by Roger Simmermaker
Please note: this was written around 2002
To many Americans, Wal-Mart seems as American as apple pie. After all, what could be more American than a company started by retail legend Sam Walton, who successfully pioneered America's biggest buy American retail program? History may be correct and compelling in this regard, but today's Wal-Mart bears little resemblance to Sam's original vision of old, except the low prices. The low prices remain, but unless we are to accept that the end justifies the means, today's Wal-Mart deserves a closer look at just how they maintain their popularity and seemingly unshakeable reputation as the low-price leade.
To be quick to the point, Wal-Mart's buy American campaign is a complete sham. However, most people looking for the cheapest bargain possible pay attention to little else than price, and it is quite possible the thing they remember most about America's number one retailer is, besides the low prices, that they pretty much stock mostly made in U.S.A. goods wherever and whenever possible, which is entirely untrue. Were they to visit stores in Mexico or Canada in the mid-1990's, however, they would find buy Mexican and buy Canadian campaigns just as prominent as the buy American campaign back home.
Furthermore, after Wal-Mart acquired 122 Canadian Woolco stores in 1994, they ran full-page ads claiming "Wal-Mart is a Canadian company, managed by Canadians and staffed with Canadian Associates." But the fact is that Wal-Mart is an American company, whose profits are sent to Bentonville, Ark. and whose taxes on those profits are paid to the American government.
In the 1980's, Wal-Mart passed Sears and Kmart to become America's largest retailer. Their economic prowess ranks them bigger than Poland, if they were to be considered a nation rather than a company. Not only did they become the largest retailer, they surpassed General Motors as the United States' largest employer. And, as of 1992, Wal-Mart employed more Americans than General Motors, Ford and Chrysler combined. So what's the big deal, you ask? Wal-Mart accomplished this through a buy American campaign that has since turned into empty patriotism. Wal-Mart's made in USA marketing scheme invites criticism today since it imports so many of its products from third-world countries.
I am not prepared to compare the volume of Wal-Mart's imports against similar competitors like Kmart, but I can tell you that the only reason Wal-Mart's "Bring it home to the USA" slogan was credible in the beginning was because it had more goods come overseas to start with compared to Kmart.
Of course Wal-Mart's slogans come and go like most other retail chains, but at least one was ordered to be discontinued since it simply was not true. For this reason, the Better Business Bureau forced Wal-Mart to stop using the slogan "Always the Low Price."
According to a 1998 National Labor Committee study, 85 percent of all apparel products sold at Wal-Mart was made outside the USA. Wal-Mart, of course, defends itself wondering if Kmart and Target have similar percentages (which they probably do). The difference is that Kmart and Target don't make the same buy American claims as Wal-Mart.
At Wal-Mart, Girl Scouts are prohibited from asking "Would you like our cookies?" And while Kmart donates 3.6 times as much as Wal-Mart to charity, Wal-Mart believes that by spending less of their profits on charity, they give more discretion to the charitable will of their employees, as if their employees have enough disposable income to spend on charity donations.
Most recently, another self-professed example of Wal-Mart's "flexibility" is their offer of "opportunity" to their associates to dip into their retirement funds. The reason? Even though Wal-Mart is the nation's largest employer in terms of the number of American workers, they found it necessary to raise health insurance costs not covered by the company a full 30% from 2001 levels. And although Wal-Mart does voluntarily contribute 2% of their employees' pay into their 401(k)s, the company failed to mention that those employees who do raid their 401(k)s will have certain tax liabilities as a result, claiming it is already mentioned in other company literature.
Still, grumbling employees feel they deserve an appropriate accompanying statement on an issue as serious as raiding retirement funds to pay for basic health care. A single working mother would now have to pay $120 a month for health care to cover herself and one child. Wal-Mart's move is sure to increase the current level of over 44 million Americans who don't have health insurance. The national average of company-sponsored health plans is 60%, but only 38% of Wal-Mart employees take advantage of company-sponsored health care. The majority of the rest rely on state or federal health care benefits that you and I pay for through our taxes. A nation of low income earners simply cannot support the most costly health-care system in the world.
In 1996, the Congressional Research Service issued a report that noted retail jobs "provided significantly lower wages than jobs in many industries, and are often only part-time positions, seasonal opportunities, or subject to extensive turnover.In short, it is easy to over-estimate the true benefit to would-be workers in the local economy." Another downside to accompany this statistic is that retailing in now one-third of our economy.
Similar to increased foreign investment, research shows that more Wal-Marts destroy jobs rather than create them. For every two jobs Wal-Mart creates, three jobs are lost in the community. And since the average Wal-Mart employee makes $11,700 annually, which is below the poverty line for a single mother with 2 children, wages throughout the community are reduced as well.
