War on Wal-Mart

City Journal reported Here is a story you’re unlikely to read in the spate of press attacks on Wal-Mart these days: When Hartford, Connecticut, tore down a blighted housing project, city officials hatched an innovative plan to redevelop the land: lure Wal-Mart there, entice other retailers with the promise of being near the discount giant, and then use the development’s revenues to build new housing. Wal-Mart, after some convincing, agreed, and city officials and neighborhood residents celebrated a big win—better shopping, more jobs, and new housing in one of America’s poorest cities. But then, out of nowhere, outsiders claiming to represent the local community began protesting.

Some will complain about just about anything.

Astonished city leaders and local residents quickly discovered the forces fueling the campaign: a Connecticut chapter of the United Food and Commercial Workers Union; and ACORN, the radical community group. Outraged residents fought back, denouncing outside interference, but opponents persisted, filing three separate lawsuits that have delayed construction, including a ludicrous suit claiming that the development would destroy unique vegetation that has sprouted since the housing project came down. “These people looked for every possible reason to stop a project that the community wants,” says Jackie Fongemie, a frustrated community activist who has fought for the store. “Where were the environmentalists when rats were running wild around this place?”....

I don't know about the environmentalists, but I bet PETA was happy that the rats were allowed to run wild.

The few small-town merchants and their political allies who protested that the stores were destroying town shopping districts sensed, though they didn’t completely understand it at the time, that Wal-Mart was at the forefront of a revolution that would transform the American landscape, as consumers abandoned small, inefficient Main Street stores to shop in expansive shopping centers offering everything at one stop and at low prices. Before Wal-Mart, general-merchandise stores typically operated on profit margins as high as 45 percent of sales, but Wal-Mart managed on an operating profit of just 22 percent and passed the difference on to customers, who flocked in when they saw how much they could save. Merchants predicted that Wal-Mart would hike its prices as soon as the competition disappeared, but years later Wal-Mart is still considered among the sharpest-priced, best-value retailers in the world—even in its original small-town markets....

And they will remain that way, because otherwise KMart and Target would take over from them.

Wal-Mart staved off unions with another then-revolutionary and now-standard management technique: giving employees a stake in the company’s success, offering them one of the earliest profit-sharing programs, which, as an incentive to work hard, doled out shares in one of the best-performing stocks of the last 50 years.

I bet that ticked the unions off

In his biography, Walton tells of hourly employees who prospered, like truck driver Bob Clark, who accumulated more than $700,000 in his profit-sharing account over 20 years; and Jean Kelley, a shipping supervisor who in ten years at Wal-Mart accrued nearly $230,000 in Wal-Mart shares.

Something they would not have done had unions taken over. Only the union bosses would have the big bank accounts.

The folksy country retailer also quickly recognized the value of efficient inventory and delivery systems, ultimately leading a technology revolution that spread throughout the retailing industry and its chain of suppliers.... It was among the first to put computers—and later, scanners—in stores to track inventory, starting back in the 1970s. With information from those computers telling headquarters what consumers were buying and what items needed to be reordered, Wal-Mart managers realized they could revolutionize the way merchandise moved to stores. Instead of building warehouses that stored vast stocks of items, they constructed a network of computerized distribution centers, which on one side received needed goods from suppliers and almost immediately sent them out the other side to individual stores just before the stores ran out of them. The company even added a satellite system that could track its delivery trucks through global positioning technology and tell store managers exactly when shipments would arrive. So efficient did the whole system become that Wal-Mart was soon selling goods in its stores even before it had to pay its suppliers for them, vastly cutting its inventory costs. Nor did Wal-Mart stop these innovations at its own doorstep. It compelled suppliers to squeeze out their own waste and to connect to its computerized inventory system, so that a factory could know when it was time to stamp out 20,000 more ten-inch frying pans or 15,000 more 12-inch ones.

This is something that only a large company like Wal-Mart, could do.

Union-supported policy groups, like the San Diego–based Center on Policy Initiatives, argue that Wal-Mart should be made to pay “sustainable” or “self-sufficiency” wages—wages that they deem adequate to meet basic needs—in order to gain permission to expand in California.

