Think Local - Buy Local

[ponto]

When H. Ross Perot ran for President back in 1992, he coined a memorable political phrase. The passage of the North American Free Trade Agreement, he said, would create "a giant sucking sound" -- the sound of jobs escaping out of the U.S. and into Mexico.

Today, if you listen carefully, you can hear a second giant sucking sound: Wal-Mart sopping up the vitality from middle-class American families, local communities, and the national economy

EMPTY DOWNTOWNS. This happens in three different but related ways. First, there's the clobbering of Main Street: Wal-Mart moves in on the edges of towns, and the much smaller downtown merchants, unable to match its prices, soon go under. Second, there's the miserable wage and benefits package offered by Sam Walton's creation. And third, there's Wal-Mart's purchasing strategy, which seems to be about buying American-made products only as a last resort -- to the point that today Wal-Mart, by itself, is China's eighth-largest trading partner!

UNCOVERED WORKERS. Overall, only 38% of Wal-Mart's nonsupervisory workers receive health-care benefits, according to the United Food & Commercial Workers Union

Wal-Mart has gone so far as to actively instruct its employees on how to apply effectively for government health-care programs like Medicaid.

Judging by any reasonable standard, it's clear Wal-Mart has left American taxpayers the burden of picking up a huge tab for its uncovered health-care costs.

http://msnbc.msn.com/id/9619709/

[kcredden]

Thanks Ponto for that insightful, and eye-opening post. Now people can see why I shop locally for many of my stuff now.

I hope I can get the parts for my new system locally too. Oh Chuck! Oh Ed! :)

[kdown]

Sam Walton responded to the concerns of small-city retailers who criticized the WalMart strategies as being unfair and destructive to traditional downtowns in this way:

Quite a few smaller stores have gone out of business during the time of WalMart's growth. Some people have tried to turn it into this big controversy, sort of a "Save the Small Town Merchants" deal, like they were whales or whooping cranes or something that has the right to be protected.
Of all the notions I've heard about WalMart, none has ever baffled me more than this idea that we are somehow the enemy of small-town America. Nothing could be further form the truth: WalMart has actually kept quite a number of small towns from becoming extinct by saving literally billions of dollars for the people who live in them, as well as by creating hundreds of thousands of jobs in our stores. I believe millions of people are better off today than they would have been if WalMart had never existed.

I don't want to be too critical of small-town merchants, but the truth is that a lot of these folks just weren't doing a very good job of taking care of their customers. Whenever we put a WalMart store into a town, customers would just flock to us from the variety stores. With our low prices, we ended an era of 45% markups and limited selection. We shut the door on variety-store thinking.

[tkcomer]

Wal-Mart wasn’t the death of downtowns. Malls were. With their convenient parking and many stores virtually all in one spot. Granted, Wal-Mart was the icing on the cake. But like any major corporation, it took a turn for the worse. During the past 10 years, in order to maximize shareholder value, it’s quest to lower cost, at all costs, costs us. Poor pay, coupled with little to no benefits, keeps a lot of its workers on welfare. They used to have a proud “Buy American” campaign, but now rarely do they buy anything made in this country. They used to proudly display “Made in the USA” signs. When is the last time you saw one of those? It’s bad enough that a lot of their workers have to be enrolled in government assisted programs. But I keep thinking of the thousands of displaced factory workers that used to have a job also. Wal-Mart’s executives threw out their “Buy American” program, and threw a lot of people out of work. Not to compete, mind you. They were already doing that very well. But for greed.

[kybikertrash]

I don't know how Wal-Mart can say that small town merchants weren't taking care of their customers.
When was the last time you went into Wal-mart and asked a clerk for something and they could actually tell you where it was?
I remember going to the camping dept. a couple of years ago and not being able to find something asking the clerk for Sterno "canned heat" and the clerk (who BTW had worked there for years) told me it wasn't in his dept., it was with the lamp oils in housewares. I was dressed for a costume party, in platform shoes and looking pretty silly (I hated even having to go in there like that in the first place) but I walked across to the lamp oil aisle only to have the clerk tell me she didn't even know what Sterno was but she was sure it wasn't in her dept.
So I went back to sporting goods and looked again and there it was!!!!! I have had many of these experiences in Wal-mart, and every time I go into Everett's hardware downtown and ask for something they take me right to it.
tkcomer is right. Corporations these days are all about greed. There are even businesses today that have been bought out by corporations and that still put out the image of being independent, and send all of their profits to their out of town coprorate office, so the money doesn't even stay in the local economy. But usually people don't know and think like they are supporting their community by doing business with these businesses.

