Why Wal-Mart?

January 18, 2004

By Michael Jessen

If you are looking to boost the economy of your community, there appear to be good reasons to avoid inviting Wal-Mart to be part of your city's economic future.

Although Nelson, BC (http://www.city.nelson.bc.ca/) already has a Wal-Mart store, a group of citizens accumulated more than $1 million in just 10 days in 2002 to purchase a piece of surplus provincial property where Wal-Mart was considering a big expansion to its adjacent store. The group didn't really badmouth Wal-Mart, they just thought the city didn't need a bigger box store. In reality, they saw a better use for the property -- mixed residential and small commercial development -- a use that was envisioned by many citizens during a recent planning exercise.

A little over a year later, the community of Trail -- located only 50 miles from Nelson -- is considering spending as much as $2.5 million in taxpayer's money to pave the way for a Wal-Mart superstore in the Silver City. Known mainly as the location of the biggest lead/zinc smelter in the world, Trail (http://www.cityoftrail.com) is now gambling Wal-Mart will jump-start a sluggish retail sector.

Trail's citizens will soon go to referendum on the city council's planned borrowing of $2.5 million to service the construction of a new Wal-Mart store. The city's plans include water, sewer, drainage, and road improvements to serve the department store and the surrounding neighbourhood. While city council unanimously endorses the planned borrowing and any zoning changes needed to accommodate Wal-Mart, a citizen's group claimed it had no trouble gathering the required signatures on a counter-petition challenging the borrowing bylaw.

Legally required public hearings will be held in 2004 on changes to Trail's zoning bylaw and official community plan, necessary to allow Wal-Mart to construct its store on the site of a former drive-in movie theatre about 5 kilometres from the city's downtown core. The retailer has also received approval in principle for some development variance permits -- such as a 289 square foot sign (the current sign bylaw only allows a maximum sign area of 97 square feet) and a reduced building setback on Highway 3B of 4.4 metres instead of the current 6 metres.

Not all the business owners in Trail's downtown have expressed enthusiasm for council's bending over backwards to attract Wal-Mart. They have good reason.

Big doesn't always signify best and Wal-Mart is really big. Wal-Mart (see either http://www.walmart.com or http://www.walmartstores.com) is now the world's largest company with $245 billion in sales revenue in 2002 from its 4,750 stores worldwide. Wal-Mart has more than doubled in size in the past five years, increasing sales at an annual rate of 15%. If the company can maintain this growth rate, it will double its revenues over the next five years and top $600 billion in 2011. Currently, only 30 countries in the world have a gross domestic product that annually exceeds Wal-Mart's sales.

Every week, 138 million shoppers visit one of those stores. In 2002, 82% of American households made at least one purchase at Wal-Mart. It is three times the size of the number two retailer, France's Carrefour. In 2002, Wal-Mart sold in three months what number two American retailer Home Depot sold in the year. In the category of general merchandise, it does more business than Target, Sears, K-mart, J.C. Penney, Safeway, and Kroger combined.

As of August 31, 2003, Wal-Mart had 1,489 Wal-Mart stores, 1,397 Supercenters, 532 Sam's Clubs and 56 Neighborhood Markets in the US alone. In addition, Wal-Mart operates 1,309 stores in ten other countries and is the largest retailer in both Canada and Mexico. Wal-Mart employs about 1.1 million "associates" in America at an annual wage of about $14,000 a year, below the US $15,060 poverty line for a family of three.


 sells 19% of all grocery-store food in the United States, making it the largest food seller;

 handles 16% of all pharmacy-drug sales in the United States;

 controls 30% of the U.S. household staples market;

 and sells 15-20% of all CDs, videos, and DVDs in the United States.

As a result, Wal-Mart dominates a large and increasing share of the business done by almost every major consumer products company. Wal-Mart is responsible for:

 28.3% of Dial's (soap products) business;

 24% of Del Monte Foods' business;

 23% of Clorox's (bleaches and cleaners) business;

 and 23% of Revlon's (cosmetics) business.

With such dominance in the market, it is no wonder Wal-Mart has a history of forcing suppliers to lower prices, dropping certain magazines from display racks after displeasure with cover art or content, and insisting on sanitized versions of CDs with explicit lyrics.

