Supermarkets slam Wal-Mart--Lower labor costs at heart of strikes by grocery workers

AP via Deseretnews ^ | October 21, 2003 | Gavin McCormick

[ChemistCat]

CROSS LANES, W.Va. — To find the cause of the nation's three supermarket strikes, just follow Judy Ranson's shopping cart.

An inveterate bargain hunter, Ranson used to chase down the best grocery deals at three stores: her local Kroger in Cross Lanes or down the road at a Fas Check in Dunbar and at a Poca Supermarket in Poca.

Now she makes one trip a week, to the Wal-Mart Supercenter, which opened five years ago a mile and a half down the road and across Interstate 64 from Kroger.

Ranson, who is 57, spends about $90 for herself and her husband. She estimates that she saves $40 to $50 off what she'd pay at the supermarket. "Kroger's prices are too high on a lot of stuff," she said. "I figure $100 ought to be enough to feed anyone for a week."

Officials at Kroger and the nation's other dominant supermarket chains — Ahold, Albertsons Inc. and Safeway Inc. — cite competition from Wal-Mart Stores Inc. and other box stores moving into the grocery business as a reason to hold the line on labor costs.

Those costs include health-care benefits that are the sticking point in United Food and Commercial Workers strikes of 3,300 workers at 44 Kroger stores in West Virginia, Kentucky and Ohio; 70,000 workers at three Southern California chains; and 10,000 workers at three chains in Missouri.

Similar struggles are expected within the next six months as UFCW contracts expire in the Phoenix and Washington, D.C., areas.

"Box stores are a very real threat," said Archie Fralin, a Kroger spokesman in Roanoke, Va. "Their lower labor costs make it imperative for us to manage costs. That's just a reality."

Wal-Mart doesn't break out earnings by division, so it's hard to calculate how much food it sells. But analysts say in just 10 years it has become the biggest player in the grocery business, last year capturing anywhere from 5 percent to 15 percent of the industry's $680 billion pie.

Traditional supermarket sales have dropped about 3 percent in the past year, estimates The Food Institute, a New Jersey-based trade group.

"The supermarket chains are still profitable, but executives see their market share down more than 5 percent over five years, and they're frightened," said George Whalin, president of Retail Management Consultants in San Marcos, Calif.

Lower labor costs for nonunion workers make up part of the advantage of box stores like Wal-Mart.

Including pension and health benefits, Kroger estimates it pays workers on average $6 an hour more in West Virginia than Wal-Mart. Burt Flickinger, managing partner of Strategic Resource Group in New York, says the difference in other parts of the country runs as high as $10 to $14 an hour for full-time workers.

At the Cross Lanes Kroger, striking UFCW workers say Wal-Mart's opening five years ago cost their store $100,000 in weekly receipts — between a third and a half of the store's income.

In response, workers say, Kroger has slashed the store's payroll from 86 to 45 full- and part-time workers.

"All we hear from management is 'Do more,' " said Kay Underwood, 49, a 29-year Kroger employee. "We did an employee survey, and the number of us on Paxil, Prozac, blood pressure medicines, you name it, has gone sky high. We're killing ourselves for this company."

Fralin wouldn't comment on individual Kroger store sales.

But he said industry studies show that Wal-Mart often takes as much as $100,000 a week from existing supermarkets, and he hypothesized that a store losing that much would see labor costs cut similarly.

Wal-Mart insists labor costs are just one part of a low-price formula that includes better purchasing logistics and information systems.

Analysts agree that the Arkansas chain's famously efficient ordering and distribution systems give it an edge, as does its clout in pushing for low wholesale prices. They also say supermarkets have room to improve.

"Most big chains went on a buying binge of smaller chains in the 1990s, and many of those acquisitions have not been fully integrated," said Mark Hamstra, editor of Supermarket News. "They still have costs to wring out from those buys."

Jim Lowthers is president of UFCW Local 400, which represents 30,000 food-industry workers in six states including West Virginia. He says his local has lost 5 percent of its members in five years.

"All these companies make billions of dollars, and all they want to say is 'Wal-Mart, Wal-Mart, Wal-Mart,' " he said. "They've joined together to say the only way to save is by reducing worker benefits. There's no reason they can't compete, profit and still take care of their employees."

Neil Stern, a partner with Chicago retail analyst firm McMillan/Doolittle, said he sympathizes with both management and workers.

"No one can say these retail workers are making too much money," Stern said. "At the same time, these companies are operating on an uneven playing field in terms of labor costs, and that can't continue."

Whalin calls the grocery industry invasion by box stores like Wal-Mart and Target, warehouse clubs like Costco and even drugstore chains like Longs a "sea change."

