MissBiz, "Shopping Our Way to the Unemployment Line: The Big-Box Impact"
by MissBiz aka Jackie Howatt
Published and Copyright November 1, 2006
Saint Mary's University, The Journal
Last week, on October 16, 2006, I read about the Wal-Mart Supercenter strike in Hialeah Gardens, Florida on businessweek.com. Coincidentally, my Retail Management class was simultaneously doing an in-depth assignment regarding big-box retailers and their detrimental sociological and economic affects. Like many, I’ve been aware of the negative impacts of power-retailers, like Wal-Mart. But with so much of it in the news lately, and even right now as I flip through this collection of Wal-Mart news articles compiled by my professor, it is literally making me sick to think about the future of retailing, and the monster we have all created.
When brainstorming this article, I couldn’t find a concrete storyline, or a cohesive way in which to write it. I concluded, however, that my goal is simply to expose some of you to the political issues taking place right now regarding the unbelievable power that big-box retailers (namely Wal-Mart) inflict upon our economy, and our lives. Wal-Mart seems to be making headlines every day. I cannot possibly cover every damaging account, but I want to highlight some of the more notable instances that might make you think twice about this retail goliath (and others like it).
First, Wal-Mart has made an art of “squeezing” their suppliers and streamlining their inventory and channel distribution so perfectly that it is basically impossible to compete with their intelligence. This is the main strategy that their company is built upon. It was a genius approach of retailing ten years ago, and they grew exponentially because of it. Their share price peaked in 2000 at $70 (signonsandiego.com). Analysts believe that the popularity of Wal-Mart came at a time when the baby-boomer generation also peaked at retirement age. This extensive demographic found it convenient to buy almost every necessity under the sun, underneath one roof, and at a price that was compatible with their fixed income. But now that Wal-Mart has accumulated an established market-base, and as the severe decline in one of their largest target-markets (the baby-boomers) looms ahead, their operational strategies are severely impacting everyone – even you – the taxpayer.
The most prevalent and ongoing political issue regarding Wal-Mart is unionization, or the lack there of. Simply put, Wal-Mart cannot “afford” to deal with a unionized workforce. By “afford” I don’t mean that they literally cannot pay their employees a decent salary, because they can; Wal-Mart is the largest company in the world - period. They can’t “afford” it because their entire business is based upon the lowest guaranteed prices. Unionization would cause wages to increase, therefore inflating product prices. Unionization has been a major sore spot for Wal-Mart and they have generated negative publicity because of their determination to avoid the subject altogether. A milestone example of this can be seen in the case of Wal-Mart store number 3643 in Jonquiere, Quebec in 2004/2005. The employees of this small town Wal-Mart location obtained union certification, but soon after they did, Wal-Mart shut its doors - for good. Wal-Mart claimed that the location wasn’t making any money. This left 190 people unemployed, not to mention the physical concrete void they left standing in the middle of a small forestry town.
Refusing unionization and paying their employees minimal hourly wages with inadequate benefits is somewhat old news, but gives an idea of where the company and its employees stand. Making recent headlines, however, is that Wal-Mart is clamping down even harder on their operations with a new set of employee rules and restrictions just issued within the past few months. These new policies are a direct reaction to their stagnating same-store sales, and therefore, their need to cut costs across the board to remain profitable.
Several of the new policies are not sitting well with Wal-Mart employees, for example, pushing the part-time workforce from 20 percent to 40 percent, wage capping, strictly monitoring employee absences, and hiring “healthier” and subsequently younger employees (marketplace.publicradio.org). These procedures would be desirable for any cost-leader company, as implementing these strategies will “trim the fat” from the bottom line. However, because Wal-Mart already provides little compensation (or empathy) to their employees, the backlash was expected - and arguably justified.