According to stories in two major business magazines, Business Week (http://www.businessweek.com) and Fast Company (http://www.fastcompany.com), Wal-Mart's "everyday low prices" come at a cost. The conglomerate dictates delivery schedules, inventory levels and influences product specifications. Suppliers often have to choose between designing goods their way or the Wal-Mart way. Many companies have actually gone out of business trying to meet Wal-Mart's expectations.

The web site Wal-Mart Watch (http://www.walmartwatch.com) claims Wal-Mart destroys jobs in local communities, lowers wages, persecutes women workers, falsely advertises the origin of its products, and is being sued for consumer rip-offs and use of offshore garment facilities that subject workers to sub-minimum wages, 12-hour work days, seven-day work weeks, and unpaid overtime.

Authors Richard Freeman and Arthur Ticknor, in an article entitled Wal-Mart is Not a Business, It's an Economic Disease (http://www.larouchepub.com/other/2003/3044wal-mart.html), in the November 14, 2003 issue of Executive Intelligence Review write that "Wal-Mart has plundered the productive functions of the U.S. economy." They conclude, "It's time to shut down Wal-Mart!"

In an editorial November 13, 2003, the New York Times put it this way:

"Wal-Mart is a non-union, low-wage employer aggressively moving into the grocery business. Everyone should be concerned about this fight. It is, at bottom, about the ability of retail workers to earn wages that keep their families out of poverty. . . Wal-Mart's prices are about 14% lower than other groceries' because the company is aggressive about squeezing costs, including labor costs. Its workers earn a third less than unionized grocery workers, and pay for much of their [own] health insurance. Wal-Mart uses hardball tactics to ward off unions. Since 1995, the government has issued at least 60 complaints alleging illegal anti-union activities. . . Wal-Mart may also be driving down costs by using undocumented immigrants. Last month, federal agents raided Wal-Marts in 21 states. Wal-Mart is facing a grand jury investigation, and a civil racketeering class-action filed by cleaners who say they were underpaid when working for contractors hired by Wal-Mart. Wal-Mart insists that it was unaware of its contractors' practices. But aware or not, it may have helped to deprive legally employable janitors of jobs and adequate pay. This Wal-Martization of the work force, to which other low-cost, low-pay stores also contribute, threatens to push many Americans into poverty. . ."

Low prices are more than a slogan at Wal-Mart. Business Week in a cover story (Is Wal- Mart Too Powerful?) October 6, 2003 called it "the fundamental tenet of a cult masquerading as a company." As the world's largest retailer, Wal-Mart pressures it's suppliers to deliver what it wants, when it wants, and at the price Wal-Mart is willing to pay. Comply, or you risk being dropped by Wal-Mart as a supplier.

On the plus side, this relentless pressure to supply goods at lower prices has forced suppliers to investigate and implement efficiencies worth billions of dollars. Companies that are leaner, more focused, and faster are good for the economy you say, and you're right. According to the Fast Company December article (The Wal-Mart You Don't Know), Wal-Mart's never-ending quest to reduce prices has benefited consumers. "The giant retailer is at least partly responsible for the low rate of U.S. inflation, and a McKinsey & Co. study concluded that about 12% of the economy's productivity gains in the second half of the 1990s could be traced to Wal-Mart alone," writes author Charles Fishman.

"Wal-Mart has also lulled shoppers into ignoring the difference between the price of something and the cost," Fishman continues. "Its unending focus on price underscores something that Americans are only starting to realize about globalization: Ever-cheaper prices have consequences. Says Steve Dobbins, president of thread maker Carolina Mills: We want clean air, clear water, good living conditions, the best health care in the world -- yet we aren't willing to pay for anything manufactured under those conditions."

Wal-Mart's current "Rollback" advertising campaign continues to focus on lower prices. (The company spent $618 million in advertising expenses in 2002, an average of $1,693,150 per day.) To keep lowering prices though, many of Wal-Mart's suppliers no longer make their products in North America. Manufacturing jobs in the U.S. have been declining for 34 consecutive months, due in no small part to Wal-Mart's cost-cutting strategies. Suppliers have out-sourced their products to factories in South America or South East Asia. The irony is that former North American manufacturing employees can now hardly afford even Wal-Mart's low prices with their unemployment benefit cheques. They have shopped themselves out of a job.