"Supermarkets have to do better at wringing the costs out of everything," he said. "But no matter what they do, in the long run they can't compete. Ultimately we're going to see fewer chains operating in each region — two, not three or four."

[kancel]

>>"All we hear from management is 'Do more,' " said Kay Underwood, 49, a 29-year Kroger employee. "We did an employee survey, and the number of us on Paxil, Prozac, blood pressure medicines, you name it, has gone sky high. We're killing ourselves for this company."<<


Is she kidding. When I worked union grocery they used to prevent me from working. I was a bagger while in high school and worked nights. After 9pm or so the store would practically die- I'd do all my front end jobs and be bored stiff out of my mind for another hour or two. There were jobs to done still but baggers couldn't do them according to union rules because the bagger would be taking work away from a checker who made a higher hourly salary.

They deserve the bed they have made. Wal-Mart pays bagger salaries and miracle of miracles there are actually people willing to do those jobs at that wage- just as I would have.

Now their jobs are too stressful. Boo-fricken-hoo. Poor baby. Maybe if you would have accepted some help form lower wage workers instead greedily keeping them to yourselves you wouldn't be in this boat.

[Aquinasfan]

When shopping at Walmart it's important not to allow your bare skin to touch ANYTHING.

LOL!

[Snerfling]

It's just crowded with merchandise. I assume the prices are probably a little lower than at Target, but the mental expense is higher.

On this same vein, we just a had new Kohl's open up. I'd heard about it doing really well in the mid-west, so we went by to take a look. If you've never been in one, it's a real wake-up call for the retail industry.

While Wally has pioneered the super low cost, low shopping experience end of the spectrum, Kohl's has taken an altenative track: reasonably priced merchandise with a GREAT shopping experience.

Jeez, no wonder they're kicking the living sh*t out of Mervyns and perhaps Target/Walmart at some cross-over point. The place has super wides aisles, is kept spotless and well lit, and has basically swiped the GAP look as far as soft wood shelving, etc.

[xusafflyer]

I don't hate Walmart as much as some of you do but there is another superstore that I cannot stand.

It is known as Best Buy.

If you want some great stories about life of the minimum wage worker, check out this site:

http://www.bestbuysux.org/

[adam_az]

I'm no economist and I never claimed to be.

There's also a difference between big flexible markets where specialty stores can make it no matter what, and smaller ones where a single Walmart really can throw everybody else out of business, and they do that; I've seen it happen.

There's no such thing where any store can make it "no matter what." It all depends on the ingenuity of the store owner at meeting consumer needs. If a wal mart "makes" a specialty store go out of business it's not the walmart - it's the consumer who thinks their needs are better being met by the wal-mart. Wal-marts arent like a magnet and consumers like so many iron filings. Consumers moving en masse to loyalty to a new market entrant happens because the consumer thinks they are saving more at the store they move to, or else their other needs are being better met.

Example - I used to live in Scottsdale, AZ which is sort of like the Beveryly Hills of Phoenix. The super wal-mart is very nice there, and i shopped there frequentlyu. Now, I moved to a different part of Phoenix, a downtown area with a lot of historical buildings. There is ONE supermarket here, and it's awful. I drive further to get to a better one, and sometimes drive even further to get to Trader Joes (www.traderjoes.com) or one of a number of Asian groceries I frequent. There is a Super Wal Mart of equal distance to these places... but I won't go there, because it's in a part of town that attracts a clientele of largely illegal immigrants, and is always overcrowded and dirty. Down the block from there, there is another supermarket, which is also always crowded and stinky.

My point, there are a lot more factors that go into INDIVIDUAL consumer preferences than the simple location of a wal-mart. We are not iron filings!

[adam_az]

While Wally has pioneered the super low cost, low shopping experience end of the spectrum, Kohl's has taken an altenative track: reasonably priced merchandise with a GREAT shopping experience

They just opened a Kohls in Scottsdale AZ in a Super Wal Mart shopping center... and the Wal Mart is 2 blocks from another super market, and 5 blocks from tons of other retailers..... and another Kohls 5 miles down the road in a Target shopping center that has a few other clothing stores.

Yay competition. Will some go out of biz? Yup. Why? Because consumers thought their needs were being better met elsewhere.

[AxelPaulsenJr]

LOL, nicely done.

[kancel]

>>Remember what Blockbastard Video did? They drove all the small chains and mom and pops out of biz, then promptly jacked up their rental prices.<<

Blockbuster used to be the cheapest? Blockbuster was always the most expensive. The reason to go there was they were well laid out, they had more than two copies of any given current hit and they had all the "movie theater" extras- cokes, popcorn, candy. it was one-shop stopping. Plus if you rented at one location you could still drop it off elsewhere if you were out. With mom and pop you had to go back to that location- which meant you had to stay local and they rarely had drop boxes. Changes like drop boxes and implementing a share system with other stores to compete with Blockbusters convenience could have saved mom and pop stores.