A policy I found particularly grabbing was the “hiring and promoting a healthier staff” initiative. Even though this is bad news for those older Wal-Mart employees who face being shafted due to their ailments, Wal-Mart is actually performing a service to us taxpayers by applying this procedure. Just to shed some light on the ramifications that Wal-Mart’s low wages combined with minimal to nil health insurance can impose on taxpayers: “Reliance by Wal-Mart workers on public assistance programs in California comes at a cost to the taxpayers of an estimated $86 million annually; this is comprised of $32 million in health related expenses and $54 million in other assistance” (http://www.dsausa.org). Even though this is an American statistic, the affects are mirrored throughout the global economy. This same study also reports that, “If other large California retailers adopted Wal-Mart’s wage and benefits standards, it would cost taxpayers an additional $410 million a year in public assistance to employees”. If Wal-Mart wants to hire healthier employees, it might lessen the impact on taxpayers, however, this faintly mitigates their burden on society, as their employees need to be subsidized in other ways due to insufficient wages.
The power that Wal-Mart bestows over its employees is devastating. But it doesn’t stop there. When a business becomes so pervasive and domineering as Wal-Mart has become, it sends a rippling affect throughout the community and the global economy as well. They wreak havoc on their suppliers and competitors wherever they go. It is almost impossible to compete with Wal-Mart, especially if a nearby business carries similar products or services, because they will consistently outdo any price point. A Wal-Mart supplier suffers greatly because their margins become almost non-existent due to Wal-Mart’s “squeezing” affect, as mentioned earlier. Suppliers find themselves in a tangled web. Wal-Mart’s business keeps manufacturing facilities at full capacity, which means consistent business, however, with little margin leeway and a full staff, it is hard to turn a profit.
“Therein lies the basic conundrum of doing business with the world's largest retailer. By selling a gallon of kosher dills for less than most grocers sell a quart, Wal-Mart may have provided a ser-vice for its customers. But what did it do for Vlasic? The pickle maker had spent decades convincing customers that they should pay a premium for its brand. Now Wal-Mart was practically giving them away. And the fevered buying spree that resulted distorted every aspect of Vlasic's operations, from farm field to factory to financial statement” (fastcompany.com).
Jim Wier, the owner of the Snapper lawn-equipment company, is otherwise famously known as “the man who said no to Wal-Mart”. While Wal-Mart was pressuring his company to supply more mowers, Mr. Wier was determined not to turn his decades-old company into a Wal-Mart pawn. “Why would you buy a walk-behind mower from Snapper that costs $519? What could it possibly have to justify spending $300 or $400 more? That's the question that motivated Jim Wier to stop doing business with Wal-Mart. Wier is too judicious to describe it this way, but he looked into a future of supplying lawn mowers and snow blowers to Wal-Mart and saw a whirlpool of lower prices, collapsing profitability, offshore manufacturing, and the gradual but irresistible corrosion of the very qualities for which Snapper was known. Jim Wier looked into the future and saw a death spiral” (fastcompany.com).
Wal-Mart is so convenient for the end-consumer. We can’t deny that. We’ve all shopped there at some point. But even though we’ve all heard bits and pieces of anti-Wal-Mart anecdotes, I think many of us choose not to look too far into it, for fear that we might feel compelled to “put ourselves out” a little bit, and to reconsider the convenience and gratification that Wal-Mart provides us. Like global warming, maybe if we ignore it and walk with our heads down, it’ll go away. This is so not the case. Every dollar you spend is comparable to a vote. Do you believe in the Wal-Mart “party”? Do you support their “platform”, their “campaign”, their values, their impacts, their actions? Would you vote for them?
Consolidation and acquisition is the most widespread fear among consumers in regards to big-boxes. With Wal-Mart providing everyday essential products (even groceries) at rock-bottom prices, and with Best Buy providing every gadget imaginable at rock-bottom prices, and with companies like Home Depot, Staples, Shoppers Drug Mart, and Costco following suit, will there be any room for competition (choice) in the future? Will we eventually be shopping at one giant Supercenter like mindless robots? Will any of us who will either work for a small company or start a small company ourselves stand a chance? “Are we shopping our way straight to the unemployment line?” (fastcompany.com).
