillance of union supporters.”

“Workers in Paris, Texas suffer similar injusticesThe NLRB investigation of Wal-Mart’s actions resulted in a complaint charging that Wal-Mart managers carried out surveillance on their workers, restricted workers’ attire in an effort to retaliate against union supporters and also threatened and interrogated workers.”

“In Orlando, Florida, Wal-Mart faces a NLRB trial on June 28, 2003 for illegal surveillance of workers, illegal threats and harassment of workers.”

Source: UFCW, “Wal-Mart’s War on Workers,” PR Newswire, January 8, 2003, and the National Labor Relations Board .

$50 MILLION to settle an off-the-clock class action suit in Colorado

In 2000, “Wal-Mart paid $50 million to settle a class-action suit that asserted that 69,000 current and former Wal-Mart employees in Colorado had worked off the clock.”

Source: Steven Greenhouse, “Suits Say Wal-Mart Workers Forced To Toil Off The Clock,” New York Times, June 25, 2002 [reprinted via Common Dreams ]

In Texas it is estimated that they cheated workers out of up to one hundred and fifty million dollars in unpaid wages

“In a recently certified class-action suit in Texas on behalf of more than 200,000 current and former Wal-Mart workers, statisticians estimate that the company underpaid its Texas workers by $150 million over four years by not paying them for the many times they worked during their daily 15-minute breaks. That $150 million estimate does not include other types of unpaid work. The statisticians, who analyzed time records from 12 Wal-Mart stores, found that the Texas employees averaged at least one hour of unpaid work each week from working through breaks.”

Source: Steven Greenhouse, “Suits Say Wal-Mart Workers Forced To Toil Off The Clock,” New York Times, June 25, 2002 [reprinted via Common Dreams ]

Wal-Mart Managers delete time from workers’ timecards

In Massachusetts, “a Middlesex court judge has put his imprimatur on a suit alleging the retail giant failed to pay employees for time worked and neglected to give them meal and rest breaks, the Herald has learned. The eight-page ruling by Superior Court Judge Ernest B. Murphy cites an affidavit by a computer expert hired by the plaintiffs. The expert allegedly found 7,000 instances during a one-year period when Wal-Mart managers deleted large blocks of time from their employee payroll records.”

Source: John Strahinich, “Judge OKs Employee Lawsuit Against Wal-Mart,” Boston Herald, January 7, 2005.

Meanwhile, in California, a class-action lawsuit potentially involving up to 215,000 current and former Wal-Mart and Sam’s Club employees “charges that Wal-Mart, based in Bentonville, Ark., deleted thousands of hours of time worked from employees’ payroll records by erasing overtime hours and by penalizing employees who forgot to punch in after their meal breaks by denying them pay for the remainder of those days.”

Source: “Alameda County Suit Alleges Wal-Mart Cheated Workers,” Bay City News, January 20, 2005.

Wal-Mart currently faces lawsuits in thirty-one different States for wage and hour abuses potentially involving hundreds of thousand workers.

Wal-Mart Wage and Hour “Off the Clock” Class Actions:

Adcox v. WM, US Dist. Ct. (“USDC”), Southern Dist. of TX, 11/9/04;

Armijo v. WM, 1st Judicial Dist. Ct., Rio Arriba County, NM, 9/18/00;

Bailey v. WM, Marion County Superior Ct. IN, 8/17/00;

Barnett v. WM, Superior Ct. of WA, King County, 9/10/01;

Basco v. WM, USDC, Eastern Dist. of LA, 9/5/00;

Braun v. WM, 1st Judicial Dist. Ct. Dakota County MN, 9/12/01;

Braun v. WM, Ct. of Common Pleas, Philadelphia County, PA, 3/20/02;

Brown v. WM, 14th Judicial Circuit Ct., Rock Island, IL, 6/20/01;

Carr v. WM, Superior Ct. of Fulton County, GA, 8/14/01;

Culver v. WM, USDC, Dist. of CO, 12/10/1996;

Carter v. WM, Ct. of Common Pleas, Colleton County, SC, 7/31/02;

Gamble v. WM, Supreme Ct. of the State of NY, County of Albany, 12/7/01;

Gross v. WM, Circuit Ct., Laurel County, KY, 9/29/04;

Hale v. WM, Circuit Ct., Jackson County, MO, 8/15/01;

Hall v. WM, 8th Judicial Dist. Ct., Clark County, NV, 9/9/99;

Harrison v. WM, Superior Ct. of Forsyth County, NC, 11/29/00;

Holcomb v. WM, State Ct. of Chatham County, GA, 3/28/00;

Hummel v. WM, Common Pleas Ct. of Philadelphia County, PA, 8/30/04;

Iliadis v. WM, Superior Ct. of NJ, Middlesex County, 5/30/02;

Kuhlmann (In Re: Wal-Mart Employee Litigation) v. WM, Circuit Ct., Milwaukee County, WI, 8/30/01;

Lerma v. WM, Dist. Ct., Cleveland County, OK, 8/31/01;

Lopez v. WM, 23rd Judicial Dist. Ct. of Brazoria County, TX, 6/23/00;

Mendoza v. WM, Superior Ct. of CA, Ventura County, 3/2/04;

Michell v. WM, USDC, Eastern Dist. of TX, Marshall Div., 9/13/02;

Montgomery v. WM, USDC, Southern Dist. of MS, 12/30/02;

Mussman v. WM, IA Dist. Ct., Clinton County, 6/5/01;

Nagy v. WM, Circuit Ct. of Boyd County, KY, 8/29/01;

Newland v. WM, Superior Ct. of CA, Alameda County, CA, 01/14/05;

Osuna v. WM, Superior Ct. of AZ, Pima County, 11/30/01;

Pickett v. WM, Circuit Court, Shelby County, TN, 10/22/03;

Pittman v. WM, Circuit Ct. for Prince George’s County, MD, 7/31/02;

Robinson v. WM, Circuit Ct., Holmes County, MS, 12/30/02;

Sago v. WM, Circuit Ct., Holmes County, MS, 12/31/02;

Romero v. WM, Superior Ct. of CA, Monterey County, 03/25/04;

Salvas v. WM, Superior Ct., Middlesex County, MA, 8/21/01;

Sarda v. WM, Circuit Ct., Washington County, FL, 9/21/01;

Savaglio v. WM, Superior Ct. of CA, Alameda County, 2/6/01;

Scott v. WM, Circuit Ct. of Saginaw County, MI, 9/26/01;

Smith v. WM, Circuit Ct., Holmes County, MS, 12/31/02;

Thiebes v. WM, USDC, Dist. of OR, 6/30/98;

Willey v. WM, Dist. Ct. of Wyandotte County, KS, 9/21/01;

Williams v. WM, Superior Ct. of CA, Alameda County, 3/23/04;

Wilson v. WM, Common Pleas Ct. of Butler County, OH, 10/27/03;

Winters v. WM, Circuit Ct., Holmes County, MS, 5/28/02.

Source: Wal-Mart Stores 10K Filing , March 31, 2005, Pg. 16, Item 3 .

Federal Poverty Level Family of Four – $17,650

Source: U.S. Department of Health and Human Services, 2001 Federal Poverty Guidelines

Average Wal-Mart Hourly Sales Employee Wages – $13,861

“On average, Wal-Mart sales clerks — “associates” in company parlance — pulled in $8.23 an hour, or $13,861 a year, in 2001, according to documents filed in a lawsuit pending against the company.”

Source: Anthony Bianco and Wendy Zellner, “Is Wal-Mart Too Powerful?” Business Week, October 6, 2003. Primary source information on 2001 wage data is from the testimony of Dr. Richard Drogin, in Dukes v. WM.

Wal-Mart is paying eleven million dollars to settle Federal allegations it used illegal immigrants to clean its stores.

“Wal-Mart will escape criminal sanctions and pay $11 million to settle claims stemming from a federal investigation of illegal workers hired by the company’s cleaning contractors, the company said Friday…The more than four-year investigation was led by Immigration and Customs Enforcement agents and federal prosecutors in Pennsylvania. It produced 245 arrests of undocumented workers in 2003.”

Source: CNN/Money, “Wal-Mart Pays $11M Over Illegal Labor,” CNN.com, March 18, 2005.

Wal-Mart is facing a class-action lawsuit for discrimination against $1.6 million former and current female employees.

Source: Liza Featherstone, “Selling Women Short: The Landmark Battle for Workers’ Rights At Wal-Mart,” Basic Books, 2004.

For more information on this lawsuit, please visit the Wal-Mart Class website .

Edith Arana was told by a manager, “There’s no place for people like you in management…” – WAL-MART and Racial Discrimination

Wal-Mart disputes a claim made by Edith Arana in the film, that she experienced racial as well as gender discrimination in her experience working at Wal-Mart, by saying hers is an isolated incident.

In fact, in addition to Edith Arana’s claim, Cleo Page and Betty Dukes, two of the six named plaintiffs in Dukes v. Wal-Mart Stores , the largest gender discrimination class-action lawsuit in history, have also filed individual race discrimination claims against Wal-Mart.

