Always Low Prices--Always.

I would have pointed out Steven Greenhouse's article in today's New York Times, but it doesn't say much more about the anti-WM conference that the BusinessWeek article by Wendy Zellner I already discussed. There is only one part of the article that seems extraordinarily absurd to me, and it's not the one that claims--without a source--that 1/3 of all WM employees have no health insurance. I take issue with the idea that WM sets the trend for wages in the US:

"In short, the company's management legislates for the rest of us key components of American social and industrial policy," Mr. Lichtenstein [history professor at the University of California] said.

Wal-Mart has created a very different model from General Motors, he added, noting that G.M. helped build the world's most affluent middle class by paying wages far above the average and by providing generous health and pension plans. Mr. Lichtenstein said G.M.'s wage pattern spurred other companies to raise compensation levels, while Wal-Mart's relatively low wages and benefits — its workers average less than $18,000 a year — were doing just the opposite.

I do not accept it as fact that WM "legislates" in any fashion. It is not a government. Neither does it set the trends in the entire economy. I do not belive that it sets the trends for the retail sector overall, although it may set trends for competing low-end businesses.

WM may be the largest private employer in US and Mexico, but that doesn't mean it sets national policies, or that dominates labor markets, or that other companies want a workforce that looks like WM's.

Just how dominant is WM in labor markets? Far less than the federal government. It employs 1.4 million people out of a national level of employment of about country's 130 million nonfarm employees. That's a little over 1%. Since there are about 22 million government employees in the US; shouldn't their payment practives "set the trend" for the private sector far more than WM, given that they compete directly with the private sector for employees in almost all labor markets?

Kevin's post about the opposition to the Neighborhood Market store in Denver got me wondering: How many people even know what a WM Neighborhood Market store is like?

The only place I saw them was in Overland Park, KS, and they were brand-new there. There were two of them within a mile or two of each other. I did not go inside them, but I did drive in front and look in. (That is a warning as to the accuracy of the following impressions.) These stores are nothing like a regular Wal-Mart. They are small, pretty-looking buildings from the outside, slightly smaller than, say, a standard Safeway/Kroger/Albertson's store, with a smaller parking lot. (At least, it looks smaller.) The signage is attractive, and the front of the store is mostly glass, not concrete. It seemed that it would be a somewhat nicer place to shop than a Safeway, with low shelves and comfortable lighting. It looked like it would be a far nicer place than a Walgreen's, even given the larger size. Without actually being able to make out the goods, it looked a more like a Whole Foods Market than a standard grocery store. If I'm ever near one again, I will be sure to go in a pay closer attention.

I think if the Denver residents who opposed the store had actually seen these markets, they may have felt differently.

VikingPundit links to an article in the Economist about WM's growth potential, which they conclude is lower than in the past, not due to its already immense size, but due to more union and legal resistance in areas it has yet to penetrate deeply::

A force for good?

In the popular imagination, Wal-Mart ruthlessly exterminates the competition, especially local mom-and-pop retailers. Yet as Bain's Mr Rigby argues, Wal-Mart is more than just a destructive force. "Wal-Mart is good for retailing in the same way that any good predator is good for an ecology," says Mr Rigby. "Life works through struggle, and many retailers are better today because of Wal-Mart."

A number of retailers in America have gone up against Wal-Mart and survived--even thrived. They have deliberately avoided trying to do the same thing as Wal-Mart.

Later on it adds:

Indeed, in many cases manufacturers actually make more money selling through Wal-Mart than through other retailers.

See also VP's link to a Boston.com article filed from Wisconsin:

Democrats have vilified Wal-Mart as an icon of corporate greed for its reliance on cheap, foreign-made goods. Republicans have countered by pointing to satisfied shoppers like Lawrence.

There are many reasons why people hate WM: its censorship of magazines, ugly stores, poor quality merchandise, catering to sprawl, low wages, poor treatment of workers, high profits, its success, competition against small businesses ,etc. Community resistance to WM is made up of all these strands, and when one reason is knocked down, another is picked up. But a general belief is that WM is a net cost to a community.

