Wal-Mart nation? Its size, power, and low prices have helped make it an American success story. So why are some people today so fearful of War-Mart?
He says he signed on to work at the Roswell Wal-Mart, where his mother is a department manager, to earn money for college; he graduated from high school in nearby Marietta, Ga., last spring and hopes to attend Georgia State University. He is also a Wal-Mart shopper, buying "a lot of games and electronic devices, and parts for my car," he says.
For Adeduro, working and shopping in Wal-Mart is practically second nature. "I've been in the store since I was 8," he says, "and it's kind of like family."
But as Wal-Mart has grown, some people don't see it as the family-friendly place that Adeduro does. Wal-Mart is no longer just a store, but a force to be reckoned with--and not just for all the mom-and-pop businesses along the Main Streets of America.
1.2 MILLION WORKERS
Last year, Wal-Mart rang up $256 billion in sales (more than any other company, including General Motors and ExxonMobil), and accounted for 2.3 percent of the nation's GNP in 2002. It now sells gas and groceries, along with $3,000 plasma TVs and $1,000 diamond jewelry. Its approximately 3,600 stores and warehouse clubs stretch from Maine to Alaska and to countries like Great Britain, Mexico, and China. Wal-Mart employs 1.2 million workers globally, and with about 1 million of those in the U.S., it is the nation's largest private employer.
Wal-Mart's reach extends to its suppliers, who must operate as efficiently as possible in order to sell their goods to Wal-Mart at the lowest possible prices. And its influence is certainly felt in competitors' aisles: Toy sellers, electronics dealers, and music vendors are just some of the retailers whose fortunes have been affected by Wal-Mart. In August, Toys "R" Us announced that it might leave the toy business now that discounters like Wal-Mart are selling more and more toys.
AT WHAT COST?
The company says its low prices help people afford what they might otherwise not be able to buy, and some economists believe that Wal-Mart has itself helped hold down the nation's inflation rate. But others have begun asking: Is there a cost to Wal-Mart's relentless focus on low prices?
Labor unions, for example, have attacked the company for discouraging workers from unionizing and demanding better pay, and a recent class-action lawsuit contends that women are not promoted to management positions as frequently as men. Other lawsuits contend that Wal-Mart subcontractors hired illegal immigrants to clean the stores, and that hourly workers were pressured to work overtime without pay. And in the past, Wal-Mart has been found to have sold goods made by child laborers in sweatshops in China and other places overseas.
"Wal-Mart is not just a chain, but a chain of exploitation that stretches from the sweatshops in China to the sales floors of Massachusetts," says Al Norman, founder of a group called Sprawl-Busters that fights "big-box" stores of all kinds.
In its early years, Wal-Mart concentrated on rural areas of the United States, catering to shoppers overlooked by other stores. Its specialty was selling basic supplies for a simple life stuff for the house or the car, all of it priced to go out the door quickly.
Wal-Mart's tremendous growth can be attributed to many factors. From the beginning, it focused on price and on figuring out what consumers really want to buy, continuously tracking prices and selection at competing stores and usually trying to meet or beat them.
Wal-Mart was also early to recognize the value of technology in helping it manage all that data. Today, handheld computers and advanced software help monitor the comings and goings of inventory in its warehouses. Sales data from every store go back to company headquarters in Bentonville, Ark. And each store's merchandise is carefully selected after researching an area's demographics: what shoppers earn, eat, play, and watch. Such close product control also helps keep costs down.
Samuel R. Walton, Wal-Mart's founder, started out as a clerk at J.C. Penney. He opened the first Wal-Mart--a a small, unassuming store--in Rogers, Ark., in 1962. Years later, even when he was worth billions, Walton, known as "Mr. Sam," wore plaid shirts to work and drove a battered pickup truck.
Although Walton died in 1993, his legacy remains. Visitors to Wal-Mart's corporate offices in Bentonville are struck by the no-frills atmosphere, from the linoleum that covers the floors to the macaroni and cheese served in the cafeteria.
Suppliers--who include most of the biggest names in electronics, entertainment, packaged food, apparel, and jewelry--speak admiringly but often wincingly of Wal-Mart's emphasis on getting their products at the lowest possible price. Wal-Mart contends that whatever savings it ekes out from suppliers are passed along to shoppers.
In some parts of the country, opposition to Wal-Mart has intensified in recent years. A company-sponsored referendum earlier this year in Inglewood, Calif., asked voters whether they wanted a Wal-Mart built in their town. The answer came back: no. Recent efforts to build stores in Chicago, New Orleans, and Dallas have also been defeated or delayed by community opposition.
Some objections to Wal-Mart stores are for aesthetic reasons and the impact--such as traffic congestion--that a big store can have on a community. The National Trust for Historic Preservation recently declared the entire state of Vermont endangered by what it called "behemoth stores"--specifically Wal-Mart. These big stores also have the effect of hurting smaller stores that may have more quaintness or character.
Danny Mordecai, who owns a sporting-goods store in Gardendale, Ala., protested when Wal-Mart planned to replace one of its local stores with a much larger one. When the new Wal-Mart opened last year, Mordecai was dismayed to find a display near the front door devoted to name-brand bats, mitts, and other sports equipment--the same brands offered at Mordecai's Sporting Goods. "This year," says Mordecai, "my baseball retail business is down 20 percent."
As Wal-Mart becomes an ever-larger outlet for media products--books, magazines, movies, music, etc.--concerns have also been raised about its impact on American culture. In 2003, Wal-Mart refused to continue selling three men's magazines, citing customer preferences, and ordered several women's magazines covered up at the checkout aisle, based on worries that their headlines were offensive. Last month, Wal-Mart refused to sell Jon Stewart's best-selling America (The Book) in its stores because it contains nudity. Such moves have some critics decrying Wal-Mart for interfering with free speech. Wal-Mart defends them as business decisions the company has a right to make.