Several of the other women involved in the class-action have provided depositions that attest to racial discrimination as well as gender discrimination. Those testimonies are available at the WalMartClass.com website and include the declarations of the following women, who testify to racial discrimination in addition to their gender discrimination claims:

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May 16th, 2012

Essay, Research Paper: Wal-Mart

Economics

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Abstract Sam Walton, a leader with an innovative vision, started his own company

and made it into the leader in discount retailing that it is today. Through his

savvy, and sometimes unusual, business practices, he and his associates led the

company forward for thirty years. Today, four years after his death, the company

is still growing steadily. Wal-Mart executives continue to rely on many of the

traditional goals and philosophies that Sam’s legacy left behind, while

simultaneously keeping one step ahead of the ever-changing technology and

methods of today’s fast-paced business environment. The organization has faced,

and is still facing, a significant amount of controversy over several different

issues; however, none of these have done much more than scrape the exterior of

this gigantic operation. The future also looks bright for Wal-Mart, especially

if it is able to strike a comfortable balance between increasing its profits and

recognizing its social and ethical responsibilities. Why is Wal-Mart so

Successful? Is it Good Strategy or Good Strategy Implementation? — In 1962,

when Sam Walton opened the first Wal-Mart store in Rogers, Arkansas, no one

could have ever predicted the enormous success this small-town merchant would

have. Sam Walton’s talent for discount retailing not only made Wal-Mart the

world’s largest retailer, but also the world’s number one retailer in sales.

Indeed, Wal-Mart was named “Retailer of the Decade” by Discount Store

News in 1989, and on several occasions has been included in Fortune’s list of

the “10 most admired corporations.” Even with Walton’s death (after a

two-year battle with bone cancer) in 1992, Wal-Mart’s sales continue to grow

significantly. The Wal-Mart Philosophy — Wal-Mart is successful not only

because it makes sound strategic management decisions, but also for its

innovative implementation of those strategic decisions. Regarded by many as the

entrepreneur of the century, Walton had a reputation for caring about his

customers, his employees (or “associates” as he referred to them), and

the community. In order to maintain its market position in the discount retail

business, Wal-Mart executives continue to adhere to the management guidelines

Sam developed. Walton was a man of simple tastes and took a keen interest in

people. He believed in three guiding principles: 1. Customer value and service;

2. Partnership with its associates; 3. Community involvement (The Story of

Wal-Mart, 1995). The Customer — The word “always” can be seen in

virtually all of Wal-Mart’s literature. One of Walton’s deepest beliefs was that

the customer is always right, and his stores are still driven by this

philosophy. When questioned about Wal-Mart’s secrets of success, Walton has been

quoted as saying, “It has to do with our desire to exceed our customers’

expectations every hour of every day” (Wal-Mart Annual Report, 1994, p. 5).

The Associates — Walton’s greatest accomplishment was his ability to empower,

enrich, and train his employees (Longo, 1994). He believed in listening to

employees and challenging them to come up with ideas and suggestions to make the

company better. At each of the Wal-Mart stores, signs are displayed which read,

“Our People Make the Difference.” Associates regularly make

suggestions for cutting costs through their “Yes We Can Sam” program.

The sum of the savings generated by the associates actually paid for the

construction of a new store in Texas (The story of Wal-Mart, 1995). One of

Wal-Mart’s goals was to provide its employees with the appropriate tools to do

their jobs efficiently. The technology was not used as a means of replacing

existing employees, but to provide them with a means to succeed in the retail

market (Thompson & Strickland, 1995). The Community — Wal-Mart’s popularity

can be linked to its hometown identity. Walton believed that every customer

should be greeted upon entering a store, and that each store should be a

reflection of the values of its customers and its community. Wal-Mart is

involved in many community outreach programs and has launched several national

efforts through industrial development grants. What are the Key Features of

Wal-Mart’s Approach to Implementing the Strategy Put Together by Sam Walton –

The key features of Wal-Mart’s approach to implementing the strategy put

together by Sam Walton emphasizes building solid working relationships with both

suppliers and employees, being aware and taking notice of the most intricate

details in store layouts and merchandising techniques, capitalizing on every

cost saving opportunity, and creating a high performance spirit. This strategic

formula is used to provide customers access to quality goods, to make these

goods available when and where customers want them, to develop a cost structure

that enables competitive pricing, and to build and maintain a reputation for

absolute trustworthiness (Stalk, Evan, & Shulman, 1992). Wal-Mart stores

operate according to their “Everyday Low Price” philosophy. Wal-Mart

has emerged as the industry leader because it has been better at containing its

costs which has allowed it to pass on the savings to its customers. Wal-Mart has

become a capabilities competitor. It continues to improve upon its key business

processes, managing them centrally and investing in them heavily for the long

term payback. Wal-Mart has been regarded as an industry leader in “testing,

adapting, and applying a wide range of cutting-edge merchandising

approaches” (Thompson & Strickland, 1995, p. 860). Walton proved to be

a visionary leader and was known for his ability to quickly learn from his

competitors’ successes and failures. In fact, the founder of Kmart once claimed

that Walton “not only copied our concepts, he strengthened them. Sam just

took the ball and ran with it” (Thompson & Strickland, 1995, p. 859).

Wal-Mart has invested heavily in its unique cross-docking inventory system.

Cross docking has enabled Wal-Mart to achieve economies of scale which reduces

its costs of sales. With this system, goods are continuously delivered to stores

within 48 hours and often without having to inventory them. Lower prices also

eliminate the expense of frequent sales promotions and sales are more

predictable. Cross docking gives the individual managers more control at the

store level. A company owned transportation system also assists Wal-Mart in

shipping goods from warehouse to store in less than 48 hours. This allows

Wal-Mart to replenish the shelves 4 times faster than its competition. Wal-Mart

owns the largest and most sophisticated computer system in the private sector.

It uses a MPP (massively parallel processor) computer system to track stock and

movement which keeps it abreast of fast changes in the market (Daugherty, 1993).

Information related to sales and inventory is disseminated via its advanced

satellite communications system. Wal-Mart has leveraged its volume buying power

with its suppliers. It negotiates the best prices from its vendors and expects

commitments of quality merchandise (Thompson & Strickland, 1995). The

purchasing agents of Wal-Mart are very focused people. “Their highest

priority is making sure everybody at all times in all cases knows who’s in

charge, and it’s Wal-Mart” (Vance & Scott, 1995, p. 32). “Even

though Wal-Mart was tough in negotiating for absolute rock-bottom prices, the

company worked closely with suppliers to develop mutual respect and to forge

long-term partnerships that benefited both parties” (Thompson &

Strickland, 1995, p. 866). Wal-Mart built an automated reordering system linking

computers between Procter & Gamble (“P&G”) and its stores and

distribution centers. The computer system sends a signal from a store to P&G

identifying an item low in stock. It then sends a resupply order, via satellite,

to the nearest P&G factory, which then ships the item to a Wal-Mart

distribution center or directly to the store. This interaction between Wal-Mart

and P&G is a win-win proposition because with better coordination, P&G

can lower its costs and pass some of the savings on to Wal-Mart. Sam Walton

received national attention through his “Buy America” policy. Through

this plan, Wal-Mart encourages its buyers and merchandise managers to stock

stores with American-made products. In a 1993 annual report management stated

the “program demonstrates a long-standing Wal-Mart commitment to our

customers that we will buy American-made products whenever we can if those

products deliver the same quality and affordability as their foreign-made

counterparts” (Thompson & Strickland, 1995, p. 868). Environmental

concerns are important to Wal-Mart. A prototype store was opened in Lawrence,

Kansas, which was designed to be environmentally friendly. The store contains

environmental education and recycling centers (Slezak, 1993). Wal-Mart has also

adopted the low cost theme for its facilities. All offices, including the

corporate headquarters, are built economically and furnished simply. To conserve

energy, temperature controls are connected via computer to headquarters. Through

these programs, Wal-Mart shows its concern for the community. Wal-Mart has been

led from the top but run from the bottom, a strategy developed by Sam Walton and

carried on by a small group of senior executives led by CEO David Glass.

Although recent growth has led Wal-Mart to add more management layers, senior

executives strive to maintain its unique culture. This culture, described as

“one part Southern Baptist evangelism, one part University of Arkansas

Razorback teamwork, and one part IBM hardware” has worked to Wal-Mart’s

advantage (Saporito, 1994, p. 62). Just how Successful is Wal-Mart? — A

forecast (see Appendix A) of Wal-Mart’s income for the period 1995-2000,

considering increases of 30.6% in Net Sales, 27.7% in Operating Expenses, and

52.3% in Interest Debt (a level which is below Wal-Mart’s historically

compounded growth rate of 55.6%) indicates that the company should continue to

report gains each year until 2000. Growth on Sales — According to most analysts

and company projections, sales should approximate $115 billion by 1996,

representing an increase of 30.6% as compared to 1995. If the company continues

at this pace, sales should reach $334 billion by the year 2000. The growth on

sales that Wal-Mart reported during the 1980s and the beginning of the 1990s

will be difficult to repeat, especially considering the ever-changing

marketplace in which it competes. In an interview, Bill Fields, President of the

Stores Division, said “Wal-Mart is now seeing price pressure from companies

that once assiduously avoided taking it on. These include specialty retailers

such as Limited, category killers like Home Depot and Circuit City, and catalog

companies like Spiegel. I think everybody prices off of Wal-Mart. You’ve got

Limited reaching levels we’d thought they’d never get to. The result is that

everyday low prices are getting lower” (Saporito, 1994, p. 66). In

addition, the baby-boomers are reaching their peak earnings years, when

financial and personal priorities change. Thus, savings, not spending, will

likely take precedence because most baby-boomers are approaching retirement.