In this vein, the Rocky Mountain News reports on local resistance to a WM Neighborhood Market in northwest Denver:

"If this proposal was from anyone else other than Wal-Mart, we would not be here in the midst of this controversy," [the WM representative] said.

The crowd applauded Perry's words but not his point: that a 40,000-square-foot Wal-Mart concentrating on grocery and pharmacy business was indeed different from its larger suburban Supercenter cousins, and would still be consistent with the assiduously planned urban neighborhood.

Wal-Mart is Wal-Mart is Wal- Mart, residents said, whether the store calls itself a "Neighborhood Market" or not....

As for the idea that only Wal-Mart can sustain the development project, longtime resident Linda Bevard said anything is preferable.

"A better legacy than a Wal-Mart would be a vacant lot," she said.

The Emek Basker study (big PDF file) that shows an increase of 50 retail and a decrease of 20 wholesale jobs, on average, with each new WM surprises the head policy consultant at the LA Economic Development Corporation:

In January, a study by the Los Angeles County Economic Development Corp. found an individual family could save $589 a year on groceries by shopping at a supercenter. Overall, shoppers could save $3.76 billion in a seven- county region of Southern California, according to the $65,000 report, which was commissioned by Wal-Mart.

Gregory Freeman, the LAEDC's director of policy consulting, said he was surprised by the Missouri report's findings new Wal-Mart stores could produce more jobs, not fewer.

"I think you'd have to be," Freeman said. "Part of the reason we agreed to do the study was it seemed like all you ever read about Wal-Mart was that they destroyed jobs."

Dave Newbart of the Chicago Sun-Times writes about WM's PR campaign. Remember, there's no more reason to believe WM is telling the truth than its opponents:

The strategy, the officials said in a meeting with the Chicago Sun-Times editorial board Thursday, is to finally respond to the voluminous attacks against Wal-Mart, many of which are inaccurate, they said. No more will the Arkansas-based retailing behemoth be content to satisfy customers while ignoring the press.

IMHO, WM opponents don't understand that the company hasn't really fought all that hard yet:

"We've been unfairly maligned,'' said B. John Bisio, Wal-Mart regional director of community affairs for the Midwest. "There is a real misrepresentation of the facts.''

Wal-Mart's bid to open two stores in Chicago has been strongly opposed by unions and some aldermen, who questioned Wal-Mart's treatment of workers and hostility toward unions....

Asked why Wal-Mart has opposed any unionizing of its American workers, Bisio said unions are not necessary because their Chicago area workers are paid, on average, $10.77 per hour.

He said union officials have unfairly targeted his company in an industry where there are few unions. "Wal-Mart has been painted into a corner by unions who want to organize Wal-Mart because it is 1.3 million-strong,'' he said.

We learn from Sprawl-Busters that one Malcolm McComb III was falsely accused by WM and police and arrested for counterfeiting a $!00 bill:

A Pike County Circuit Court Jury awarded McComb damages, but it took McComb nearly five years to win his case. In April of 1999, McComb went to Wal-Mart to shop after cashing his paycheck at a local supermarket. He paid the checkout clerk with a $100 bill. The Wal-Mart "associate" called store officials over, and store employees called in the police. "The male officer told me to empty my pockets," McComb testified. "I emptied my pockets. He searched me and said I was under arrest for counterfeit money. It made me feel embarrassed and angry." McComb had to take off work the following day to visit the police station. He was told then that his bill was authentic, and the charges had been dropped.

Sprawl-Busters makes it sound like there was no reason to suspect Mr. McComb, who was abused by police and WM. Except that the reason he was accused was that the $100 bill was printed in 1950:

The challenged bill was a 1950 series, which explained why it appeared to be different from other bills and did not react well under testing, said McComb's attorney Ed Bean of McComb.

Police said they had changed their procedures because of the lawsuit.