We use Netflix now- they must have the sweet deal with the post office though. Or they must expect a lot of "gym membership" customers who pay the monthly but hardly ever rent. Hope they aren't slashing their throats, it would be a shame to lose them.

[oceanview]

walmart rents DVDs through the mail just like netflix.

[kancel]

>>5) Every Wal-Mart I've ever seen built has led to dozens of other businesses opening up around them, not resulting in an entire town shutting down.<<

The new Wal-Mart here was responsible for getting all the roads around it fixed- potholes got fixed, lights put in, streets widended. We also have a lot of growth around it. I dont know if Wal-Mart is the chicken or the egg but they don't seem to be hurting us. I wish they were a SuperCenter though...

[Wright is right!]

"On this same vein, we just a had new Kohl's open up. I'd heard about it doing really well in the mid-west, so we went by to take a look. If you've never been in one, it's a real wake-up call for the retail industry."

We have one here that my wife really likes, although I haven't yet been. She says it's a lot like the erstwhile Upton's, a chain that went out of bidness simply because its Aussie owners got bored with selling "clothes and stuff." Not making this up. The chain was in the black and had a loyal following. But the owners said they simply wanted to "do something else."

Michael

[jpsb]

What you don't see is the dozens of mom and pop stores closing down thru out the entire area. What will happen is that you'll have a cheap distribution center that will serve everyone for miles around and you have bars. But you will lose the little retailers that used to do business in the area. The local hardware stores will die, the local shoe store will die, the local grocery store will die etc. But hey, the bars will still be there!

[sandydipper]

I like Wal-Mart it's one stop and it's always cheaper. Competition should model thier stores after the Wal-Mart success.

[Wright is right!]

"It's just crowded with merchandise."

Half-full or half-empty. I LIKE a store that's crowded with CHOICES as opposed to a store that looks sparsely stocked and unlikely to have the particular variation of a product I'm looking for.

My biggest beef about Wally World is that, of the brand names they carry (which is a large list), the items FROM those brands tend away from the brands' top-of-the-line models. They carry only the low-mid range of any given brand, making it difficult to apples-to-apples with other stores on the same gear. Like didge cameras. They won't have the current model numbers, but a super deal on what was new 6 months ago. So I don't shop them for those items. But there are plenty of other things I DO buy there, and until the new 24/7 Superstore opens 3 minutes from here in two weeks, I'l occasionally make the trip and put up with the laid-off minority state employees staffing the registers and the obese women with 90 churldrin in the aisles to save on stuff that would cost 50% more at Le Krogere' or Publixissimo.

Michael

[strongbow]

Whoa there PGalt, you may be on to a fundamental truth not desired by the left to be exposed.

[grania]

Most people wash their new underwear before making it

Freudian slip?

[suzyq5558]

There isnt a supercenter walmart in my part of the world but there is a plain ole walmart about 8 miles down the road.And im almost afraid to admit it but yikes ! i do shop there once a month to save a few sheckels on my laundry soap and toothpaste.
im going this afternoon to get the kids there holloweenie costumes. i see no need to drive 15 miles outa my way when wally world is much closer to me.
on the other hand i dont buy any of our clothing there nor would i probably buy food stuffs from wally world. and the store i go isnt crammed with people like at a swapmeet but then again i live in a rural area.
i like wally world for some things and i like my winco for food shopping. i guess im a penny pinching tight wad but i try to get as much as i can out a dollar.

[PeoplesRep_of_LA]

At the Cross Lanes Kroger, striking UFCW workers say Wal-Mart's opening five years ago cost their store $100,000 in weekly receipts — between a third and a half of the store's income.

What what what? "Cost" Well I thought that money grew on trees to the UFCW? Where did this "store's income" verbage come from all of a sudden?

These people make me sick, they price themselves, and American workers in general, out of the competitive market place. Claim that they are helping "the working man" the whole time, and the only thing they seem to spread is bitterness, anger, and class envy. Terribly sorry, but if there is any justice in the world-no skill jobs like that would be making very little.

Course the word "justice" certainly has been perverted by the Hard Left over the past few generations, I doubt anybody knows the meaning of the word anymore. Thank goodness the Reverend Jackson is out here in SoCal to preach to us its meaning.

[Grit]

Netflix is great, been using it for years as well. Takes exactly 2 days to get a movie.

But even they have online movies nipping at their heels. 'Adapt or die' is the way it has always been.

[suzyq5558]

you go girl!!:) i saved my few sheckels on laundry soap this month at wally world and didnt go home wondering to my self g-d am i walmart slut? have i no shred of diginty? i hope no one saw me there .oh the horror!!!!