Debt Position — Based on Wal-Mart’s position in 1994, which was considered a

year of expansion for the company, (Wal-Mart added 103 new discount stores, 38

“Supercenters”, 163 warehouse clubs, and 94,000 new associates)

interest debt increased 52.3%. The cost paid by Wal-Mart to finance property

plants and equipment forced the company to increase long term debt by 4.6 times

during the period 1991-1995. Long term debt for 1995 is $7.9 billion. If

Wal-Mart continues its expansion plans based on more debt acquisition at 1994

levels, the company may not attain forecasted gains by as early as 1998.

Operating Expenses — Operating expenses will be a key strategic issue for

Wal-Mart in order to maintain its position in the market. The challenge is how

to run more stores with less operating expenses. According to Bill Fields,

“. . . the goal is to increase sales per square foot and drive operating

costs down yet another notch” (Saporito, 1994, p. 66). Trends indicate that

operating expenses have been growing at a rate of 27.7% in recent years.

However, Wal-Mart should reap the benefits of its investments in high

technology, and be able to operate more stores without increasing its expenses.

Cost of Sales — Cost of sales historically has been equal to the level of

sales. If the company continues to take advantage of its buying power, Wal-Mart

can expect to lower its cost of sales. Wal-Mart’s future will depend on how well

the company manages its expansion plans. For the coming years, the company will

need to justify its expansion plans with consistent growth in sales, in order to

offset the increases in debt interest and operating expenses. What Problems are

Ahead for Wal-Mart? What Risks? — Throughout the 1980s, Wal-Mart’s strategic

intent was to unseat industry leaders Sears and Kmart, and become the largest

retailer in the U.S. Wal-Mart accomplished this goal in 1991. But Wal-Mart’s

current strong competitive position and its past rapid growth performance can’t

guarantee that the company will remain as the industry leader or maintain its

strong business position in the future. Carol Farmer, a retail consultant, told

the Wall Street Journal that, “One little bad thing can wipe out lots of

good things” (Trimble, 1990, p. 267). Every move in its business operation

ought to be well thought-out and executed. Wal-Mart needs to address two major

areas in order to maintain or to capture an even stronger long term business

position: 1) Single-business strategy — Wal-Mart’s success is mainly based on

its concentration of a single-business strategy. This strategy has achieved

enviable success over the last three decades without relying upon

diversification to sustain its growth and competitive advantages. Given its

current position in the industry, Wal-Mart may want to continue its

single-business strategy and to push hard to maintain and increase market share.

However, there is risk in this strategy, because concentration on a

single-business strategy is similar to “putting all of a firm’s eggs in one

industry basket” (Thompson & Strickland, 1995, p. 187). In other words,

if the retail industry stagnates due to an economic downturn, Wal-Mart might

have difficulty achieving past profit performance. Also, if Wal-Mart continues

to follow Sam Walton’s vision of expansion, Wal-Mart will reach its peak in the

very near future. When it does, its growth will start to slow down and the

company will need to turn its strategic attention to diversification for future

growth. 2) Social responsibility — Retail stores can compete on several bases:

service, price, exclusivity, quality, and fashion. Wal-Mart has been extremely

successful in competing in the retail industry by combining service, price, and

quality. However, other merchants may object to Wal-Mart’s entry into their

community. Because of its ability to out-price smaller competitors, Wal-Mart’s

stores threaten smaller neighborhood stores which can only survive if they offer

merchandise or services unavailable anywhere else. This makes it very hard for

small businesses, such as “mom-and-pop” enterprises, to survive. They,

therefore, fight to keep Wal-Mart from entering their locales. Numerous studies

conducted in different states both support and criticize Wal-Mart (Verdisco,

1994). Nevertheless, Wal-Mart did drive local merchants out of business when it

opened up stores in the same neighborhood. As a result, more and more rural

communities are waging war against Wal-Mart’s entrance into their market.

Besides protesting and signing petitions to attempt to stop Wal-Mart’s entry

into their community, the opposition’s efforts can even be found on The

Internet. Gig Harbor, a small town in Washington, recently started a World Wide

Web page entitled “Us Against the Wal.” The town’s neighborhood

association promised that they “will fight them [Wal-Mart] tooth and

nail” (PNA/Island Aerie Internet Productions, 1995/1996). The increasing

opposition indicates that the road ahead for Wal-Mart may not be as smooth as

Wal-Mart’s annual report would entail. This requires Wal-Mart to rethink its

expansion strategy since it would not be profitable to operate in an unfriendly

community. How Big Will Wal-Mart be in Five Years if all Continues to go Well?

– Before he died, Sam Walton expressed his belief that by the year 2000

Wal-Mart should be able to double the number of stores to about 3,000 and to

reach sales of $125 billion annually. Walton predicted that the four biggest

sources of growth potential would be the following: 1. expanding into states

where it had no stores; 2. continuing to saturate its current markets with new

stores; 3. perfecting the Supercenter format to expand Wal-Mart’s retailing

reach into the grocery and supermarket arena — a market with annual sales of

about $375 billion; 4. moving into international markets (Thompson &

Strickland, 1995). Wal-Mart Supercenters represent leveraging on customer

loyalty and procurement muscle in order to create a new domestic growth vehicle

for the company. With few locations left in the U.S. to put a new Sam’s Club or

traditional Wal-Mart, the Supercenter division has emerged as the domestic

vehicle for taking Wal-Mart to $100 billion in sales. Before the Supercenter,

Walton experimented with a massive “Hypermart”, encompassing more than

230,000 square feet in size. The idea failed. Customers complained that the

produce was not fresh or well-presented and that it was difficult to find things

in a store so big that inventory clerks had to wear roller skates. One of

Walton’s philosophies was that traveling on the road to success required failing

at times. As a result of the unsuccessful experiment, Walton launched a revised

concept: the Supercenter, a combination discount and grocery store that was

smaller than the Hypermart. The Supercenter was intended to give Wal-Mart

improved drawing power in its existing markets by providing a one-stop shopping

destination. Supercenters would have the full array of general merchandise found

in traditional Wal-Mart stores, as well as a full-scale supermarket,

delicatessen, fresh bakery, and other specialty shops like hair salons, portrait

studios, dry cleaners, and optical wear departments. Supercenters would measure

125,000 to 150,000 square feet, and target locations where sales per store of

$30 to $50 million annually were feasible. Walton’s prediction was right on

target. The Supercenter division more than doubled in size during 1993, then

doubled again in 1994. Supercenters, once thought of as risky because of slim

profit margins on the food side, will most likely make Wal-Mart the nation’s

largest grocery retailer within the next five to seven years (Longo, 1994).

Expanding overseas, Wal-Mart moved into the international market in 1991 through

a joint-venture partnership with CIFRA S.A. de C.V., Mexico’s leading retailer.

Since then the company has entered Canada, Hong Kong, mainland China, Puerto

Rico, Argentina, and Brazil. The Wal-Mart International Division was officially

formed in 1994 to manage the company’s international growth. By the year 2000,

analysts expect Wal-Mart to be a huge international retailer, with numerous

locations in South America, Europe, and Asia. Conclusion — The ever-changing

market presents continuing challenges to retailers. First and foremost,

retailers must recognize the strong implications of a “buyers’ market”

(Lewison, 1994). Customers are being offered a wide choice of shopping

experiences, but no one operation can capture them all. Therefore, it is

incumbent upon management to define their target market and direct their

energies toward solving that specific market’s problems. Technology,

demographics, consumer attitudes, and the advent of a global economy are all

conspiring to rewrite the rules for success. Success in the next decade will

depend upon the level of understanding retailers have about the new values,

expectations, and needs of the customer. If Wal-Mart continues its

customer-driven culture, it should remain a retail industry leader well into the

next century.

Daugherty, R. (1993). New approach to retail signals strong future for point

of purchase displays. Paperboard Packaging, pp. 24-27. Lewison, M. D. (1991).

Retailing. New York: Macmillan. Longo, D. (1994). New generation of exec’s leads

Wal-Mart into the next century. Discount Store News, pp. 45-47. PNA/Island Aerie

Internet Productions (1995/1996). Us against the Wal. Gig Harbor, Washington:

Peninsula Neighborhood Association. [Online] Available: http://www.harbornet.com/pna/.

Saporito, B. (1994, May). And the winner is still . . . Wal-Mart. Fortune, pp.

62-68. Slezak, M. (1993). Seeds of “environmental store” planted in

1989. Discount Stores Inc., pp. 25-27. Stalk, G., Evans, P., Shulman, L. (1992,

March-April). Competing on capabilities: the new rules of corporate strategy.

Harvard Business Review, pp. 55-70. Thompson, A. A., Jr. & Strickland, A.J.

III. (1995). Strategic management concepts and cases (8th ed.). Chicago: Irwin.

Trimble, V. H. (1990). Sam Walton: The inside story of America’s richest man.

New York: Dutton. Vance, S., & Scott, S. (1994). Wal-Mart: a history of Sam

Walton’s retail phenomenon. New York: Twayne. Verdisco, R. J. (1994, October).

Superstores and Smallness. Discount Merchandiser, p. 8. Wal-Mart Stores, Inc.

(1995). The story of Wal-Mart. Bentonville, Arkansas: Corporate Offices of Wal-

Mart Stores, Inc. Wal-Mart Annual Report, 1994 Wal-Mart Annual Report, 1995.

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May 16th, 2012

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Wal-Mart buys 35% in China retailer

AGENCIES Feb 28, 2007, 05.22am IST

SHANGHAI: Wal-Mart Stores, the world’s biggest retailer, agreed to buy 35% of Trust-Mart, a hypermarket operator in China, to expand in the world’s fastest-growing major economy and challenge Carrefour. The investment may lead to Wal-Mart taking ownership control of the operator of 101 hypermarkets in China, the Bentonville, Arkansas-based company said in a statement on Tuesday. Wal-Mart didn’t release financial details.