It does matter to your home town, your state, and your country not only what you buy, but also where you shop. As a BJ's Wholesale slogan once said, "When we shop, we're doing more than making a purchase, we're making an investment." The health of the U.S. economy is the outcome of all the individual actions we take collectively as a people. Consumers don't necessarily demand cheap goods, but often find it necessary to locate cheap goods to save money. I do not believe that the majority of Americans, especially since the events of September 11, think that bargain shopping is more important than patriotism, but it is sad to believe that more and more consumers find it necessary to find the best deal available. And to the extent that this is true, it is also sad to believe that it is a signal of distress for the nation.
A full-time Wal-Mart employee earns less than $12,000 a year, and they are offered few if any health care benefits. A full-time employee as defined by the company is anyone who clocks-in 28 hours a week. 28 hours a week, by the way, is just below the threshold that would require Wal-Mart to pay their "Associates" benefits.
At the beginning of my research on buying American before I printed the first edition in 1996, I did hear stories about how Wal-Mart kept certain small businesses from going belly up that had few retail outlets to market their goods. Since that time, I have read many more stories pointing to just the opposite. Gitano Group, for instance, lost control of its management and price structure because of Wal-Mart, and ultimately went bankrupt. As Wal-Mart allowed Gitano to eventually sell just one-third of its products to Wal-Mart Stores, Wal-Mart required the company to shift more production overseas as a condition for a continuing supplier-retailer relationship. Wal-Mart then proclaimed Gitano mismanagement as a reason to seriously reduce orders from the struggling company. Gitano went bankrupt. All the American jobs Wal-Mart helped create through an initial increase in orders evaporated as domestic factories closed.
Wal-Mart once allowed Rubbermaid to sell 15% of its products to them. But when Rubbermaid tried to increase prices to offset a rise in the cost of raw materials, Wal-Mart switched to Rubbermaid's competitors. In 1995, Rubbermaid announced layoffs for 9 percent of its workers as it closed nine factories.
It is my hope that America does not define itself merely as a nation of bargain shoppers. We are a nation of values, tradition, and historical culture. By shopping at Wal-Mart, American consumers may get cheap underwear, but American workers get layoff notices.
Wal-Mart's success has turned many Main Streets of small-town U.S.A. into ghost towns. A 1995 Iowa survey showed that of the small retail industry devastation statewide, half the clothing stores, nearly one-third of the hardware and shoe stores, one-fourth of the department and building materials stores, and nearly one-fifth of jewelry stores had closed their doors because of Wal-Mart.
What's more is that Wal-Mart usually buys cheap land on the outskirts of town and uses their clout to get local officials to grant special tax breaks at taxpayers' expense. This amounts to nothing more than bidding for redundant jobs with public funds.
Al Norman, author of a Slam-Dunking Wal-Mart, gives several examples of what small-town America has done and can do to stop Wal-Mart from ruining Main Street USA in your hometown too. Remember, you may not get that coveted "Bargain Shopper of the Week" award by shopping at small businesses, and will probably pay a little more, but shouldn't we be more concerned about what's good for America's future than today's cheap bargain?
Why would America's future be better with less Wal-Mart's and more locally-owned businesses? Because the poorer a nation's workers are, the less rich the nation becomes. A study by the University of Massachusetts found that $1 spent in a locally owned business has four to five times the economic spin-off of $1 spent in a Wal-Mart store. The reason, of course, is that rather than keeping profits within the community to pay for local programs, profits are sent to Arkansas where Wal-Mart has its headquarters.
You are probably also less likely to join one of the 25,000 people who have filed a lawsuit in court because they have been hit by falling products instead of falling prices at Wal-Mart's stacked-to-the-ceiling store layout. And by not having to pay attorneys' fees to recover damages, you can use that extra money to support your local hometown.
Your town will also be less likely to become a victim of large, abandoned buildings, and your community will look much nicer without these eyesores. My state of Florida currently leads the nation with 30 (at last count) abandoned Wal-Mart buildings. With Wal-Mart's multi-national success, you might gather the reason behind this phenomenon is something other than their lack of retail success in certain areas, and you are right. Their predatory tactics have led to success rather than the failure. Wal-Mart will often open up a normal-sized store to "test" the local market. And if it proves to be more attractive, Wal-Mart will then open a new "supercenter" on the outskirts of the same town, leaving the old and now-empty traditional-sized building behind.