Even more detailed and to the point:

It lacked the words "In God We Trust," a special identification strip and a watermark. Also, a special pen indicated it was phony as well.

So if Sprawl-Busters was even-handed and fair in its treatment of WM, it would have indicated that WM's actions--and those of the police, while clearly wrong after-the-fact, were made on good faith. Calling in the police when all the standard tests showed the bill a fake is a reasonable action that many other propreitors would also have taken.

However, large chain stores pay dearly for proven false arrest claims; we can rest assured that WM will not make this costly mistake again.

It's often implied by anti-WM activists that WM won't budge an inch, but in Ozark, Missouri, the town found WM more than willing to modify its design to meet the aesthetic requirements of local government:

"It's warmer, it has more rooms, and it has grown back to the way a department store should look," Spells said.

"It doesn't look like a discount store. It looks more like Target."

The Ozark Supercenter, like many other newer Wal-Mart stores across the nation, reflects an effort by the corporation to add more allure and prestige to the world's biggest discount chain....

Rather than the signature blue-gray box design, the Ozark Supercenter was built with concrete blocks in an earthy tone to create a brick look on the outside.

Inside, the store features wooden floors in its clothing department. And, as in many newer stores, skylights throughout the ceiling let in more natural light to the Ozark store, brightening up the entire retail space....

Merchandise --— from towels to soaps to cucumbers to tires -- are arranged neatly on shelves.

And clutter is nowhere to be seen....

Some of the changes come from regulations of local planning and zoning commissions, Weber said, but Wal-Mart has been willing to comply.

Ozark Mayor Donna McQuay pushed for the brick look for the Supercenter, and she said Wal-Mart officials quickly accepted the idea.

Also see the sidebar, which points to about an actual academic study of WM:

Emek Basker, an MU assistant professor of economics, came to this conclusion after examining employment data from 1,749 counties and 2,383 Wal-Mart stores across the country between 1977 and 1998.

His study shows an average of 50 new retail jobs are created in counties that have Wal-Mart stores while 20 wholesale jobs are lost.

On Mises Blog, Tracy Saboe made the following comment, which ALP was been given permission to reproduce:

For the most part, Wal-Mart is a good company.

It makes customers happy, that's what companies are suppose to do.

When costs get cut, sometimes wages go down -- but the buying power of those wages go up. I.E., real wages go up.

I don't fault Wal-Mart for their hiring and firing practices, or for how much they pay. It's their business. They can do what they want with it. I'm not one of those liberals who goes around screaming "it's not fair" just because a company needs to downsize. I tell them, "Life isn't fair. Get over it."

Actually one thing that I've learned after discovering libertarian thought and more specifically Austrian Economics that's made me a better person is just how much of a good thing it is that life isn't fair. If it were, we'd have a very stagnant society. It's the unfairness and the inequalities in life that make trade possible in the first place. If everything were perfectly fair -- there'd be no reason to trade -- nothing to look up or forward too, and hence no reason and hence no way to better ourselves. For how can one better oneself if one has no way to know being better is possible, and even if on a hunch tried, is inherently incapable of knowing which various ways of betterment might be possible. One needs to see others better then one's self, in order for such thoughts to even be
possible.

However. On the more sinister side, Wal-Mart is beginning to bed more and more with Federal, State, and Local governments now.

It receives numerous subsidies from the US government to invest in foreign Countries. Through the Market Access Act, the Import Export Bank, and others, our Tax Dollars are being used to subsidize Wal-Marts losses in foreign countries. These are the same programs that FDR used to subsidize the Communism in Russia with our tax dollars. They haven't been abolished yet, after all these years. Another thing is that Wal-Mart uses local governments in a lot of places to steal property for it through Eminent Domain laws. Eminent Domain is government thievery in and of itself, but this is far worse. Local governments will condemn a place, and then only be required to compensate the owners for a fraction of the value, and then give the property to Wal-Mart. Not to mention the subsidizing to its grocery section in the form of food stamps. (See my own personal parting of ways with Wal-Mart in Walmart, Little Debbies, and Food Stamps .)