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Buying Trust-Mart would more than double Wal-Mart’s stores in China and allow it to win customers from Carrefour, operator of more than 1,000 supermarkets in the world’s most populous country. On October 17, a person familiar with the negotiations said Wal-Mart planned to acquire all of the Chinese retailer in a deal that valued it at about $1 billion.

“Wal-Mart’s expansion in China is too slow, compared with that of Carrefour,” said Hu Hongke, a Shanghai-based analyst at China Merchants Securities. “Expanding through acquisitions would be a growth short-cut in China, where good retail locations are limited.

Trust-Mart, a closely held chain of grocery and appliance stores with more than 31,000 employees, will continue to operate under its own brand, according to the statement.

Wal-Mart is buying the stake in Trust-Mart through purchasing shares in owner Bounteous, registered in the British Virgin Islands. Founded in 1997, Trust-Mart has expanded to more than 20 provinces in China, the company said on its Web site. It sells about 20,000 items, including groceries, home appliances and clothing, in stores with total space in excess of 400,000 square meters. Wal-Mart, which entered China in 1996, operates 73 stores in 36 cities in China.

“Through this investment in Trust-Mart we have the opportunity to expand our presence in China,” Wal-Mart vice chairman Michael Duke said in a statement. “This is an important step in bringing additional scale to our China retail business.” He Delai, assistant president of Trust Mart, declined to give financial or other details when contacted by telephone today. Credit Suisse Group said in a statement it advised Wal-Mart on the purchase.

Wal-Mart’s overseas ambitions were thwarted last year by its withdrawal from Germany and South Korea, and after Japan’s Aeon won exclusive rights to acquire the supermarket company Daiei last October. China’s retail sales grew 13.7% last year to $770 billion last year, equivalent to one quarter of the US market.

The economy expanded 10.7% in 2006, the fastest pace since 1995, helping increase incomes by 12.1% among urban people and 10.2% in rural areas.

Carrefour, the world’s No 2 retailer, said October 30 it plans to open 20 hypermarkets a year in China in several years. The French company has 90 superstores and more than 1,000 supermarkets in the world’s most populous country, its website says. China deregulated its retail market in December 2004 to meet World Trade Organisation pledges, allowing overseas retailers to operate in the country without local partners

To meet fiercer foreign competition, Chinese companies have stepped up consolidation, with Shanghai Bailian Group combining four Shanghai companies to become the country’s biggest retailer with 6,000 stores.

Wal-Mart last October appointed Ed Chan as head of its retail business in China, replacing Joe Hatfield this month. Chan joined the company from Hong Kong-based retailer Dairy Farm Group, where he was regional director of North Asia.

The US retailer said last year that two-thirds of its stores in China have set up trade-union branches. The company, with 33,000 employees there, is co-operating with the All-China Federation of Trade Unions. In August, Wal-Mart introduced a credit card with Bank of Communications in China.

China’s consumer industry has potential for more expansion as per-capita spending is only $1.60 per day, compared with $27 for the average American consumer, Goldman Sachs Group Inc. said in a February 12 report. The government is encouraging domestic spending to reduce the economy’s reliance on exports and fixed- asset investment.

China’s retail sales surged 15% from a year earlier to 220 billion yuan ($28.2 billion) during the nation’s week-long Lunar New Year holiday, spurred by rising incomes, the ministry of commerce said in a statement on Monday. Parkson Retail Group, a retail chain in China owned by Malaysia’s Lion Group, on Tuesday posted profit growth of 73% in the fourth quarter.

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May 15th, 2012

We’ve heard all the horror stories about the retail giant. They’re just not true.

STEVE MAICH | Jul 25, 2005

There’s a place on the western edge of Cleveland that encapsulates the story of the city — its proud industrial past, its slow depressing decline, its hopes for a brighter future. But the battle now being waged over that patch of land tells an even bigger tale.

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It’s called the steelyard flats, a 130-acre plot of barren wasteland at the intersection of Interstates 90 and 71, in what was once the heart of Cleveland’s thriving steel industry. The site has sat idle since 2000, when LTV Steel went bankrupt. The finishing mill was torn down, and the shells of a few remaining buildings have been crumbling here ever since. The place is now littered with discarded scrap metal, concrete and junk: a dozen old tires here, a shattered TV there.

Continued Below

Soon, however, this site will also be a symbol of renewal. In May, work began on what will be the first big-box shopping centre in this city of 500,000 people. It’s called Steelyard Commons, and will include a Target store, a Home Depot, a Staples, plus restaurants and smaller businesses. It’s expected to bring close to 2,000 jobs to the city identified as the most impoverished urban area in the U.S. in the 2004 census. Unemployment here runs at 11 per cent — roughly double the national average.

But there’s a problem. Wal-Mart Stores, the world’s biggest retailer, will be the anchor tenant of Steelyard Commons, and that has transformed this place into another front in North America’s most bitter retail cold war. Wal-Mart’s critics say the company destroys local economies, putting small competitors out of business; that it abuses workers with low wages and paltry benefits; and that it drives urban sprawl and all the environmental damage that goes with it. And so, a coalition of labour leaders, activists and city councillors have banded together, vowing to keep Wal-Mart out even if it means killing the whole project.

It’s a divisive political standoff that’s been mirrored in communities throughout North America over the past few years. To the project’s advocates in City Hall, this is just the kind of development Cleveland so desperately needs. Aside from precious jobs, the mall will spin off US$3 million in property taxes annually, US$1.8 million of which will go to the city’s struggling school system, plus US$700,000 in local payroll tax. It will also give city residents a place to shop near home, rather than travelling to the suburbs. Officials estimate local residents spend US$4 billion a year in retail shops, a third of which currently goes outside the city. If ever there was a Wal-Mart that deserves support, they say, this is it.

But that’s just the point: Wal-Mart isn’t engaged in a series of messy local zoning disputes. It’s at war with a well-financed, well-organized opposition, determined to fight it on every front. From Los Angeles to the Saguenay, from Hartford, Conn., to Vancouver, a broad array of activist groups and unions have launched protests, lawsuits and ad campaigns, all aimed at discrediting Wal-Mart, halting its growth, and unionizing its workforce.

Like most wars, it’s about money and power, and the first casualty is truth. Because even after all the scrutiny and analysis of the Wal-Mart phenomenon, most of what we’ve been told — about worker abuse, destroyed small-town economies, crushed suppliers and greedy management — is wrong.

To Carol Foote, it just didn’t make sense. It was near the end of the summer of 2000, and most of her neighbours in Miramichi, N.B., were planning to drive to Moncton, an hour and a half away, to buy school supplies for their kids at Wal-Mart. Foote knew that many in town already made regular trips there to buy household goods, clothes and electronics. And she knew every carload took more money from the local economy. But the prices, they said, were just too good to pass up.

So, Foote and her friend Paula Beaulieu decided to make it their mission to bring Wal-Mart to Miramichi. They organized a petition, and within six weeks they’d gathered 11,276 signatures in and around the town of about 19,000 residents. “The whole talk of the Miramichi was this petition,” Foote remembers. “Lots of people would say, ‘I’ll sign, but we’ll never get one,’ and I’d say, ‘C’mon, you’ve got to believe!’ “

It took almost five years of trying, but last January Wal-Mart finally opened an outlet in Miramichi. Aside from creating dozens of jobs, Foote says the store has brought new life to the town’s small commercial district. Pennington’s has opened a store, Staples is on the way, and there is talk of a Quizno’s sandwich shop. To city dwellers, the arrival of such mass-market brands is no big deal, but in a little town like Miramichi, they represent investment that would’ve seemed impossible a few years ago.

This is how the Wal-Mart revolution was built: on small towns like Miramichi. The numbers are truly staggering. Wal-Mart had sales of US$288.2 billion last year — meaning, if it were a country, it would be the world’s 33rd biggest economy, ahead of Sweden, Switzerland and Hong Kong. It has 1.7 million employees worldwide, slightly less than the population of Montreal. The company’s stock has risen 79 per cent in the past decade, giving it a market value just north of US$200 billion — more than the total combined value of Canada’s Big Five banks. And profit rose 13 per cent last year, to US$10.3 billion, making it the undisputed Goliath of retail.

In Canada, the growth is no less impressive. Wal-Mart first arrived here in 1994, buying 122 Woolco stores with about 15 per cent of the department store market. Over the next decade, it more than doubled its number of outlets and increased its market share to about 52 per cent. And while critics portray this as the work of a ravenous invading force, the truth is most communities reached out to Wal-Mart and embraced it.

Foote heard lots of grousing about Wal-Mart, but when she looks at what it has brought to her town, she has no regrets. “We weren’t trying to hurt our city, we just wanted it to grow,” she says. “The stores here charged so much, people had to go to Moncton. And when they did, they’d buy their fuel there, they’d eat there. All our money was leaving town. I thought, ‘This has got to stop.’ ” Rather than Wal-Mart crushing the few local businesses like the critics warned, she suspected the store would invigorate them, because that’s just what has happened in hundreds of places across the country.

In 2002, Ryerson University completed the first major study on the company’s impact on nearby small retailers, and found the opening of a new outlet is generally an economic boon for the whole area — attracting other retailers and driving up sales at nearby stores. In metropolitan areas, a new Wal-Mart was generally followed by an increase of $56.8 million in local sales, and the opening of 12.9 new stores. In rural areas, the commercial boost was $74.1 million and 16.7 new stores on average. Meanwhile, economic growth in areas with Wal-Mart stores far outpaced growth in places without them. The final line of the study said it all: “It is difficult to make the case that a Wal-Mart store actually puts other retailers out of business.”