We have to collectively understand the implications of walking into a Wal-Mart (or any big-box retailer) and purchasing toilet paper for the sake of saving fifty cents. The implications run far deeper than you think. Society has created a monster that feeds off of our physical and moral laziness. I’m not saying to never shop at a Wal-Mart again, but next time you find yourself walking into a big-boxed retailer, ask yourself, “is it worth it?”.
Published and Copyright November 1, 2006
Saint Mary's University, The Journal
Last week, on October 16, 2006, I read about the Wal-Mart Supercenter strike in Hialeah Gardens, Florida on businessweek.com. Coincidentally, my Retail Management class was simultaneously doing an in-depth assignment regarding big-box retailers and their detrimental sociological and economic affects. Like many, I’ve been aware of the negative impacts of power-retailers, like Wal-Mart. But with so much of it in the news lately, and even right now as I flip through this collection of Wal-Mart news articles compiled by my professor, it is literally making me sick to think about the future of retailing, and the monster we have all created.
When brainstorming this article, I couldn’t find a concrete storyline, or a cohesive way in which to write it. I concluded, however, that my goal is simply to expose some of you to the political issues taking place right now regarding the unbelievable power that big-box retailers (namely Wal-Mart) inflict upon our economy, and our lives. Wal-Mart seems to be making headlines every day. I cannot possibly cover every damaging account, but I want to highlight some of the more notable instances that might make you think twice about this retail goliath (and others like it).
First, Wal-Mart has made an art of “squeezing” their suppliers and streamlining their inventory and channel distribution so perfectly that it is basically impossible to compete with their intelligence. This is the main strategy that their company is built upon. It was a genius approach of retailing ten years ago, and they grew exponentially because of it. Their share price peaked in 2000 at $70 (signonsandiego.com). Analysts believe that the popularity of Wal-Mart came at a time when the baby-boomer generation also peaked at retirement age. This extensive demographic found it convenient to buy almost every necessity under the sun, underneath one roof, and at a price that was compatible with their fixed income. But now that Wal-Mart has accumulated an established market-base, and as the severe decline in one of their largest target-markets (the baby-boomers) looms ahead, their operational strategies are severely impacting everyone – even you – the taxpayer.
The most prevalent and ongoing political issue regarding Wal-Mart is unionization, or the lack there of. Simply put, Wal-Mart cannot “afford” to deal with a unionized workforce. By “afford” I don’t mean that they literally cannot pay their employees a decent salary, because they can; Wal-Mart is the largest company in the world - period. They can’t “afford” it because their entire business is based upon the lowest guaranteed prices. Unionization would cause wages to increase, therefore inflating product prices. Unionization has been a major sore spot for Wal-Mart and they have generated negative publicity because of their determination to avoid the subject altogether. A milestone example of this can be seen in the case of Wal-Mart store number 3643 in Jonquiere, Quebec in 2004/2005. The employees of this small town Wal-Mart location obtained union certification, but soon after they did, Wal-Mart shut its doors - for good. Wal-Mart claimed that the location wasn’t making any money. This left 190 people unemployed, not to mention the physical concrete void they left standing in the middle of a small forestry town.
Refusing unionization and paying their employees minimal hourly wages with inadequate benefits is somewhat old news, but gives an idea of where the company and its employees stand. Making recent headlines, however, is that Wal-Mart is clamping down even harder on their operations with a new set of employee rules and restrictions just issued within the past few months. These new policies are a direct reaction to their stagnating same-store sales, and therefore, their need to cut costs across the board to remain profitable.