But these actions are no different from any other big corporation large enough to have political insiders. In many ways Wal-Mart is forced to partake in these despicable acts of government thievery because, "everybody else is doing it" and if it doesn't, it'll go out of business. After all, it has to compete. They're just trying to figure out how to maximize profit -- a noble goal to be sure.

The real problem is a government that does not respect private property rights anymore.

If you would like to make a one-time post to ALP, or to join ALP, please email me at kbrancat@gmu.edu

As J.H.Huebert rightly pointed out in his comments to this post, one cannot infer "what a community wants" unless every individual in the community wants it. Even if you consider that stance extreme, you must admit that what the community wants cannot be deduced solely from the existence of organizations formed by a small subset of community members.

In fact, for nearly all communities, there is no generally accepted way--by members of the community or outsiders--to determine whether "the community" badly wants a Wal-Mart, or whether it is seriously resisting one. I am reminded of this confusion by the population of Rosemead, CA:

Two groups have formed to go head to head over the next few months.

Save Our Community, which opposes a Wal-Mart, was formed when the Wal-Mart idea was first floated two years ago. Since then, Save Our Community has gathered about 40 active members and boasts a mailing list of 250 residents, said L.C. Bevington, chair of the community group.

Members of Putting Rosemead in a Desirable Environment, or PRIDE, met for the first time last week with a Wal-Mart consultant to strategize in favor of the store.

Wendy Zellner of BW goes to a WM conference at UC Santa Barbara, and finds the same "litany" that one finds in the reports from major media outlets and anti-WM campaigns. But somehow, she is surprised at this; she shouldn't be if she did a Google News search for WM:

"There's no such thing as 'Wal-Mart studies,' but there's something going on here," says Lichtenstein. Historian Susan Strasser from the University of Delaware says when she mentioned her plans to attend the conference to friends and acquaintances, she was stunned at the level of interest it generated.

Not surprisingly, on this liberal college campus in a city obsessed with urban planning, those attending were a decidedly anti-Wal-Mart crowd. One of the panelists was a United Food & Commercial Workers researcher. Another was a lawyer involved in the massive sex-discrimination suit against Wal-Mart. Many of the academic participants acknowledged that they rarely, if ever, step foot in a Wal-Mart store, and few had ever visited Bentonville, Ark., the company's headquarters.

The Moscow Times reports that several consultants in Moscow claim that WM's next international expansion will be into Russia:

Since 1991 the company has moved into Germany, Japan, South Korea, Argentina, Brazil, Puerto Rico, the United Kingdom, China, Canada and Mexico.

Where Wal-Mart goes next is a closely guarded secret, but the company does give clues. In January, CEO Lee Scott named China, Russia and India as prime candidates for future expansion. And although, as Scott said, China is the only country where the company could "replicate" what it has done in America, it doesn't represent a new market.

Understanding and adapting to culture is part of the key to a making profit:

n addition to solving logistics issues, the Wal-Mart advance team is likely looking at cultural peculiarities that might affect their strategy, retail analysts say. In Germany, for example, Wal-Mart failed to pick up on certain social nuances -- such as not recognizing that most Germans weren't used to other people bagging their groceries. Partly for this reason, the company has struggled to turn a profit since its entered the country nearly a decade ago.

The newspapers buzzed when WM's initiative in Inglewood, CA failed. But I don't think their reporting brought to light just why WM tried to avoid the city council. Here's what I posted on David Sucher's excellent City Comforts blog in response:

Is this case the rule, or the exception?

Also, I dislike the standard media theme that WM wanted to exempt itself from all local standards. Why would WM want to exempt itself, when its detailed plan already met all those standards?!

Mr. Kanelos, the Wal-Mart official, said that the 71-page initiative spells out the project in minute detail, including building materials, traffic flows, landscaping and even plumbing fixtures. Each of these provisions "meets or exceeds every local and state building and environmental requirement," he said.