That study confirmed what Wal-Mart had long claimed: that its stores are economic generators, not predators. And, it seems, even small-business owners are coming around to that view. A 2004 Canadian Imperial Bank of Commerce survey of more than 1,800 small-business owners across Canada found that just 16 per cent of respondents said they had been hurt by competition from big-box retailers like Wal-Mart and Home Depot. Five per cent said the big boxes had actually helped them, while the vast majority claimed little or no impact.

Andy Grossman, however, doesn’t buy any of that. Grossman is executive director of Wal-Mart Watch, a lobbying and publicity organization that coordinates the efforts of several anti-Wal-Mart groups. In April, it launched a two-week media blitz across the U.S., with full-page ads in major newspapers like the New York Times alleging a by-now familiar litany of misdeeds. “Wal-Mart needs to become a better corporate citizen, a better neighbour and a better employer,” Grossman says. And at the very top of his list of grievances is Wal-Mart’s purported ill-treatment of its workers. But there again, research suggests the criticism is overblown.

To be sure, nobody is claiming that being a Wal-Mart associate is a job many would aspire to. It’s a low-wage gig, with only moderate opportunity for advancement, and it’s not easy. The average full-time Wal-Mart worker in the U.S. makes US$9.68 an hour, which works out to roughly US$17,500 a year before taxes. If that worker is a sole earner trying to support a spouse and child, it puts him only about US$1,500 above the federal poverty line. Labour advocates say that in light of Wal-Mart’s US$10-billion profit, the company should pay higher wages. But a closer look at the numbers paints a different picture. Wal-Mart’s 2004 profit works out to a little more than US$6,000 per employee, compared to US$54,000 at General Electric, and US$143,000 per employee at Microsoft. Despite mammoth earnings, Wal-Mart doesn’t have as much room for generosity as it first appears.

Health care is another oft-cited complaint. Only about 48 per cent of Wal-Mart’s workers buy into the company’s health care plan, and critics say that’s because it’s too expensive: US$40 a month for an individual and US$155 for a family, plus a US$1,000 deductible. A recent study by researchers at the University of California at Berkeley concluded Wal-Mart’s wages and benefits are so low that its workers in California rely on about US$86 million in public assistance every year. On the other hand, Wal-Mart points out that only about 36 per cent of all retail workers get employee-sponsored health care in the U.S. — meaning its plan is better than most in its industry. And while unions say the company should provide big benefits like those offered by General Motors, financial analysts point out that skyrocketing health care costs now threaten the stability of GM’s business and have contributed to massive layoffs — hardly a model to emulate.

Even in Canada, where the health care issue is largely moot, it would still be difficult to raise a family on an associate’s wage. But very few are in that position. While the majority of Wal-Mart employees work full time, the company also employs many students, seniors and people collecting a second income. And Wal-Mart says only seven per cent of its staff are supporting a family.

Perhaps most telling is the fact that most Wal-Mart workers seem content. Human resources consulting firm Hewitt Associates issues an annual ranking of Canadian employers based largely on worker satisfaction surveys, and for three of the past four years Wal-Mart has been named best retailer, due mainly to incentives like profit sharing and a discounted stock purchase program. And despite union claims of widespread mistreatment, Andrew Pelletier, director of corporate affairs with Wal-Mart Canada, says new stores usually receive between six and 10 applications for every available job.

The various campaigns to paint Wal-Mart as an avaricious and abusive employer simply don’t hold up to scrutiny, says Elisa Sumanski, a legal analyst with the National Right to Work Legal Defense Foundation, a Virginia-based group that represents workers in disputes with their unions, and which has received grants from Wal-Mart’s founding Walton family. “We think it’s really pretty simple — if Wal-Mart is such a terrible place to work, then why are so many thousands of people so eager to work there?” she says.

But when it comes to Wal-Mart, perception and myth are powerful. In spite of all the evidence to the contrary, the company is still struggling with the consequences of its increasingly tainted image. For much of the past year debate raged in Vancouver’s city council over plans to build the city’s first Wal-Mart. Opponents complained the store would be an energy-hogging blight on the environment. Wal-Mart responded by designing perhaps the most environmentally progressive big-box store ever — lit with skylights, cooled with shade trees, with rainwater running the toilets, and a geothermal heating system run by wind-turbine power. But nothing could convince the critics. “Big-box stores create traffic congestion, cause air pollution and harm small businesses,” said councillor Anne Roberts, who led the anti-Wal-Mart campaign. Last month, city council rejected the plan by eight to three.

Shortly after, Wal-Mart received its second B.C. rejection in a week, this time when the town council of the Vancouver Island city of Campbell River voted 7-0 against a rezoning application that would have paved the way for the retailer. More than 300 people spoke against Wal-Mart during three days of hearings, most saying the proposed riverside site should be used for a park. Pushing the development was the Campbell River Indian Band, which was hoping to buy the parcel of land from a logging company and had applied to have its status changed. After being turned down, some band members said racism had played a part in the rejection.

As far as Bruce Bartlett is concerned, people who hate Wal-Mart don’t understand it.

Bartlett, a former deputy assistant secretary for economic policy at the U.S. Treasury Department, now serves as senior fellow at the National Center for Policy Analysis, a conservative Washington think tank. Over the past two decades, he has watched the company’s astonishing rise with admiration, and the recent public backlash with dismay.

His concern is not primarily for the company or its executives. Nor is he worried for the descendants of founder Sam Walton — by far the wealthiest clan in North America. Rather, Bartlett worries about the impact the war on Wal-Mart will have on the poor families who have come to rely on the stores. “The problem with this debate is that there’s no one out there representing the people who’ve benefited from Wal-Mart, which is primarily the poor people,” Bartlett says. “If you’re stuck with a low income and you can reduce the amount you pay for basic items, then your real income goes up.”

Those savings are substantial. In 2002, a study by the New England Consulting Group estimated that Wal-Mart’s “everyday low prices” on a wide range of groceries and household goods saves U.S. consumers US$100 billion annually, or US$600 a year for the average American family. That’s because not only does Wal-Mart sell for less, it forces competitors to cut prices in order to compete. UBS Warburg analysts measured grocery prices in various markets across the country and found that basic food items are 10 to 15 per cent cheaper in areas where Wal-Mart competes. So it’s far from being an insidious influence: those savings are a godsend for consumers, especially for working-poor families. As W. Michael Cox, chief economist for the Federal Reserve Bank of Dallas, said in 2003: “Wal-Mart is the greatest thing that ever happened to low-income Americans.”

As Wal-Mart has grown, those savings have sent ripple effects through every corner of the North American economy, even benefiting consumers who’ve never set foot in one of its stores. In 2002, the consulting firm McKinsey & Co. delved into the so-called “Wal-Mart effect” and found it was the biggest single contributor to the growth of economic productivity across the U.S. between 1995 and 1999. According to McKinsey, Wal-Mart’s pioneering approach to computerized inventory management, and analysis of store traffic patterns to better deploy its staff in peak hours, improved the efficiency of thousands of companies. The U.S. National Bureau of Economic Research has found that Wal-Mart’s prices have a significant impact on holding down the rate of inflation. That, in turn, helps keep interest rates low, and helps fuel economic growth.

All this isn’t some happy accident, but a fundamental part of what makes the company tick. Ever since Sam Walton opened his first store in Arkansas in 1962, Wal-Mart has dedicated itself to providing the lowest possible price for people living on a budget. “The underpinning of everyday low prices is a commitment to lowering the cost of living,” says Wal-Mart Canada’s Pelletier. “That was Sam Walton’s vision, and it permeates the company today. The only way we can do that is by driving waste out.”

Even now, 13 years after Walton died, his obsession with cost is still evident in every aspect of the business. Head offices are spartan and basic. Company officials fly economy, and stay at bargain hotels. And every person, in every division, is constantly encouraged to look for less expensive ways of doing everything. Critics say this obsession with price has put relentless pressure on suppliers, even driving some out of business as they failed to meet Wal-Mart’s demands for efficiency. But the company makes no apologies. It offers suppliers full access to sales data on every item sold, right to the minute and the penny. And every year thousands of small suppliers line up for the chance to get their products on Wal-Mart’s shelves.

That helps explain why, for the past several years, Wal-Mart has ranked among the world’s most admired companies, according to Fortune magazine’s annual rankings. This year’s survey of thousands of executives and industry analysts put the company first among retailers for innovation, employee talent, quality of management, financial soundness, and second for social responsibility.

So, last year, when Bruce Bartlett saw opponents in his own city of Washington defeat plans for a Wal-Mart, he shook his head. “It’s just stupid and frankly insane if you really care about the well-being of your constituents,” he says. “They’re shooting themselves in the foot, and they’re just showing that they really don’t care about people at all. They’d rather cater to a few squeaky wheels.”

But the wheels turning against Wal-Mart are more than squeaky. They’re coordinated, tireless, and deeply committed to their cause. For them, defeating Wal-Mart is a matter of life or death.

Tom Robertson is a guy who wears his passions on his sleeve.

Sitting in his wood-panelled office near downtown Cleveland, the head of the northern Ohio chapter of the United Food and Commercial Workers union lays out his objections to Cleveland’s proposed Wal-Mart, but he finds it hard to contain his contempt. “My mission isn’t to organize Wal-Mart when they come to town. My mission is to keep them the hell out of town so they won’t drive wages down,” he explains, gaining steam as he speaks. “They just fuckin’ destroy jobs, period, because they replace high-paying jobs with low-paying jobs.”