[kdown]

Wal-Mart: The world's largest retailer in a league of its own


Despite its enormous workforce, there is a paternal feel to Wal-Mart
Employees enjoy a large degree of autonomy
Every store worker has the power to lower the price on any Wal-Mart product if he spots it cheaper elsewhere
Through Wal-Mart's proprietary systems, proven suppliers are given full and free access to real-time data on how their products are selling, store by store
Future growth will come from aggressive new store openings, plus a move into food and into such services as banking

The world's largest retailer still thinks of itself as a small-town outfit. That may be its greatest strength, says The Economist

There is no shortage of statistics describing Wal-Mart's size. With $216bn in sales, it has bypassed General Electric to become the world's second-largest company after ExxonMobil. With 1.2m staff, it is the biggest private-sector employer in the world. It broadcasts more live television than any network. The computer controlling its logistics is the world's most powerful after the Pentagon's. Six years ago it sold almost no food, yet today it is America's biggest grocery retailer.

To appreciate fully how big Wal-Mart is, however, you have to travel to its headquarters in tiny Bentonville, Arkansas, a state where chickens outnumber people. A building the size of 24 football fields, carrying a giant Wal-Mart logo, looms out of the barren landscape. Yet this massive warehouse also offers a clue that size is not the main reason for Wal-Mart's success. Under the logo, in equally large letters, it says, “Our people make the difference.”



Despite its size, the world's largest retailer has stuck to its small-town roots. Its founder, Sam Walton, set up shop in a hamlet near Bentonville in 1962 because retailers such as Kmart and Sears dominated large towns.

That decision shaped Wal-Mart's success. “Being founded in Bentonville was a coup,” argues Richard Church, an analyst at Salomon Smith Barney. Lacking customers, staff and suppliers, Mr Walton had to do things differently. He offered incentives: profit sharing for the staff, partnerships for suppliers. And customers got friendly service and “everyday low prices”, which meant that Wal-Mart had to keep costs minimal.

Frugality came naturally to Mr Walton, who was a country boy. He made executives sleep eight to a room on trips. Once America's richest man, he drove an old pick-up truck and flew economy class. “Every time Wal-Mart spends one dollar foolishly”, he wrote, “it comes out of our customers' pockets.” A decade after his death, this is still ingrained in Wal-Mart's culture.

Thus, although its soaring market capitalisation--now $252bn--has made millionaires of executives and hourly workers alike, there are no signs of opulence or ego at the company's austere headquarters. Lee Scott, the chief executive, drives a VW Beetle and as recently as August shared a hotel room to save money. John Menzer, head of Wal-Mart International, sits in a tiny office on the same floor as his staff. Executives take out their own rubbish, pay for their coffee and are told to bring back pens from conferences.

The company's small-town values drive its relationship with staff and suppliers. Despite its enormous workforce, there is a paternal feel to Wal-Mart. It is as if everybody were still working for some strict, though ultimately benign, uncle. Employees are called “associates”. Most own shares and are on profit share.

They also enjoy a large degree of autonomy. Ken Schroader, store manager at Wal-Mart's Supercenter in Siloam Springs, Arkansas, proudly demonstrates the scanners that tell his department managers precisely how well products are selling--sales compared with last year, mark-ups, how much is in stock or in transit.

Such details allow a department head to become a small shopkeeper, running his section like an independent store and moving stock faster. (Wal-Mart shifts inventory twice as fast as the industry average.) Every humble store worker has the power to lower the price on any Wal-Mart product if he spots it cheaper elsewhere.

That sort of delegation is apparent outside the stores too. Michael Duke, head of logistics, uses his 6,000 truck drivers (most of whom own Wal-Mart shares) to keep tabs on inventory problems at stores. Involvement breeds loyalty: driver turnover is only 5% a year, compared with an industry average of 125%. George Tracy, head of personnel at a Bentonville distribution centre, cracks down on whatever raises costs and rewards whatever lowers them.

This month, for instance, Laura Blumenstein, one of his workers, will get dinner for two and a parking spot near the entrance (this is Wal-Mart, after all) for logging inventory fast and accurately. To raise flagging spirits, weird stunts--such as pig-kissing contests and quasi-evangelical weekend get-togethers--are laid on. In America, at least, this works.