But small town USA is not alone in resisting Wal-Mart, nor should they be. Unions like the UFCW (United Food and Commercial Workers) could be hit hard if Wal-Mart opens supercenters in California, where union jobs in the supermarket industry are prevalent. The Orange County Business Council concluded that wages and benefits could be reduced up to $1.4 billion a year if Wal-Mart were to move into Southern California alone. The reason? Wal-Mart's pay averages $9.63 an hour, or 47% less than at unionized grocery chains. The fact that these are union wages is not the issue. It is because union wages are higher than the wages at Wal-Mart, who has resisted the union at every turn.
Despite the resistance, the UFCW won a union election in Jacksonville, FL in February, 2000. Even though the election involved only 11 meatcutters, it was a huge lift psychologically for the union, who had consistently failed to organize any of Wal-Mart's 900,000 U.S. workers. Wal-Mart reacted by eliminating almost every meatcutter job in the country, and simultaneously issued a statement claiming the switch to prepackaged meat had nothing to do with the union election. Kmart, on the other hand, honored their UFCW Union election when meatcutters voted 11-3 for union representation in an Oakland Super Kmart.
Not only does Wal-Mart avoid paying wages at levels that would be considered sufficient if they really cared about their associates, they also avoid paying court-ordered fines.
According to the December 17, 2001 Wall Street Journal, Wal-Mart was ordered to pay $6.8 million in fines for trying to screen hopeful job seekers with disabilities. According to the Associated Press, $3.8 million will be paid to 21 former applicants, and another $3 million will be used to set up a fund that allows other previous applicants with disabilities to come forward and provide documentation of being unfairly turned away between 1994 and 1998.
This incident is certainly no red herring. Consider that on August 12, 1999, Wal-Mart was found guilty in federal court for not paying its pharmacists overtime, violating labor laws. The Denver court ordered the defiant company to pay back wages to their affected employees. But then again, Wal-Mart has disregarded court orders before. In July of the same year, Wal-Mart was ordered to pay Tommy Hilfiger $6.4 million for ignoring court orders to stop selling fake Hilfiger apparel.
Only to the degree that Americans are wage earners can they also be consumers. Consumers aren't necessarily demanding cheaper imports. With the events of September 11, polls show that a more-patriotic America increasingly prefers American-made goods. Consumers are simply being offered better deals on price during this recession, and many are taking them. After all, what American would pass up a good deal that could potentially save them money? The problem is that cheap imports cost the consumer and the taxpayer more in the long run. But admittedly it isn't up to the average consumer to discern such issues - it's up to their elected representatives. But even though it is a job they are elected to perform, they either don't see the big picture or are willing to ignore it - at least for now.
Wal-Mart is an American company, and an emphasis should be placed on the profits of our home companies, but not at the expense of virtually the rest of America.
What Can Be Done?
Especially with the recent bankruptcy filing of America's number two retailer Kmart, it is increasingly important to spread our consumer dollars between more competitiors rather than fewer. Wal-Mart is getting far too many dollars from U.S. consumers, and it is likely that once their competition is gone, Wal-Mart will slowly raise their prices. In the absence of formidable competition, it is unlikely Wal-Mart cares any more about your ability to buy at rock-bottom prices than they care about abiding by court orders to pay millions of dollars in fines. If it is reasonably necessary for you to shop at larger stores, shop at Sears, Target, Kmart or BJ's Wholesale Club (Sam's Club is owned by Wal-Mart). However, if at all possible, patronize your smaller, locally-owned stores first, where you can see the benefits of keeping local dollars local and strengthening your community. After all, local economies are the building blocks of state economies, and state economies are the building blocks of the national economy. Let's not replace higher-wage jobs and better benefits with lower-wage jobs and unaffordable benefits.
It is quite possible that if America were to shop less at Wal-Mart, which immerses the consumer's mentality into a state of bargain shopping, we might actually spend less, save more, and develop better spending habits to boot. I believe that if we spent less money on cheap imports that we really don't need anyway, especially in a time of economic recession, we just might be able to pay slightly higher prices at stores that don't thumb their noses at U.S. laws.
When consumers are immersed in a bargain shopping mentality, they are often persuaded to buy things they really don't need, but buy them anyway since the deal is just too good or too cheap to pass up. These extra dollars saved could be spent at retail chains that find themselves in financial trouble, like Kmart, because of what Wal-Mart is doing, and keep them healthy and provide more competition to keep Wal-Mart on their toes. The Enron scandal taught us not to put all of our retirement-investment eggs in one basket. We should also be careful not to put all of our consumer-investment eggs in one basket either.
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Walmart's Phoney Patriotism