Robertson is paid to defend the unionized workers at a chain of small local grocery stores that will be threatened by Wal-Mart’s arrival. But, he acknowledges, this fight is about more than just this city and his roughly 1,600 local members. It’s about saving the union movement itself, and that’s why so many labour organizations and their political allies have joined the fight. “If Wal-Mart continues to grow and expand based on their terms and conditions, with nobody overseeing the way they treat people and compete, yes — it could destroy the labour movement,” Robertson says.

The plight of Robertson’s own union illustrates why. Over the past three years, his local has lost 3,000 members — a decline of more than 10 per cent — and he says Wal-Mart is the number 1 reason for it. Unionized stores have had to cut staff and wages to compete, and other companies have increased efforts to prevent unionization.

The UFCW’s membership crisis is but one example of a larger trend unfolding throughout the continent, as traditionally union-heavy industrial companies downsize, and as mostly non-union sectors like services, technology and retail become a much larger portion of the economy. The same phenomenon is happening in Canada, where private sector unionization has fallen from 26 per cent in the early 1970s to just 18 per cent in 2003. In short, organized labour is dying a slow death and its financial strength and political influence are waning as a result.

The fight over Wal-Mart is really a fight to halt organized labour’s gradual death spiral. If the unions are to turn the tide, they need to be in retail, and if they are going to get into retail, they have to get into Wal-Mart — union leaders themselves acknowledge as much. As Stuart Acuff, organizing director of the AFL-CIO, America’s umbrella organization for trade unions, told Fortune last year, “If we want to survive, labour has no choice but to organize Wal-Mart.”

They’ve spared no expense to do it. For the past five years, the UFCW has sent organizers around Canada and the U.S., trying to get Wal-Mart workers to sign union cards and force certification votes. It waged a four-year effort, at a cost of about US$3 million a year, to certify a single Las Vegas store. But so far, they’ve had no luck.

Wal-Mart has been equally aggressive in keeping the unions out. Managers are encouraged to report union activity, and the UFCW points to dozens of cases in which it accuses the company of firing workers for working on behalf of the union. When the UFCW was able to get a unit certified in Jonquire, Que., the company responded by shutting down the store. Pelletier insists, however, that this is not a fight over worker rights. “At the end of the day, this campaign is all about money for the union,” he says. “The union is looking for dues to finance their operations. If they could collect union dues from our thousands of associates across the country, this would amount to millions of dollars a year into the union and out of the pockets of our workers.”

Lately, though, the unions and their allies have changed their approach. Efforts to unionize have been stymied, so they’ve decided to focus on discrediting the company and slowing its growth. Hence Wal-Mart Watch’s publicity campaign, and the union-supported zoning fights cropping up everywhere. “It’s an effort to destroy Wal-Mart because the company’s continued growth and success is really an argument against the need for unionization,” Sumanski says.

But Andy Grossman says the union fight is only part of the picture. As he sees it, Wal-Mart is driving a vicious cycle: it starts with lower prices, and leads over time to a single player essentially rewriting the economics of the industry for everybody. Pretty soon, there are fewer employers, lower wages, less medical coverage, more poverty — all widening the gap between the rich owners of Wal-Mart stock and the poor who shop and work there. “This is a societal fight,” Grossman explains. “Wal-Mart is a symbol, because they’re so good at what they do, others have to emulate them. This company’s reach is so broad, we need to change the relationship between it and the communities it seeks to do business in, otherwise it’s going to continue to destroy our societies.”

For Grossman, those are the stakes: social destruction. Never mind that most of the research refutes this view. Never mind that millions more consumers vote with their feet and their wallets every year, opting for the financial freedom Wal-Mart affords. The point is that Grossman, and thousands of others, believe with near-religious zeal that Wal-Mart is dangerous. And the war drags on.

Back in Cleveland, Chris Ronayne is still a little baffled by the whole controversy. As chief of staff to Democratic Mayor Jane Campbell and former head of the city planning commission, he knew enough to expect opposition to any plan to bring Wal-Mart to the city. And he knew his boss would be locking horns with the very union bosses that helped put her in office in 2001.

Still, he didn’t expect the debate to be so nasty. Opponents tried, and failed, to pass a change to zoning laws to keep the company out, and protesters recently tried to crash Campbell’s re-election campaign kickoff. Former supporters have denounced the mayor for selling out to the Great Satan of Corporate America. “We see this as a first step toward a bigger turnaround, toward making Cleveland into a city that can attract residents,” Ronayne says. “We know these are starter jobs, but this city has seen a serious erosion of our employment base and a starter job is better than no job, from our perspective. We need jobs, period.”

And while there is certainly a vocal faction, led by the UFCW, vowing to keep fighting Wal-Mart every step of the way, it remains in the minority. With the support of about 78 per cent of residents in a recent poll and with a legal building permit in hand, it appears Wal-Mart has won this battle. The war, though, is less certain, and the company knows it. Already it’s getting much more difficult and expensive for Wal-Mart to build stores. It is sued thousands of times every year by local activists, disgruntled ex-employees, and unions. Thanks to a steady stream of negative press, thousands of consumers would sooner go barefoot than buy shoes there.

The company, as always, puts a positive spin on things. Pelletier says all the scrutiny will only make Wal-Mart stronger and more responsive. He says it will keep listening to the complaints, and acting to address what it can. But the one thing that will not change is Sam Walton’s admonition to put the customer first, always. Carol Foote likes it that way. “I think sometimes it’s just easier for people to blame the other guy,” she says. “If your customers aren’t coming back, maybe you should look at why they’re not coming back rather than trying to point the finger.”

But the war on Wal-Mart raises more complicated questions. If the company helps poor families, creates decent jobs and fuels economic growth, what does it say that so many are so determined to stop it? More important — if Wal-Mart loses this fight, who wins?

Read Steve Maich’s weblog, All Business

Story from Macleans.ca:

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May 15th, 2012

From dining out of a toilet to dining inside a replica airplane. A look at the oddly-themed restaurants of the world. Slideshow

Wal-Mart to add small U.S. stores

A Wal-Mart sign is seen in Miami, Florida May 18, 2010.

Credit: Reuters/Carlos Barria

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By Brad Dorfman

CHICAGO | Wed Oct 13, 2010 6:09pm EDT

CHICAGO (Reuters) -Wal-Mart Stores Inc will increase store building in the United States next year, including adding more smaller stores to try to reach more customers, even as it expects sales at existing stores to improve in coming months.

Most of the stores the company plans to build in the United States will be larger than 60,000 square feet. But Wal-Mart plans for 30 to 40 of its 185-205 new U.S. discount stores to be smaller than that, Bill Simon said at the company’s annual meeting with analysts and investors in Rogers, Arkansas.

Both Wal-Mart and rival discounter Target Corp are trying out smaller store formats to get into densely populated urban areas and increase sales. Some of the new Wal-Mart stores will be less than 30,000-square feet and will be targeted at those urban areas and small towns, the company said.

Analysts have been concerned about Wal-Mart spending money on new stores while sales at existing stores have stagnated.

“The fact that a significant number of planned new stores will be medium- or small-sized stores and not the large super centers helps to ease some (but not all) of our concern about accelerating store openings at a time when comp-store sales are soft,” Edward Jones analyst Matt Arnold said.

Wal-Mart would not say how many of the smallest stores would be opened in 2012 and the company is also still determining what the stores will look like, Wal-Mart executives said.

The world’s biggest retailer expects to keep capital spending in the United States flat in the fiscal year that begins February 1, 2011, at $7.5 billion to $8.0 billion as it shifts spending from remodeling existing units to building new stores, Simon said.

Total capital spending for the company is expected to rise 3.7 percent in fiscal 2012 from an estimated $13.5 billion to $14.5 billion this year as the company increases spending in faster-growing international markets.

The company also expects total sales to rise 4 percent to 6 percent in 2012.

The increased store building comes as Wal-Mart is also trying to lift sales at its existing U.S. stores, which have declined in each of the past five quarters.

CORE CUSTOMERS LEAVE

Simon expects U.S. same-store sales will increase in the fourth quarter.

He said sales growth was the key focus for the U.S. business, echoing a concern analysts have raised as Wal-Mart has lost some market share this year, including to lower-priced dollar stores.

“The biggest take-away I would have for you is that we can grow,” he said.

Aside from increased competition from dollar stores, Wal-Mart also shot itself in the foot, first through a poorly executed attempt to cut down on the products in its stores and then a failed attempt to increase traffic with thousands of temporary price “rollbacks.”

The company has actually seen more business from customers with household incomes of more than $70,000. But the company has been losing business from its core customers, which Simon defined as having household income of $50,000 to $70,000.

The company has shifted its focus back to offering “everyday low prices,” instead of the “rollback” strategy. It has also been returning items to the shelves.

Internationally, the company sees opportunities to expand in several markets around the world, said Doug McMillon, CEO of Wal-Mart’s international unit.

In September, Wal-Mart said it was in talks to buy South Africa’s Massmart, a $4 billion deal that would give it a big presence in Africa. Wal-Mart has also been looking for a way to get into Russia.

McMillon also said the company can fill in its geographic portfolio in Latin America and also wants to enter new markets in Asia.

“There are other large, high-growth markets that over time we hope to enter,” McMillon said about Asia.

He also said the company needs to add scale in Japan and Argentina.