Suppliers are treated as part of the family, once they have proved their worth. Nervous newcomers are shown to “the row”, a long corridor of drab rooms, each adorned with a notice explaining that Wal-Mart's buyers do not accept bribes. It is like a scene from a bazaar: sweaters spill out of suitcases and haggling over prices continues all day. Angel Burgos, from Puerto Rico, wants to sell computers to Wal-Mart: “We were grapes,” he sighs, “but now we are raisins. They suck you dry.”

Proven suppliers, though, feel differently. Through Wal-Mart's proprietary systems, they are given full and free access to real-time data on how their products are selling, store by store. By sharing information that other retailers jealously guard, Wal-Mart allows suppliers to plan production runs earlier and so offer better prices.

Procter & Gamble's $6bn-a-year business with Wal-Mart is so important that the maker of Crest toothpaste has a 150-strong Bentonville office dedicated to it. Andy Jett, a director there, says Europe's retailers are still blind to the competitive edge that partnering with suppliers gives Wal-Mart. “Wal-Mart treats suppliers as an extension of its company. All retailers will eventually work this way,” he predicts.

All this effort has produced sparkling results. In less than four decades, Wal-Mart has come to account for 60% of America's retail sales and 7-8% of total consumer spending (excluding cars and white goods). Its same-store sales growth is running at five times the industry average and its pre-tax profits have grown by 15% a year over the past decade, to $9.3bn in 2000.

No other global retailer comes close when measured by sales. Mr Scott says future growth will come from aggressive new store openings, plus a move into food and into such services as banking (though Wal-Mart's foray into Internet retailing has not been entirely successful). “Is there some reason we couldn't be three times this size?” he asks.

However, analysts worry about saturation in America and expect domestic profit growth to slow to 9% within five years--not bad for a normal company, but disappointing for the supercharged Wal-Mart.

Wall Street is pinning its hopes instead on Wal-Mart's overseas efforts. Founded only a decade ago, the international division already accounts for 17% of sales and 11% of profits. Mr Menzer says that the operation will contribute a third of Wal-Mart's profits growth within five years. Linda Kristiansen, an analyst at UBS Warburg, an investment bank, forecasts that profits outside America will grow by 21% a year on average until 2006. CSFB, another bank, puts the figure at 26%.

Are these predictions too bold? Wal-Mart is already the biggest retailer in Canada and Mexico. It bought itself the number-three position in Britain with its £6.7bn ($11bn) acquisition of Asda in 1999, and it is now pushing into China.

But its ventures in Argentina, Indonesia and Germany have been flops, accompanied by heavy losses. With a presence in nine countries, Wal-Mart is in fact less international than other aspiring global retailers such as France's Carrefour, which has stores in 31 countries.

Most of Wal-Mart's overseas problems were avoidable. In the 1990s it made the mistake of exporting its culture wholesale, rather than adapting to local markets. When it moved into Indonesia, it shipped in an entire warehouse on a barge.

In Germany, its biggest headache, Wal-Mart was ready neither for the entrenched position of such discounters as Aldi nor for the inflexibility of suppliers and the strength of trade unions. It had little feel for German shoppers, who care more about price than having their bags packed, or German staff, who hid in the toilets to escape the morning Wal-Mart cheer.

“We screwed up in Germany,” admits Mr Menzer. “Our biggest mistake was putting our name up before we had the service and low prices. People were disappointed.” Mr Scott is blunter, blaming the cock-up on “incompetent management”. Just as well that Wal-Mart can afford such mistakes. “Who else can lose $300m a year in Germany and barely notice?” asks CSFB's Michael Exstein.

Wal-Mart is at least learning from its experience. Unlike its small, nervous steps into some foreign markets, the acquisition of Asda was bold, providing crucial expertise in selling food. Wal-Mart is also becoming more culturally astute, even importing good ideas from overseas into its domestic business.

And things are looking up in Germany. Employees like being asked what they think, and shoppers, used to surly staff and dingy stores, are slowly warming to service with a smile.

But Wal-Mart's biggest problem is its lack of “human capital”, says Coleman Peterson, head of personnel. The group has been at pains to replace expatriates with locals, and every overseas country team except China's is now led by a non-American. Yet it is expanding faster than it can train people internally, and has lost high-quality local managers to rivals.

This leads to another problem: that the international division still lacks scale. To exploit savings from sourcing globally, Wal-Mart needs to make more acquisitions. Buying Carrefour would be the boldest move.

However, Wal-Mart is more likely to buy the hypermarket businesses of Germany's Metro, worth $4bn. The two sides talked last year, and insiders say that Metro, controlled by three families, is ready to sell. Buying even part of Metro, which controls a third of Germany's retail space, would bring Wal-Mart huge clout with European suppliers, and also some more experienced European managers.