Several of the new policies are not sitting well with Wal-Mart employees, for example, pushing the part-time workforce from 20 percent to 40 percent, wage capping, strictly monitoring employee absences, and hiring “healthier” and subsequently younger employees (marketplace.publicradio.org). These procedures would be desirable for any cost-leader company, as implementing these strategies will “trim the fat” from the bottom line. However, because Wal-Mart already provides little compensation (or empathy) to their employees, the backlash was expected - and arguably justified.
A policy I found particularly grabbing was the “hiring and promoting a healthier staff” initiative. Even though this is bad news for those older Wal-Mart employees who face being shafted due to their ailments, Wal-Mart is actually performing a service to us taxpayers by applying this procedure. Just to shed some light on the ramifications that Wal-Mart’s low wages combined with minimal to nil health insurance can impose on taxpayers: “Reliance by Wal-Mart workers on public assistance programs in California comes at a cost to the taxpayers of an estimated $86 million annually; this is comprised of $32 million in health related expenses and $54 million in other assistance” (http://www.dsausa.org). Even though this is an American statistic, the affects are mirrored throughout the global economy. This same study also reports that, “If other large California retailers adopted Wal-Mart’s wage and benefits standards, it would cost taxpayers an additional $410 million a year in public assistance to employees”. If Wal-Mart wants to hire healthier employees, it might lessen the impact on taxpayers, however, this faintly mitigates their burden on society, as their employees need to be subsidized in other ways due to insufficient wages.
The power that Wal-Mart bestows over its employees is devastating. But it doesn’t stop there. When a business becomes so pervasive and domineering as Wal-Mart has become, it sends a rippling affect throughout the community and the global economy as well. They wreak havoc on their suppliers and competitors wherever they go. It is almost impossible to compete with Wal-Mart, especially if a nearby business carries similar products or services, because they will consistently outdo any price point. A Wal-Mart supplier suffers greatly because their margins become almost non-existent due to Wal-Mart’s “squeezing” affect, as mentioned earlier. Suppliers find themselves in a tangled web. Wal-Mart’s business keeps manufacturing facilities at full capacity, which means consistent business, however, with little margin leeway and a full staff, it is hard to turn a profit.
“Therein lies the basic conundrum of doing business with the world's largest retailer. By selling a gallon of kosher dills for less than most grocers sell a quart, Wal-Mart may have provided a ser-vice for its customers. But what did it do for Vlasic? The pickle maker had spent decades convincing customers that they should pay a premium for its brand. Now Wal-Mart was practically giving them away. And the fevered buying spree that resulted distorted every aspect of Vlasic's operations, from farm field to factory to financial statement” (fastcompany.com).
Jim Wier, the owner of the Snapper lawn-equipment company, is otherwise famously known as “the man who said no to Wal-Mart”. While Wal-Mart was pressuring his company to supply more mowers, Mr. Wier was determined not to turn his decades-old company into a Wal-Mart pawn. “Why would you buy a walk-behind mower from Snapper that costs $519? What could it possibly have to justify spending $300 or $400 more? That's the question that motivated Jim Wier to stop doing business with Wal-Mart. Wier is too judicious to describe it this way, but he looked into a future of supplying lawn mowers and snow blowers to Wal-Mart and saw a whirlpool of lower prices, collapsing profitability, offshore manufacturing, and the gradual but irresistible corrosion of the very qualities for which Snapper was known. Jim Wier looked into the future and saw a death spiral” (fastcompany.com).
Wal-Mart is so convenient for the end-consumer. We can’t deny that. We’ve all shopped there at some point. But even though we’ve all heard bits and pieces of anti-Wal-Mart anecdotes, I think many of us choose not to look too far into it, for fear that we might feel compelled to “put ourselves out” a little bit, and to reconsider the convenience and gratification that Wal-Mart provides us. Like global warming, maybe if we ignore it and walk with our heads down, it’ll go away. This is so not the case. Every dollar you spend is comparable to a vote. Do you believe in the Wal-Mart “party”? Do you support their “platform”, their “campaign”, their values, their impacts, their actions? Would you vote for them?