Wal-Mart expects international capital spending to rise to a range of $4 billion to $4.5 billion in fiscal 2012, from $3.5 billion to $4 billion in the current fiscal year.

That will include adding 21 million square feet of space in 2011 and 23 million to 24 million square feet the following year, a company executive said.

Wal-Mart shares closed down 10 cents at $53.82 on the New York Stock Exchange.

(Reporting by Brad Dorfman; editing by Dave Zimmerman, Matthew Lewis and Andre Grenon )

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May 14th, 2012

Wal-Mart’s Shocking Impact on the Lives of Hundreds of Millions of People

David Moberg, In These Times

Wal-Mart casts a global shadow across the lives of hundreds of millions of people, whether or not they ever enter a Supercenter. With $405 billion in sales in the last fiscal year, Wal-Mart is so big, and so obsessively focused on cost-cutting, that its actions shape our landscape, work, income distribution, consumption patterns, transport and communication, politics and culture, and the organization of industries from retail to manufacturing, from California to China.

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Yet other paths are possible, and the company would not be so influential had the world not changed to enable its metastasized growth. Had unions been stronger, especially in the South, and more devoted to organizing the growing service sector, Wal-Mart might not have become such an obstacle to labor renewal. If antitrust enforcement had not been narrowed, Wal-Mart could never have grown as big as it did. There would be no such mega-stores if state governments had not repealed Depression-era fair-trade laws. And Wal-Marts push of American consumer — product manufacturing to China depended on a previously established political and technological foundation of pro-corporate globalization.

But it would be a mistake to say that Wal-Mart is merely following the new logic of retail competition, for Wal-Mart reinforces all dimensions of this emerging business climate. As Jennifer Stapleton, assistant director of the United Food and Commercial Workers project Making Change at Walmart, puts it, They set the rules.

Consider Ana Sanchez, a 45-year-old immigrant to Southern California from Mexico. Wal-Mart does not employ her but is in some sense her boss. Sanchez worked two years at a temp agency that staffed a large California warehouse. She was trying to put her three children through college in Oaxaca, Mexico, on pay that started at $6.75 an hour, then rose to $8, with no benefits. She retrieved cartons, put labels on products, then shrink-wrapped plastic around pallets to ship. Mainly, she shipped childrens clothing made in China to Wal-Mart.

The work was hard, fast, and stressful, with constant pressure, she says. If I killed myself to make 2,000 labels one day, the next day, theyd give me 200 more. They kept raising the quota. It was very dangerous. And with every order from Wal-Mart, the supervisors would say theres an urgency for us to do it. Managers would complain that the company was putting a lot of pressure on them.

Rushing to wrap a pallet in April 2009, Sanchez fell and injured herself. Despite an unblemished work record, the agency fired her, supposedly for a paperwork error, but more likely — she believes — because she was hurt. Unable to find another job, she lives in a tiny room in a cousins house, making tamales to sell and looking for work. I dont want to go back to Mexico destroyed and a failure, she says.

Zahir Chowdury (he asked not to use his real name) manages factories in Dhaka, Bangladesh, for an Asian multinational apparel manufacturer whose clients prominently include Wal-Mart. He admires Wal-Mart for setting very structured, systematic guidelines for everything from energy efficiency to treatment of workers.

But now he worries that his prices are rising for inputs, such as cotton. His selling price has changed little over five years, but he hopes Wal-Mart will agree to pay more for finished garments, which is usually about 5 percent less than anyone else pays but for longer production runs.

Its hard, however, to meet Wal-Marts standards at Wal-Marts price. Thats why the U.S.based Worker Rights Consortium frequently uncovers major workers rights violations in the Bangladeshi (or Indian or Cambodian) factories of suppliers to Wal-Mart and other big retailers, despite their codes of conduct and monitors, says WRC Executive Director Scott Nova.

Expectations on quality are up, also on managing logistics, Chowdury says. The lead time is squeezed. Getting fabric is difficult. Everything is getting squeezed, including his workers. Though the new minimum wage is about $42 a month, he claims his company pays $90 a month because at anything much lower, workers cant survive. He hopes someone will build power lines and roads into the countryside, so he can move the factory to an area where every worker can survive at $70 to $80 a month, and he could pay less. Would Wal-Mart one day just move some place cheaper? Where will they move? he asks.

In July 2007, Wal-Mart expanded its discount store into a new Supercenter, with full grocery service, in Galesburg, Illinois, a middling industrial and market town hard-hit by globalization. Todd Frakes, a life-long grocer, managed one of two Econofoods grocery stores in town when the Supercenter opened. The first week, our sales were down about 40 percent, he recalls. Then in about six to eight weeks it evened out, to about 18 percent off. They tried everything: deep discount sales (Wal-Mart beat them), special events (Nascar Day), better ads, playing up their hometown knowledge of their customers. They cut back hours to avoid layoffs. Just over a year later, the chains corporate managers closed the two stores.

The thing with Wal-Mart is theyre just huge, Frakes says. Its hard to compete when they get stuff so cheap. Its been really tough on Galesburg. Weve lost a lot of mom-and-pop businesses. One independent grocery, Hi-Lo, survives, and Frakes works there now.

Theres been two of three factors that helped us, Hi-Lo assistant manager Jeff Jefferson says. The number of years weve been here in town and customer loyalty. We have fair prices and quality meat and produce. Were never going to be the biggest, newest store, but we can be the friendliest, and we offer service. We still cut our own meat, and we still carry your groceries to the car.

Such stories illustrate a few dimensions of The Wal-Mart Effect, as journalist Charles Fishman titled his book on the far-flung influence of Wal-Mart. Boosters of the company contend that every new store has just two relevant effects: First, it energizes the local economy; and, second, lower prices for local shoppers compensate for other negative effects.

The preponderance of research tells a different story. The net effect of Wal-Mart entering a local market is to reduce local employment, reduce area wage rates and total payroll (especially in retail), eliminate other businesses (especially small shops and small chain stores that directly compete with Wal-Mart), and raise poverty rates. University of California, Irvine, economist David Neumark and colleagues reported in a 2007 study that on average, Wal-Mart store openings reduce retail employment by about 2.7 percent, implying that each Wal-Mart employee replaces about 1.4 employees in the rest of the retail sector.

Wal-Mart knocks out many local businesses, economist Kenneth Stone discovered when he surveyed Iowa during the companys first decade there starting in the 1980s. Between 1983 and 1993, Wal-Mart opened around 45 stores in Iowa. During that period, the state lost 555 grocery stores, 88 department stores, 298 hardware stores, 444 apparel shops, 293 building supply stores, and 511 other retail outlets — as much as 43 percent of some categories of retail stores. More recently, a team from Loyola University found that 82 out of 306 businesses within a four-mile radius of Chicagos first Wal-Mart failed since the giant retailer opened in 2006, eliminating an estimated 300 jobs, roughly equaling the number of workers in the new Wal-Mart.

When Wal-Mart displaces local small businesses, it also typically reduces income and employment for local business — service providers, such as lawyers, bankers, accountants, printers, and newspaper publishers, since those services are centralized in Wal-Mart headquarters. Weakening small-business and professional networks further diminishes the communitys social capital, according to economists Stephan Goetz and Anil Rupasingha.

Wal-Marts dramatic transformation of warehousing and logistics has also increased efficiency significantly in both its own extensive operations and in third-party logistics companies with which it contracts. Wal-Mart often adopts early innovations like bar codes, then accelerates their use because its size influences industry standards. Productivity increases in the context of economic growth are generally good if the fruits of enhanced productivity are shared with workers — largely not true with Wal-Mart. Workers gain little because Wal-Mart zealously fights unionization of its own employees and its global system (including unionized dock workers), and its squeeze on suppliers and competitors increases incentives to resist unions.

Wal-Mart has also quite likely reduced U.S. employment throughout its extensive supply chain, despite suppliers expectation that they would hire more people as Wal-Mart sold more of their product. But there are stories, well documented by Fishman and others, of Wal-Marts virtual dismantling of iconic supplier firms such as Huffy (bicycles), Master Lock (padlocks), Lakewood Engineering & Manufacturing (fans), and L.R. Nelson (lawn sprinklers).

In each case, Wal-Mart kept demanding a lower price, at times challenging suppliers to match the price of cheap imports. The companies improved productivity, cut corners on quality, and pressured their own employees and suppliers (who in turn tightened the screws on down the line). But eventually, Wal-Mart pushed these suppliers out of the country to China, Mexico, and any other place that could match the China price.

From 1997 to 2004, Fishman reports, retail jobs grew more than half as fast as the population, and more than 70 percent of those new jobs were at Wal-Mart. During that period, 3.1 million manufacturing jobs disappeared, so that by 2003, more Americans were working in retail than in manufacturing. Simultaneously, Wal-Mart tripled its imports from China, importing in 2004 about 10 percent of all Chinese exports to the U.S. It seems likely that most of those imports were still nominally from hollowed-out American businesses. So Wal-Mart sped up both American deindustrialization and consolidation of a low-wage, bargain — driven consumer culture where quality and price were both cheapened.

Its not even clear that the surviving, compliant suppliers have prospered. Two independent studies found that suppliers to Wal-Mart, especially smaller businesses, are likely to end up with lower profits than suppliers who service other big retailers. Beyond squeezing prices, Wal-Mart often takes a bite out of suppliers, delaying payments to them. But some suppliers, mainly large ones, may gain enough from Wal-Marts big orders to make increased profits despite the squeeze.

