Americans & Wal-Mart

Wal-Mart's influence on the U.S. economy has reached levels not seen by a single company since the 19th-century rise of Standard Oil, economists and historians say. Even if you don't shop at Wal-Mart, the retail powerhouse increasingly is dictating your product choices -- and what you pay -- as its relentless price-cutting helps keep inflation low.

Wal-Mart is the top seller of groceries, jewelry and photo processing. It is moving into banking, used-car sales, travel and Internet access. It averages 100 million customers a week.

Anyone whose stocks rose in the late 1990s owes Wal-Mart, the world's biggest company. It alone accounted for as much as 25 percent of the U.S. productivity gains from 1995to 1999, says consultant McKinsey & Co. Such gains drove corporate profits, thus stock prices. Wages in retailing, one of the biggest sources of new jobs in the '90s and current decade, are also affected by Wal-Mart.

"I joke we're all going to be working for Wal-Mart someday," says economist Mark Zandi of consultant Economy.com.

Although Wal-Mart is hitting speed bumps because of growing labor challenges, employment lawsuits and higher costs, few doubt it will stop besting competitors as it expands. While other retailers such as Home Depot, tech giants such as Microsoft and manufacturers such as General Electric played big parts in the 1990s productivity gains, Wal-Mart, with its massive buying power and technology advantage, played the biggest role, economists say. As it grows, its influence, largely unknown to consumers, will continue to seep into more parts of the United States and the global economies.

"Everyone knows Wal-Mart," says Jim Hoopes, a business history professor at Babson College, "but nobody has a real sense of how big and how powerful it is."

Few companies have moved so far so fast. Founded 40 years ago in rural Arkansas by Sam Walton, Wal-Mart has swelled to 4,300 stores in nine countries and annual revenue near $250 billion. Its computer network, a critical part of its success, rivals the Pentagon's.

It is now the biggest customer for many of the world's leading consumer-products companies, including Kraft, Gillette and Procter & Gamble. At P&G, Wal-Mart accounts for 17 percent of annual revenue, up from 10 percent just five years ago. That makes those companies more dependent on Wal-Mart's success, more vulnerable should it stumble and more likely to respond to Wal-Mart's requests for lower prices and product changes.

The chain's buying power is so immense that 450 suppliers have opened offices -- many in the 1990s -- near Wal-Mart headquarters in tiny Bentonville, Ark. As many as 800 more such offices are expected in the next five years. Sales representatives want to be near Wal-Mart buyers to beat the competition, says Rich Davis, a local economic development official.

# PRODUCT CHOICES. P&G is dumping weak brands, such as Crisco and Jif peanut butter, sold to J.M. Smucker last year. It wants to focus on heavy hitters, such as Tide detergent, most desired by Wal-Mart and other big retailers, P&G says. That strategy helped P&G boost fiscal second-quarter net income 14 percent year-over-year to $1.5 billion, it said.

Other companies have tweaked products so that they pass muster with Wal-Mart. Video-game maker Planet Moon Studios two years ago wanted an industry group to give its "Giants" game a teen rating. Why? So it would be carried by Wal-Mart and others. Planet Moon changed the color of blood in the video to green from red, toned down the language and put a bikini on a topless character, says CEO Bob Stevenson. Without those changes, he says, "The risk to sales was too high."

Wal-Mart is also challenging its suppliers by developing more of its own products, called "private labels." It stepped up that effort in the mid-1990s as it expanded into vitamins, batteries and bathroom tissue. Its Great Value grocery line has 1,475 items, up from 194 two years ago.

Wal-Mart says it is committed to keeping shelves full of well-known brands such as Kellogg' cereal and Tide. But, in general, private-label profits run as high as 30 percent, vs. 15 percent on brand-name items, says Burt Flickinger, managing director of consultant Reach Marketing.

Private-label products also promise Wal-Mart more profit as the chain expands abroad, because U.S. brands don't have the same clout there. In Europe and the United Kingdom, where Wal-Mart is battling for Britain's Safeway grocery chain, private-label goods are 50 percent of its sales vs. 25 percent in the United States.

# PRODUCT PRICES. Big food companies including Kraft, which gets 10 percent of its revenue from Wal-Mart, have not been able to raise prices as quickly as they once did because of Wal-Mart's demands, says Jonathan Feeney, a consumer products analyst at investment firm SunTrust Robinson Humphrey. Kraft declined to comment.

History has shown that suppliers suffer if they run afoul of Wal-Mart. Rubber-maid raised the prices it charged Wal-Mart in the mid-1990s because of an 80 percent jump in the cost of a key ingredient in its plastic containers. The retailer responded by giving more shelf space to lower-priced competitors, helping drive Rubbermaid into a 1999 merger with rival Newell, says John Mariotti, a former Rubbermaid executive. "Rubbermaid earned Wal-Mart's wrath by not giving it the best deal," he says.

# EMPLOYMENT. Wal-Mart's impact on wages was first felt in rural towns in the South and Midwest where Wal-Mart got its start. Often, it became the biggest employer overnight, setting wage rates for all retailers, experts say.