Consolidation and acquisition is the most widespread fear among consumers in regards to big-boxes. With Wal-Mart providing everyday essential products (even groceries) at rock-bottom prices, and with Best Buy providing every gadget imaginable at rock-bottom prices, and with companies like Home Depot, Staples, Shoppers Drug Mart, and Costco following suit, will there be any room for competition (choice) in the future? Will we eventually be shopping at one giant Supercenter like mindless robots? Will any of us who will either work for a small company or start a small company ourselves stand a chance? “Are we shopping our way straight to the unemployment line?” (fastcompany.com).
We have to collectively understand the implications of walking into a Wal-Mart (or any big-box retailer) and purchasing toilet paper for the sake of saving fifty cents. The implications run far deeper than you think. Society has created a monster that feeds off of our physical and moral laziness. I’m not saying to never shop at a Wal-Mart again, but next time you find yourself walking into a big-boxed retailer, ask yourself, “is it worth it?”.
posted by MissBiz | 11:56 AM
6 Comments:
Interesting article you wrote. My mother considered applying to our local Supercenter. I told her she was better than that. A teacher to a Walmart employee, no way...
Hi Jackie,
Interesting read! Wal-Mart is really run by analysts. The only value the company provides to the general public is jobs(underpaid employees) and cheap goods.
I have a feeling Wal-Mart will one day be a case study at Uni simply because if the squeezing gets worse the profit margins will shrink and kill off the good parts of the business. If you cannot pay your employees a decent wage but you want excellent customer service you cannot expect to squeeze that from the staff. Where is the value?
I found your blog from YoungEntrepreneur.com... i wrote the posting about playing that you responded to a while back. Talk soon
Lucas
http://www.commercecubes.com/publication
I'm trying to avoid Wal-Mart as much as possible. I understand they are a huge crutch and major backbone to our existing economy, but had they not opprssed us with their tempting, "everyday low prices", our small businesses would stand better chances of surviving.
I understand that they took advantage of a great idea and opportunity with their innovative supply chain system (EDI), but now that society understands the reprocussions of a retailer of this magnitude, we need to regulate it.
Thanks for the feedback! :)
"oppressed us" with their low prices? there is no sense in that statement.
"we need to regulate it?" Who is we, the government? What are they teaching you in your economics class? While on one hand you agree they are successful because of a smart idea, you discount them for some of their business practices.
you ignore the essence of free enterprise as well and give up on small businesses competing with walmart. to compete, small businesses must innovate and become smarter than walmart. they must use their resources properly and make better business decisions.
entrepreneurs are very creative people and walmart only quickens innovation by forcing others to out-do them.
also, no one is forcing people to work at walmart. people choose to work for them. unions are not what you crack them up to be. they have done great damage to our economy (america). They are the primary focus of blame for the downfall of the american auto industry and the american steel industry. they inflate wages to levels that businesses cannot support by artificial means.
i would counter your assertion that mindless robots shop at walmart by saying the folks who shop at walmart are informed and saavy consumers. they make smart choices by not only shopping where they can get the cheapest prices, but by saving time and gas instead of driving around to different retailers where they will get more. therefore, they are more efficient and have more time to spend with family or making their business successful.
my prediction is that many brand name suppliers will follow snapper's lead and no longer supply walmart.
good luck with your biz. i will continue to follow your progress, but i think you are wrong about walmart.
Let's see:
First, yes, I meant the government should regulate Wal-Mart. If you think this doesn't make any sense, it is already being done. Just go here: http://www.laborradio.org/node/208
1. Just because a business has an innovative supply-chain system doesn't mean that the rest of their business systems are applaudable. They're two different facets.
2. It's hard for small businesses to be innovative when Wal-Mart's gurth can overtake competition in terms of low prices. This point can be debated further.