The Wal-Mart effect on wages is more clearly harmful to workers, whether they work for the company, its suppliers, or its competitors. A group of University of California, Berkeley, researchers led by Arindrajit Dube, found in 2007 strong evidence that Wal-Mart entry reduced average and total retail earnings, retail wages, and health benefits for retail workers over [the 1990s] — primarily in urban areas. The loss of 1.5 percent of earnings for all retailers in a county, plus lost health benefits, with the opening of each Wal-Mart came from substituting poorly paid workers for better paid workers and from Wal-Mart driving down wages of competitors.

On average, Dube reports, workers at large retailers make about 15 percent more than employees at Wal-Mart, which pays an average sales associate $8.81 an hour, according to market researcher IBISWorld.

The Berkeley researchers calculated that in 2000, the downward pressure on wages from Wal-Mart was costing retail workers nationally about $4.5 billion a year. Simply the threat that Wal-Mart Supercenters were coming to Southern California led unionized grocery chain managers in 2003 to unite in a lockout — imposed in response to a strike against one chain — against the United Food and Commercial Workers union. The conflict ended with concessions from workers, such as a two-tier wage schedule and provisions reducing insurance coverage. Three years later, only 54 percent of union grocery workers, down from 94 percent, had health insurance.

Long term, anybody that continues to gain market share is going to be dominant, says UFCW organizing director Patrick ONeill. Its like the U.S. and the Third World. Either we take them up to our standard, or theyll bring us down to theirs.

But what about all the money consumers save shopping at Wal-Mart? Experts estimate that Wal-Marts prices run from about 5 percent to 25 percent below most competitors. Commissioned by Wal-Mart, IHS Global Insight calculated that the companys lower prices saved U.S. consumers $365 billion in 2007 — about $1,200 per person or $3,100 per household. Such analysis led even some Democrats like Jason Furman, now economic adviser to President Barack Obama, to praise Wal-Mart as a boon to the poor. Although Furman advocates a higher minimum wage (as Wal-Mart does), he argues that even modestly higher Wal-Mart worker wages would eliminate the companys profits or push up prices, thus implicitly hurting them.

But an Economic Policy Institute team of economists authoritatively criticized Global Insights methodology and judged its projected savings from shopping at Wal-Mart implausible. For example, EPI critics say, the Global Insight report credited Wal-Mart with reducing prices it does not affect, like other services that make up 60 percent of the consumer price index. In any case, the EPI economists argued, if the savings are as big as claimed, Wal-Mart could raise wages and keep prices low. The Berkeley group also concluded that a higher minimum wage for big-box retailers would help retail workers and result in only a tiny increase in retail prices.

Government at all levels also loses when Wal-Mart moves in, lowers pay, eliminates jobs, and pushes families into poverty: As a result, government ends up paying for their Medicaid, S-CHIP (childrens health insurance), food stamps, and other aid. Indeed, in many states, Wal-Mart employees lead the list of Medicaid beneficiaries and their children lead the S-CHIP rolls, because they cannot afford the companys health plan. In 2004, the Democratic staff of the House Education and Workforce Committee calculated that a 200-employee Wal-Mart store could cost federal taxpayers $420,750 a year (more than $2,000 per employee).

But Wal-Marts spillover impact goes further. According to Good Jobs First, an economic-development research group, Wal-Mart has collected more than $1.2 billion in tax breaks and other subsidies from state and local governments (about $70 million annually). It uses gimmicks to avoid another $300 million a year in taxes (and created Wal-Mart.com as a supposedly independent corporation to avoid collecting state sales taxes). The company systematically challenges all property-tax bills.

Beyond its economic impact, Wal-Mart is notorious for censoring the books and recordings it stocks, excluding some presumably for their progressive political leanings and demanding bowdlerized versions of others. As historian Bethany Moreton recounts in To Serve God and Wal-Mart, the company has promoted an amalgam of evangelical Christianity and free — market ideology in colleges and elsewhere and draws much of its management from this cultural milieu. More recently, it has ventured into electoral politics with large political donations, mobilization against politicians supporting the Employee Free Choice Act (including heavy-handed pressure on its own employees), and the promotion of its own version of Wal-Mart Moms as a key swing constituency (an implicit buffer against attacks of its treatment of employees).

Wal-Marts greatest clout comes simply from its size, which in another era would have provoked anti-trust action — as happened with A&P from 1915 to 1979, even though A&P, like Wal-Mart, grew big organically rather than by acquiring other firms. Wal-Mart is a symptom of a true revolution in the regulation of the political economy, says Barry Lynn, a fellow of the New America Foundation. Bigness itself can be a problem, and competition as much as efficiency should be our goal, he argues, especially since Wal-Marts efficient bigness creates a dangerous deflationary downward spiral of wages and prices. Wal-Mart is not, despite its size and influence on prices, a monopoly, but Lynn says it may often act as a monopsony — a company with anticompetitive influence as a buyer — meaning that Wal-Mart is able to exert substantial control over supplier companies and their prices by accounting for a quarter or more of their sales.

Wal-Marts Slump Persists, read a February Wall Street Journal headline, as same-store sales dropped for the seventh quarter in a row. But hold the tears: Overall sales and profits were up. Yet Wal-Mart must grow to make its model work — breaking into urban markets, new countries, new demographics (more upscale), new formats (more conversions to Supercenters and small, neighborhood stores), new products (more electronics), and new image (going beyond green). But as industry analyst Bill Dempsey of the UFCW puts it, They dont have an image problem. They have a reality problem.

Even so, there are alternatives. After leaving a trail of bankruptcies and corporate consolidations in its wake, the undisputed shark of retail is being seriously nibbled by agile minnows — or maybe some halibuts. In groceries, Whole Foods and Trader Joes aim at higher price, quality, and service niches. Even though they are nonunion, they attempt to offer attractive work and competitive pay. Kroger — the most unionized of the three big merged grocery corporations — competes effectively with Wal-Mart in many markets by adapting to communities, creating a pleasant shopping experience, and holding prices fairly close to Wal-Marts levels.

Nobody literally goes head-to-head with Wal-Mart, but two companies with much better pay and benefits and less hostility to unions come close to such a face-off and are faring well. Costco, which originated on the West Coast and then went national, is a members-only warehouse club, like Wal-Marts struggling Sams Club. But according to IBISWorld, the average Sams Club cashier makes $9.48 an hour, and the average Costco cashier makes $15.50 an hour. A Costco worker also gets a substantial annual bonus, a 401(k) retirement plan, and health insurance, 90 percent of which is paid by the employer. The Sams Club cashier can buy insurance at work.

How does Costco do it? Low turnover of its trained, fairly satisfied, partly unionized, highly productive workers is one key element, says R.J. Hottovy, director of consumer research for Morningstar. The store draws a more affluent clientele than Wal-Mart, and theres a limited stock (about 4,000 items compared to about 60,000 at a Supercenter) of often high-quality, heavily discounted products, including a successful house brand. Costco practices creative merchandising of products for which it drives a hard bargain, then takes no more than a 14 percent markup, leading to higher turnover of goods and double the value of sales per store of its competitors, according to IBISWorld.

Operating 189 stores in Michigan and some nearby states, Meijer is a widely respected, generous corporate citizen in many communities. Entirely unionized in Michigan, Meijer originated the one-stop shopping supercenter roughly 50 years ago. Now facing a challenge from Wal-Mart and other retailers, Meijer is experimenting with different sizes of stores, both bigger and smaller, and has promoted itself as eco-friendly, using some wind power and offering local home grown meat and produce. Meijer does not pay as well as Costco, but it beats Wal-Mart on vacations, holidays, pensions, insurance, and a voice at work.

Ultimately, it is possible to compete with Wal-Mart, offer good deals to customers, deal fairly with suppliers, pay workers decently, and even respect their right to organize. Better public policies and stronger unions would help. Maybe Wal-Martization is not the end of history after all.

Voice of the Environment is a 501 (c-3) not-for-profit Montana-based corporation formed in 1991.

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May 14th, 2012

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May 13th, 2012

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Goldman Sachs plans to announce two measures giving its junior employees in the investment bank more vacation time, according to people familiar with the matter.

Associates at the bank, the second rung up from analysts (the most junior level), will be granted a month off before starting jobs as vice presidents. They will also get a week of “protected’ vacation when they don’t have to be as responsive to email and phone calls. Investment banking employees traditionally tend to be always “on call,” working just as hard while on vacation as when at work, a person familiar with the matter said.

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Analysts already receive these perks. In Wall Street’s hiring hierarchy, college graduates are often hired as analysts, then promoted in two or three years to associates if they make the grade. Typically, an associate will spend three years in the job before becoming a vice president.

It’s unclear when the changes will be announced, but they are expected to be rolled out over time. One source familiar with the situation said they’re being unveiled “to boost employee morale.”

Goldman, like other banks since the financial crisis, has had to cut jobs and pay and has had its culture criticized. Last week, the firm cut around 200 people in finance, technology, operations, services and other non-revenue generating roles, according to people familiar with the matter. The layoffs were part of Goldman’s yearly culling of the bottom performers at the firm.

Goldman Sachs declined to comment.

The bank put aside $12.2 billion for compensation and benefits for 2011, down 21% from the $15.4 billion a year earlier.

Greg Smith, a former Goldman Sachs employee who aired his grievances in an op-ed in The New York Times earlier this month, recently scored a $1.5 million book contract with Hachette’s Grand Central Publishing to tell his story. In his op-ed, Smith called Goldman’s culture “toxic and destructive,” an assertion Goldman disputed in an open letter to employees.

Write to Julie Steinberg at julie.steinberg@dowjones.com

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