Now, its impact on retail employment has spread nationwide, contributing to slower wage growth throughout the sector, economist Zandi says.

Pay for retail workers rose 43 percent from 1990 to 2001, vs. 50 percent for non-retail workers, according to Bureau of Econo-mic Analy-sis data. No one knows exactly how big a part Wal-Mart played, Zandi says. But its influence is "undeniable" because it created more jobs in the 1990s than any other company, he says. More retail jobs are on the way. Wal- Mart plans to add 800,000 workers in the next five years. U.S. re-tailers are ex-pected to add 3.1 million jobs by 2010, the govern-ment says.

Manufacturers, which pay more, will add fewer than 600,000 jobs in the same period. Labor unions that represent factory workers are alarmed. They say Wal-Mart, in demanding ever-lower prices from suppliers, has helped drive thousands of U.S. manufacturing jobs abroad, where labor costs are lower.

Now they worry about Wal-Mart's push into the unionized supermarket industry. Wal-Mart has no unions. That means its employees earn less than those at competing supermarkets, says the United Food and Commercial Workers.

Wal-Mart's hourly pay averages $7 to $8 an hour, vs. $11 at Kroger, Safeway and other competitors with unions, says UFCW spokesman Greg Denier.

Not true, says Wal-Mart spokesman Tom Williams. While he would not disclose wages, which vary by market, he says Wal-Mart pay is close to or equal to union wages.

# PRODUCTIVITY. Wal-Mart's key role in the 1995-99 economic boom came partly because of its legendary use of technology to analyze costs and speed delivery of goods from its 30,000 suppliers to dozens of sprawling warehouses, say retail and financial analysts.

Wal-Mart says it has the nation's biggest private satellite communications network, one that links stores to Bentonville by voice, data and video. Suppliers tap directly into Wal-Mart's computers to track sales of everything from soup to nuts, which improves inventory controls and cuts costs.

Other retailers, including Kmart, tried matching Wal-Mart's tech prowess but failed. Kmart filed for bankruptcy-court protection last year and is cutting 67,000 jobs and closing nearly 30 percent of its stores.

Wal-Mart also teaches manufacturers to be more cost-effective so product prices can stay down. For example, Wal-Mart might suggest that a supplier cut its labor costs by shipping toasters in their cartons, rather than packing them in bigger boxes and shrink-wrapping them onto shipping pallets, says James Champy, chairman of Perot Systems' consulting unit, which advises Wal-Mart suppliers.

Such close communication between a retailer and supplier is unusual. But it's being adopted by more companies, including Dell Computer, as U.S. businesses seek more productivity to better compete globally.

That future may also include fewer companies. To achieve economies of scale, more consumer products companies are merging. Wal-Mart's demand for low-cost products partly influenced Kellogg's purchase of Keebler in 2001, and the merger of Kraft and Nabisco in 2000, analyst Feeney says.

"We're all working together; that's the secret. And we'll lower the cost of living for everyone, not just in America, but we'll give the world an opportunity to see what it's like to save and have a better lifestyle, a better life for all. We're proud of what we've accomplished; we've just begun."

The mom and pop stores are really charming until you want a selection of good products at fair prices

I've got nothing against mom and pop stores in principle. But to ascribe to them some mystical virtue is unwarranted. If they really were "better" than Wal-Mart, people would keep patronizing them. And some such stores do survive.

The anti-WalMart thing really is liberalism at its worst. Some people cannot stand the fact that their fellow citizens make free choices with which they disagree. If someone decides to withhold their patronage because they don't like Walmart, that's fine by me. It's when people think "something has to be done about WalMart" that I start looking for the commissars.

After Sept.11, I remember reading that WalMart was picking up the difference in pay when employees that were also in the Nat'l Guard and Reserves were deployed. The head honchos figured the families left behind had enough to worry about without added financial difficulties. I'm not sure if this policy is still in effect, but they got my dollar for being supportive of our military and concerned for the families left behind.

wasnt that right around the time thier largest supplier (China) captured our eavesdropping plane and held our crew hostage?

All the anti-vacinationists gone into hybernation? Stuck slumming in the "evil Wal-Mart" threads?

****yawn*****What day is it?

I've been over at Liberty Post refreshing Former Lurker's thread since last month when he promised to do a big post "exposing" me.

God my finger hurts......

Although the anti-WalMarters have the same fanaticism that the anti-vaccinationists do, don't they?

Will NEVER buy anything at Wal-Mart . . . they allow people to return used bathing suits and panties. (My college roommate was fired for refusing to accept said returns.)

Ewwww....and considering some of the people I saw last time I needed to go into one....double ewwww.

I avoid them whenever possible because they treat suppliers like serfs and they refuse to sell "parental advisory" CDs. They are way too moralistic both right (CDs and contraceptives) and left (guns and ammo).

-Eric

If you hold a bake sale or craft sale at Walmart's for an organization, they will double your sale amount up to a certain figure. Don't hear of any other stores doing that. I love Walmart's. I buy almost everything there. Can't beat their grocery prices either. Ames went out of business here so now it's Walmart for almost everything I need. It's been a zoo lately in some of them. Hard to even get a cart because it's so crowded.