Levi Strauss once refused to sell its jeans and denim products to Wal-Mart, citing questionable company practices. Levi Strauss was honoured as an example of a socially responsible company. But when the bottom line at Levi Strauss turned to red, they crawled back to Wal-Mart, started producing poorer quality products, and soon were a major supplier to Wal-Mart. During the past 18 months, Levi Strauss has announced it will shut down its four remaining production plants in North America (including one in Edmonton) and shift work to Latin America and Asia. Levi Strauss, a company that 22 years ago had 60 clothing plants in the U.S. now makes no clothes at all. It just imports them.

And what about the work conditions in those off shore factories? The National Labor Committee (http://www.nlcnet.org) has two reports that will open your eyes and maybe close your wallets.

The December 17, 2003 report about the activities of Hanchang Textiles in El Salvador (http://www.nlcnet.org/campaigns/ca03/hanchang/report.body.pdf) "documents the systematic violation of worker rights, union busting and apparent tax fraud -- all carried out in plain view in front of the Salvadoran Ministry of Labor." The factory provides the Bobbie Brooks and Puritan labels for Wal-Mart. Workers earn between 75 and 83 cents an hour and are subjected to abusive conditions, including being fired for union organizing activities.

Conditions are not any better in Nicaragua's Saratoga Free Trade Zone where a South Korean owned factory Yu Jin (http://www.nlcnet.org/campaigns/ca03/yujin/yujin.pdf) provides the Faded Glory shirts sold in Wal-Mart. Workers are paid just 9 cents for every $10 Wal-Mart shirt they sew and the report details worker's wages amount to 9/10 of one percent of the retail price. Workers often work 69 hour weeks and must follow a relentless production pace -- a worker sewing the shoulder on a tee-shirt must complete one operation every 12.2 seconds, 4.9 per minute, and 294.7 per hour.

In 2002, a number of workers at the Yu Jin factory were fired for organizing a union and although the Nicaraguan courts upheld the worker's rights, the company is appealing the verdict and the case drags on.

One is left to wonder why, if Wal-Mart is powerful enough to bring supplier CEOs to their knees on the issue of pricing products, can the same company not use its influence to improve the working conditions of the people who produce the products their stores sell?

Later this spring, a National Day of Action (http://www.walmartdayofaction.com) will be held in North America to protest the anti-union activities of Wal-Mart.

It may not be too late for Trail residents as some North American cities have successfully fought the invasion of Wal-Mart into their communities. Low prices can not make up for the economic devastation to other retailers or the exploited labour of workers anywhere in the world. Community values should be worth more than a price discount.

RESOURCES - See Mad in the USA at http://www.alternet.org/print.html?StoryID=16685 for further evidence of what the New York Times calls "the Wal-Martization of America."

Jim Hightower, America's most popular grassroots commentator, is no friend of Wal-Mart and you can find his commentary on the company at http://proliberty.com/observer/20021009.htm.

Dan Gillmor, technology columnist for the Mercury News, writes about Wal-Mart at http://www.mercurynews.com/mld/mercurynews/business/7849192.htm.

For further reading: No Logo: Taking Aim at the Brand Bullies (Vintage Canada, 2000) by Naomi Klein; One Nation Under Goods: Malls and the Seductions of American Shopping (Smithsonian Books, 2003) by James Farrell; When Corporations Rule the World (Kumarian Press, 1995) by David Korten; and The Post-Corporate World: Life After Capitalism (Berrett-Koehler Publishers, 1999) by David Korten.

David Ratcliffe's review of The Post-Corporate World (http://www.ratical.org/many_worlds/seeingPCW.html) is an excellent source of information not only on the book but economic democracy.

The People-Centered Development Forum (http://www.pcdf.org/) seeks a just, inclusive and sustainable world that works for all.

BALLE - Business Alliance for Local Living Economies (http://www.livingeconomies.org/) has a mission of creating, strengthening, and connecting local business networks dedicated to building strong local economies. BALLE is launching a Local First campaign to foster and encourage buying from local businesses.

If you oppose shopping at Wal-Mart, the web site Working for Change offers the opportunity to sign a petition pledging not to shop at Wal-Mart. Although the deadline was December 31, 2003, the petition is still gathering signatures at http://www.workingforchange.com/activism/petition.cfm?itemid=16041&ms=mmo001.

Wal-Mart is tired of complaints from critics and is answering back. See the article http://msnbc.msn.com/id/4130756/ for details.

Michael Jessen is a Nelson writer and consultant on sustainability issues. He can be reached by telephone at 250-229-5632 or by e-mail at zerowaste@netidea.com. His business web site is found at http://www.zerowaste.ca.

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