What WM really wanted was to avoid the politicians who control the permit system.

Inglewood city officials and Wal-Mart have been sparring for more than a year. Initially, the City Council tried to keep Wal-Mart from moving in by adopting an emergency ordinance in October 2002 that barred construction of retail stores larger than 155,000 square feet that sell more than 20,000 nontaxable items, such as food and drugs. Supercenters run about 200,000 square feet.

Within a month, the council withdrew the ordinance after Wal-Mart threatened to sue.

The failure of the initiative revealed the worst that social democracy has to offer.

Always Low Prices is actively looking for cobloggers.

If you would like to blog the controversy surrounding the world's largest corporation, send me an email at kbrancat-at-gmu.edu.

There are no editorial restrictions or requirements to blog at ALP, save decency and my personal liability, and the desire to post at least monthly.

And yes, we welcome bloggers who dislike WM, but only if they do so out of logic, reason, and experience--not out of hype.

Reed Hastings of Netflix:

Question: Your biggest competitor for online movie rentals has been Wal-Mart Stores Inc. How serious has the challenge been?

Answer: Wal-Mart entered the market two years ago, and there was a big ballyhoo about how Netflix isn't going to survive. Back then we had 400,000 subscribers. Now we have almost 2 million. In Wal-Mart's case, great company; how've they done online? Not very well. So the fact that we're beating Wal-Mart is not really testament to how great we are. It's because Wal-Mart.com is completely clueless.

The only company in DVD rental that we fear is Amazon. We have 24 [distribution] plants; they only have five. We send out about 3 million packages a week, which is higher volume than all of Amazon worldwide.

Hat Tip: Craig Newmark

In City Journal, Steven Malanga has an article about how anti-Wal-Mart campaigners are becoming more organized:

It is [Wal-Mart's] grocery departments that are at the heart of the battle. They represent a grave new threat to unionized food stores. Though unions have been unable to organize the discount industry—Wal-Mart competitors like Target and Kohl’s are also nonunion—they have been much more successful in supermarket chains, so when Wal-Mart began pulverizing the grocery competition with its low prices and vast selection, it threatened union gains…

In response to this success, a coalition of more than 30 unions and left-wing activist groups organized a national day of protest in October 2002, urging shoppers to boycott the company as a “Merchant of Shame.” The boycott campaign got no results, but the coalition’s legislative battles are another story. California, where Wal-Mart has only one super center but wants to open 40 or so, is currently the main front in the war…

But the real isn't job losses; it is union wages…

The article is very pro-Wal-Mart. I am also and generally agree with the article. But there is one thing I would like to know more about. Malanga makes the point that Wal-Mart is “embracing a fundamental redefinition of health insurance as protection from catastrophic illnesses that can financially ruin employees, rather than a benefit meant to pay for every health-care bill.” While I do think that the country would be better off if insurance was considered this way (or better yet, if it were purchased by individuals rather than their employers), I have questions about the degree to which employees benefit from the cost savings, and about the eligibility of employees to receive coverage. Still, it's a free market, and if workers in Los Angeles didn't like the pay and benefits at Wal-Mart, they don't have to work there.

The always interesting Craig Newmark notes two views of WM:

Earl Ofari Hutchinson concedes that Wal-Mart ". . . promise[s] to bankroll private development in economically depressed areas without asking for a dime of taxpayer dollars, thereby creating thousands of new jobs . . ." But Mr. Hutchinson vigorously opposes Wal-Mart's effort to locate stores in those depressed areas because it has ". . . a well-documented record of labor and environmental abuses, and a much-deserved reputation for corporate arrogance . . ."

Excuse me, but isn't just about the biggest labor abuse not having a job? Isn't the opposite of environmental abuse doing business in run-down, inner-city areas that other businesses won't go near?

Walter Olson has his usual cornucopia of links, this time regarding the rapidly expanding practice of suing WM.