I was wondering whatever happened to that. Oh well, the world is probably better off with you covered-up anyway ;).

Well there are legitimate beefs you can make about Wal-Mart, like that disgusting cheese they use for nachos that stinks up the whole quadrant by the snackbar (which is usually by the entrance, cruel really). The pet department always seems to be run by total stoners that must sleep behind the piles of dogfood, can never get somebody to get a fish for you. The commercials are insipid, and I hate how they've designed their checkout section, and the aisles are too narow. But really I see the exact same merch (when there's product category overlap) in Wal-Mart as Sears, Target, JcPenny's and BestBuy so this whole China slave labor thing is seriously over blown.

People bash Wal-Mart for the same reason they bash Microsoft, AOL and the New York Yankees. They bash them because they are number one in what they do. It's also why the rest of the world hates the USA. We're the number one economic and military powerhouse in the world and most other nations can't deal with that. So they are always trying to "bring us down to size."

BTW, I hate AOL but only because they consist of a bunch of anti-American commie sympathizers (i.e. Ted Turner, CNN), not because they are the number one Internet provider.

Also, notice that since FoxNews topped CNN as the number one news network, they are coming under increased scrutiny. Even people here are starting to trash them. It's natural to be hated when you are the top dog.

How's this for irony for you? Had Apple played their cards right and become the dominant OS and it was Microsoft that was the perpetual underdog, we would have endless Apple-bashing threads here and calls for the government to break it up and give smaller companies like Microsoft a chance.

If Apple had played their cards right we'd be talking about not just poor mistreated MS but also dear underdog Intel. Remember the Apple model was for TOTAL monopoly, hardware, OS, and a lot of the software.

It's because America loves underdogs. We're the country where advertising that your #2 so you have to try harder is actually a successful campaign. Which probably has a lot to do with why monopolies don't have a very long shelflife here even when the courts don't intervene.

Would you buy diapers made by Jews in Nazi Concentration camps?

Even stipulating that Jews made diapers during WWII, they would not have been available in America, except to specialty markets which, most likely, would have known exactly what they were. (Likely, diapers from the "Old Country".) In fact, hausfraus would have made their own diapers by cutting up old bedsheets and the like.

In the real world, in 1940 would have you bought a Ford, even knowing of Henry Ford's love and respect for Adolf Hitler? Assuming, of course, that you were in the market for a new car in 1940.

I have a love-hate relationship with Wal-Mart. I appreciate the fact that they pass on low costs to their customers, but I can't stand buying Chinese made products. I always check to see where a product is made, and often Wal-Mart will offer several similar products so I can choose to buy the one made in the U.S. (or at least Korea, Thailand, anyplace but China). However, there are too many times when Chinese made products are the ONLY ones of a certain type that Wal-Mart carries.

Wal-Mart is kicking the competition by offering what the local consumer wants. Here in Wyoming I can buy reloading powder and Shotgun News at Wal-Mart. That amazes me. There is no other national retailer who can so effectively satisfy local tastes.

"After Sept.11, I remember reading that WalMart was picking up the difference in pay when employees that were also in the Nat'l Guard and Reserves were deployed. The head honchos figured the families left behind had enough to worry about without added financial difficulties. I'm not sure if this policy is still in effect, but they got my dollar for being supportive of our military and concerned for the families left behind."

- Many companies do this for it is good PR. I work for P&G and they also will make up the difference in your salary if you are deployed. The only problem is you must be deployed "on purpose". You can't volunteer to be deployed, your whole unit must be activated making you "have no choice". This is unfortunate. I'm a drilling reservist (UH-60 pilot) and my unit hasn't been called up and it probably won't be. However, there are many slots needed for my specialty in other units. I could volunteer and get a slot easy. I just can't afford the cut in salary. Knowing I served 8 years active duty helps me get over the guilt.
As a P&G employee, I can echo this articles sentiment about Walmarts power. We don't make a product move without their practical say-so. All or new product launches revolve around their schedule. They're really re-defining the consumer products environment.

But really I see the exact same merch (when there's product category overlap) in Wal-Mart as Sears, Target, JcPenny's and BestBuy so this whole China slave labor thing is seriously over blown.

Which is why I asked High Road what items WalMart has that are made in China that other stores don't have. After one of the last bash WalMart threads I took a quick walk through the store the next time I was there. Since most of the stuff they sell is in every other store, I really couldn't figure out what they were referring to. About the only items I could imagine would be different from store to store would be clothing. So I did a fast check of the tags of selected clothes racks and I didn't find one piece of clothing from the far east. I'm not saying there aren't any, but it isn't as bad a these WalMart haters say it is.

BTW, does anybody know if it is possible to have a PC (or Mac, for that matter) that doesn't have parts from China in them?

I'm also not terribly convinced by this "Chinese slave" thing. You hear things quoted like 12 cents a day, but in real buying power within China how much does 12 cents a day get you? I had a friend who spent some time in China and he said he was living high on the hog on a buck or two a day. What's the comparative standard of living? Are they any more "slavish" than America's "wage slaves"?

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*U.S. economy follows the Wal-Mart way; Americans