RESHAPING AN IMAGE
Wal-Mart's refusal to carry certain media products has given the discounter additional clout with music and film producers and publishers. Many now create special editions of CDs, movies, and magazines tailored to the conservative sensibilities of Wal-Mart and its customers.
Wal-Mart has not ignored public concerns and the negative publicity it sometimes gets. Two years ago, the company began a process of self-examination that included hiring an image consultant and paying for television ads that emphasize job opportunities and other benefits of working or shopping at Wal-Mart.
CEO H. Lee Scott Jr. has been explaining the shift in the company's strategy to various audiences this year: "We have not gotten the story out to the extent that we need to get our story out."
Norman, the founder of Sprawl-Busters, sees the company's recent advertising as a litmus test. "You don't see the smiley-face rollback guy as much anymore," he says. "You see these feel-good ads. They are having to completely re-adjust the way they talk to the public."
Others say that the complaints about Wal-Mart have a flip side. If companies doing business with or alongside Wal-Mart are forced to cut costs and improve efficiency, isn't that good for consumers and the economy in general? Some experts say yes--the American economy contains lots of fat and anything that trims it is beneficial in the long run.
Former Labor Secretary Robert B. Reich has called Wal-Mart "the logical end point and the future of the economy in a society whose pre-eminent value is getting the best deal." Others say it benefits low-income Americans in particular by putting downward pressure on prices, especially on the basic items that tend to consume a larger portion of the incomes of low-income people.
What is clear is that Wal-Mart's power really does stem from its popularity with shoppers. Company executives often point out that if there were no customers, there would be no Wal-Mart.
But it is also true that business has grown more complicated as Wal-Mart has grown.
"Over the years, we have thought that we could sit in Bentonville, take care of customers, take care of associates, and the world would leave us alone," Scott told a group of Wall Street analysts in September. "It just does not work that way anymore."
Number of Wal-Mart-owned stores in each state
Wal-Mart has come a tong way since Sam Watton opened his first store in Rogers, Ark., in 1962. By the end of 2003, there were 2,551 War-Mart stores in the U.S., including discount stores, supercenters, Sam's Clubs, and neighborhood markets.
To help students understand WalMart's enormous power and how it benefits or, according to its critics, hurts the economy.
CRITICAL THINKING/DEBATE: The article reports that Wal-Mart's economic clout forces its suppliers to operate as efficiently as possible (so that the price of goods they sell to Wal-Mart, and Wal-Mart then resells, are as low as possible).
What are the benefits of this practice? (Low prices for American consumers.) What are the drawbacks of this policy? (Critics say it drives small business out and promotes sweatshop operations in other countries.) Have students debate this question:
* Does government have an obligation to protect Americans' jobs even if that means products Americans buy cost more than imported goods?
CARTOON CRITIQUE: Refer students to the political cartoon on page 10. Ask them to explain the cartoon. (Do Americans have mixed feelings about Wal-Mart? What would they say to the woman who is critical of Wal-Mart's business practices and then offers to drive her friend to the sale?)
RETAIL RESEARCH: If there is a Wal-Mart in or near your community, you might have one or more students do some retail research. Your researchers can visit the store and note the price of two or more popular items. Their next task is to visit another retailer that sells the same or similar products and compare the prices. They should report their findings to the class:
* Would you buy a product if you knew it had been made by child workers in a sweatshop?
* Would you shop at a small store where you know the owners or at Wal-Mart to save some money?
FAST FACT: Wal-Mart's sales are the equivalent of the world's 30th-largest GNP and would rank right behind that of Saudi Arabia.
WEB WATCH: www.walmart.com offers information about Wal-Mart from the company's perspective. At www. walmartvswomen.com Carolyn Sapp, Miss America 1992, criticizes Wal-Mart's treatment of its female workers.
1. The key to War-Mart's pricing strategy includes
a operating in mainly rural areas.
b forcing suppliers to operate as efficiently as possible.
c having a high ratio of employees to customers.
d strong advertising in low-income areas.
2. Some economists say Wal-Mart has helped strengthen the nation's economy
a by buying so many goods from other countries.
b by employing so many young people.
c because its tow prices have helped hold down inflation.
d because it has so many stores.
3. A class-action lawsuit filed against Wal-Mart contends that the company
a competes unfairly against smart businesses.
b fails to pay its suppliers on time.
c does not pay its fair share of property taxes.
d fairs to promote women to management positions as frequently as men.
4. Other lawsuits allege that Wal-Mart stores in the U.S. illegally
a refused to pay overtime to its workers.
b pressured workers to attend political rallies.
c asked for contributions to religious groups.
d refused to sell certain newspapers.
5. How does Wal-Mart defend its rigorous cost-cutting policy? --
6. Former Labor Secretary Robert Reich says American society's pre-eminent value is getting the best deal." What is Reich's point? --
1. (b) forcing suppliers to operate as efficiently as possible. 2. (c) because its low prices have helped hold down inflation. 3. (d) fails to promote women to management positions as frequently as men. 4. (a) refused to pay overtime to its workers. 5. Answers will vary, but should include the argument that the low prices it receives from suppliers are passed on to Wal-Mart customers. 4. Answers will vary, but should include the idea that saving money is paramount, even if it comes at some social cost.
Constance L. Hays reports on business for The New York Times.
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|Author:||Hays, Constance L.|
|Publication:||New York Times Upfront|
|Article Type:||Cover Story|
|Date:||Nov 29, 2004|
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