3. I am not advocating for unions in general. But when a company, who claims their employee relationships are so great, closes a store due to the possibility of a union, and leaves a small town jobless, this is a problem. http://www.commondreams.org/headlines05/0511-03.htm
4. People who shop at Wal-Mart are not mindless robots. However, in the future, if this trend of consolidation persists, we could (hypothetically) be shopping at one giant Supercenter like mindless robots. There will be less selection, and less choice for us to make consumer decisions. If it does get to that point, which it already somewhat has, who can compete with that? I can see an Antitrust situation arising.
I sincerely hope that your prediction is right - that suppliers will have the guts to do what Snapper did.
Thanks for the input. You certainly make a good arguement, but I stand by what I wrote.
I love debates. Maybe I'll post more issues just for your sake. You seem like a good "sparring" partner...
haha, i appreciate the complement. i am actually building a debate site where people can debate in a real time, one on one fashion. the winners are determined by the viewers and their votes. ok, enough self promotion (intensedebate.com).
lets get back to walmart.
maybe its just me, but i believe in the entrepreneur. i believe there is no challenge too big and simply throwing in the towel because walmart comes to town isnt always smart. there are many things small businesses can do that a walmart cant. walmart is a large bureaucracy similar to the federal government.
bureaucracies are extremely slow to react and when they do, it can be very convoluted and unorganized because they cannot adjust quickly enough. small businesses dont have this problem. they are very agile because of their size. they can make decisions overnight. they can react to business opportunities much quicker. my contention would be that the small businesses that close simply arent used to competing and reacting quickly to business opportunities. they then become upset that they have to work harder and decide to close. so, this is one very important advantage that goes unnoticed and unused.
I am going to address the articles cited.
first, the maryland tax on walmart payroll. this raises some red flags with me. they want to tax walmart for not paying its workers enough. first, this is america we are talking about. there is no sentence in the constitution that gives a right to have healthcare insurance. there is also nothing that requires businesses to give health insurance to their workers. this is an example of government out of control. they believe they are helping citizens, but in effect they are driving away walmart and those that would have worked at walmart are once again unemployed. second, they are driving away businesses in general. what business would want to operate in a climate of government regulation where there are other markets that have less government intervention. finally, by saying "i dont think we want companies that are unwilling to provide a decent living to people that they hire" they are driving away jobs that pay low wages. businesses cant afford to pay a stock boy $15 an hour. if they did, they would have to raise their prices to a level where there would be no demand. then that business shuts down and their employees are out of work. to conclude, maryland may only want high paying jobs, but what about the folks that arent qualified for high paying jobs? they stay unemployed. i could go on, but i'll stop here. bottom line, government regulation is bad.
next, the quebec walmart... here's the key quote out of all the allegations, "There is no evidence to suggest that anti-union tactics have been employed."
also, businesses are free to pay their employees a wage the business deems proper and appropriate hours they deem appropriate. also, the policy of "no unions" or else be shutdown is crystal clear. if the workers organized, as they did, the store would be shutdown, as it was. now, whose fault is that, walmarts? or the employees who dishonored their agreement with walmart that outlined no unions. also, i dont know about you, but when i do something my employer doesnt want me to do, i get fired. what makes me laugh about this whole story is that these workers are surprised walmart did what it said it would do. now they dont have to worry about walmart in that town and are free to charge four bucks for a gallon of milk. walmart is an easy target, but no one wants to question the actions of the employees. one final note, there is no law requiring businesses to allow unions.
look, i understand the climate in canada. its very unionized and there is lots of government regulation. my contention is that canada would be much more prosperous if these two things declined.
also, i recommend other sources for your news. laborradio and common dreams are very much skewed to the left side of the spectrum. to get a more balanced point of view i would look to other sources.
i love debating, as you can see, but im not known for my brevity. overall, good debate, this is definitely a hot button issue.
one thing i do find odd about your posting is that most entrepreneurs are normally more pro-business. this isnt a bad thing, just something i noticed. take care.
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