This article, which is an excellent introduction to the forces arrayed against WM, quotes economist Kenneth Stone:

[A] growing body of economic impact research contradicts the developers' rosy win-win scenarios. Kenneth Stone, an economics professor at Iowa State University, has tallied 53 types of businesses with which Wal-Mart competes, and has tracked a startling swath of destruction.

Stone pioneered research on the Wal-Mart factor in Iowa cities with populations of 5,000 to 40,000, tracking sales from as early as 1983, and more recently examined the Supercenter onslaught in Mississippi. In his 1997 study, "Impact of the Wal-Mart Phenomenon on Rural Communities," Stone found that between 1983 and 1996, the average Iowan spend 42% more in "department stores," (qualified as "primarily" mass merchants) than in 1983. In men's clothing stores alone, consumer spending eroded by 59% in the same period, resulting in the shuttering of 60% of these businesses. And, though host communities did see some general growth in transactions overall in the years after Wal-Mart's arrival, 10 years later, host towns lost an average of 4% of total sales, some towns of less than 5,000 losing half their retail trade. And, due to the magnet effect of Wal-mart, sales transactions in neighboring towns declined 15 percent.

"Obviously, there's a zero-sum game involved here," says Stone. "If you plop down a 200,000 sq. ft. Supercenter someplace like Ankeny, Iowa (population 27,000), and are expecting your average $75-80 million a year in sales, that money doesn't come out of thin air. It comes from somewhere else."

This is either completely irresponsible economics, or inexcusable reporting. Stating that host towns and neighbors losing total sales volume is somehow a net cost to the area is completely unfounded. The implication is that the loss of small businesses means quantity sold has decreased. But instead, the net sales volume is down because WM--and other big box--prices are far lower than small-town merchants, overcompensating the increase in quantity sold due to price reductions. [Economists would state that demand was inelastic].

The Sports Economist notes that some cities are very picky about their big boxes:

Meanwhile, in Fort Worth, Texas, local politicians are pitching a $40 million dollar subsidy to lure a Cabelas Sporting Goods Superstore to their city. This brings to mind the Mississippi subsidies for a Bass Pro Superstore/baseball stadium project discussed a few posts below. There is a precedent here, and it does not bode well for taxpayers.

Regardless, it's a mysterious process that bans one flavor of superstore, and grants another millions in subsidies. What a country!

Hi. I'm a new co-blogger on this blog. I'll try to find my niche here, but I'll start out posting about a couple of topics: the shopping experience at Wal-Mart (in comparison to other stores); and the cultural effect Wal-Mart stores have on the communities around them.

First, a little background on my position on Wal-Mart:

I do respect Wal-Mart, and I think that America is clearly better because of it. I think that most campaigns against Wal-Mart are wrong, although I do sympathize with some of the smaller local merchants in some communities who are unable to compete against them.

But I really dislike shopping there. Wal-Mart stores are cluttered, with stuff piled up in narrow aisles. It's hard to find items that you're looking for. The lighting is bad, partly because the shelves are too high. They're noisy. The displays are unattractive. They're not as bad as K-marts go to be, but they're far worse than any Target.

And then I suppose I'm a bit of a snob, but some of what they sell really is really crappy. If I were buying basic dishes and kitchenware, or something like a lamp, I would not go to Wal-Mart. I would much much rather spend the extra 35 cents or whatever at Target. On the other hand, I would first go to Wal-Mart for basic automotive supplies or lightbulbs. While there, I might pick up commodities like detergent, or nationally-branded stuff like toothpaste, and maybe items like greeting cards and toys.

At any rate, that's how I felt when I lived in the environs of major cities where there was a vast selection of big-box stores (Target, Best Buy, Bed Bath & Beyond, etc.,), major malls, speciality retailers, departments stores. I felt differently about it when I lived in an urban downtown, and again differently when I visit family in a small town way out in the Nevada desert. That's all I'll say for the intro, but I'll post more about this later.