But Wal-Mart has another problem: its image. In America its giant stores are symbols of “big retail”, blamed for the destruction of entire communities. To avoid future growth being constrained by political barriers, Wal-Mart may have to raise its head from Bentonville and worry more about how it is perceived.

Unpopularity is hard for Wal-Mart executives to understand. After all, everyday low prices have been good for consumers. And a recent study by McKinsey, a consultancy, credited efficiencies in retailing (mainly Wal-Mart's) for more of America's recent productivity spurt than technology investment.

Ultimately, few doubt that Wal-Mart has both the patience and the resources to stay on top. “Never underestimate them,” advises Richard Hyman of Verdict, a consultancy. “They foster an image as country hicks. It makes the kill more of a surprise.”

Certainly, Wal-Mart has made mistakes, but it has also got more things right than its rivals, who mistake its small-town simplicity for naivety at their peril. As Mr Scott puts it, “Just because we are simple, doesn't mean we are unintelligent.”

Soure: The Economist.

[tkcomer]

Sam Walton died in ’92. Back in the mid 90s, the employees at the Maysville Wal-Mart would say, “Sam is dead. Things are changing.” I bet 99.9% of Wal-Mart customers have no clue that some of their income tax dollars are being used for government assistance programs to support a lot of Wal-Mart employees and the employees of factory workers whose jobs have gone elsewhere. I don’t know about any other store other than Maysville’s. Talk to the workers. The very few employees that they have that have been there over 5 years will tell you all about senior management doing everything they can to get you to quit. Because a new employee makes less on the hour. That’s why it’s hard to get any real help. New employees haven’t been there long enough to learn the store. And the Maysville store has a high turnover rate. Wal-Mart does a lot of things right. But after Sam died, they went from friendly to ruthless.

[snowtiger]

EXACTLY tkcomer. Walton died and so did his ideals. I worked at Wal-Mart in North Carolina and it's no better than a factory now.

[Jeremy]

In Walmart's defense:

According to the Washington Post, Walmart provided for Katrina relief an unrivaled $20 million in cash donations, 1,500 truckloads of free merchandise, food for 100,000 meals and the promise of a job for every one of its displaced workers. In many cases Walmart arrived with much-needed food and supplies before the Federal Emergency Management Agency.

Also, on the small business being put out of business by Walmart issue, consider this: The average Walmart store employs over 200 workers. If a mom and pop shop consisted of 3 employees, the mom, the pop, and an assistant, Walmart would still have to put 67 shops out of business before it created a negative impact on the job market. Also, it's not just the Walmart that comes to the area. All the other stores that open around the Walmart create new economic growth as well.

Further, to the issue of only 38% of Wal-Mart's nonsupervisory workers receive health-care, how many employees of mom and pop shops do you really think get health coverage?

[Foxy]

I am sorry that the bigger chains are putting smaller ones out of business, but I am a consumer struggling with finances. I HAVE to buy where prices are more affordable. If the locals would sell at the price of the bigger chains I would certaintly buy there. I don't buy from a bigger chain like K-Mart because Wal-Mart is cheaper. I don't buy from local hardware stores because it is cheaper to go to Lowe's. I think some of the local retailers hike up prices to make up for the lack of business. It is the same with gas prices, I buy where it is cheaper, be that the locally owned Citgo, or the national chains like Speedway or the Wal-Mart gas station. if you continue to buy where it is more exspensive, then no one is compteing to lower the prices to get you into their business. Since I must go to Lexington every other weekend, I choose to buy hardware goods there because it is cheaper. Now on the other hand, if I didn't have a family to feed and money wasn't an issue, then I would buy locally. And even now, if I can I do. I often frequent the farmers market for fresh produce and jams.

And I agree with Jeremy. I have worked at 3 different mom and pop type retailers and service places here, and I did not get any benefits, and got a lower wage than Wal-Mart employees.
(No I do not work there, but I had considered it. They do also offer a more flexible schedule than other employers in Maysville)

[tiger_n2_dragon]

Hmmm, interesting Foxy. I'm not trying to step on anyone's toes here but, I wonder what will happen to the local hardware stores. That charge $3.00 for a pound of drywall screws, once Lowe's or Home Depot come to town. Will we continue to shop at these places, just because we know who owns it, or try to save a little money?? I don't think it really matters rather your buying clothes, groceries, or lumber. Bottom line, the rich get richer and the poor get poorer, so save a little money when you can and don't forget to thank THE MAN (GOD). :)