The Left should look at how Communism failed, and how Socialism is failing in Europe. We are a Capitalistic society, and the marketplace is what decides (whether it be salaries for employees, or prices of goods sold)

The “sustainable” wage has become a popular idea with the Left, which argues that minimum wages should be much higher than the federal $5.15 per hour and should be based on an area’s cost of living. In many parts of California, liberal economists estimate, that means up to $38,000 a year for an adult worker supporting a spouse. But the Left’s case ignores the greater benefit that an efficient operator like Wal-Mart brings to shoppers and an entire economy by driving down prices and forcing other stores to perform better.... Despite the Left’s charges that Wal-Mart doesn’t pay sustainable wages, the company has little trouble recruiting, in part because the gap between its pay and union wages isn’t as large as opponents claim. The LAEDC study calculates that the true difference is less than $3 an hour, which can be offset by the other benefits that a growing company like Wal-Mart offers workers, especially in the form of advancement and stock benefits.

And no one forces people to work at Wal-Mart

While employment at unionized food stores tends to be static, with union members never moving up from their original jobs and relying on wage increases built into contracts to advance their salaries, Wal-Mart promotes heavily from within. More than two-thirds of its management started out working in its stores....Wal-Mart’s pay scales aren’t the only thing that unions and their allies fear, however. A restless innovator constantly forcing other corporations to follow it, Wal-Mart is now pushing to limit soaring health-care costs, by 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. In this, Wal-Mart endorses the many health-policy reformers who say that current corporate and government health plans, offering lavish coverage with little contribution from workers, have encouraged over-use of the system and helped spark runaway medical inflation. To discourage that, Wal-Mart’s health plans have high deductibles and don’t pay for extras like eye exams, chiropractic visits, or contraceptives. But the company will pay 100 percent of an individual’s health-care costs beyond $1,750 and has no lifetime caps on coverage—unlike more than half of other companies. As a result of its policies, Wal-Mart spends about 37 percent less per covered employee on health insurance than do similar companies.

Companies like GM, which is about to be driven into bankrupcy by healh care costs, should take note of what Walmart does.

To rein in Wal-Mart, the Left will have to keep up its assault in the courts, the statehouses, and the media, because it can’t win the battle for the hearts and minds of consumers. In a recent report on shopping patterns, WSL Strategic Retail said that Wal-Mart has succeeded like no other company in understanding what consumers want and giving it to them. Despite Wal-Mart’s years of success, the report predicted, the future looks even more favorable for the company and others that operate with its low-price, big-store philosophy. To succeed against Wal-Mart, then, the Left will have to fight to deny the vast majority of Americans what they want. Every battle it wins in that war will cost the American consumer plenty.

Brad Plumer blogged Here is a list of the Pros and Cons

Ezra Klein blogged Wal-Mart's low prices are severely overstated. The company's done such a good job of branding itself your checkbook's guardian angel that folks have begun to believe them. It's not so, though. Wal-Mart squeezes pennies on about 1% of a store's merchandise, what are called cost-sensitive items.

How does the number-one retailer maintain an image of low prices? First, by actually making sure its prices are lower than its competitors, at least on key items. These items are called "price-sensitive" items in the industry, and it is commonly believed that the average consumer knows the "going price" of fewer than 100 items. These tend to be commodities that are purchased frequently.

A mid-size Wal-Mart supercenter may offer for sale 100,000 separate items, or stock-keeping units (skus). Wal-Mart and other major retailers believe that the general public knows the going price of only 1 to 2 percent of these items. Therefore, each Wal-Mart store shops for the prices of only about 1,500 items in their competitors' stores. If it is ever found that a competitor has a lower price on one of these items than Wal-Mart, the store manager will immediately lower his or her price to be the lowest in the area.

These items are, of course, given prominent display throughout the store, further tattooing Wal-Mart's low-prices brand into consumer minds. Other pieces of merchandise aren't at such low prices and, in some cases, are surprisingly expensive, but because consumers don't know what they should cost, that goes unnoticed.

The consumers need to know what things cost, and buy the ones that are the best savings. AFAIK, WalMart does not force people to buy the ones for which it does not provide major savings

The point here isn't that Wal-Mart is enormously cheap on many things, but that it's not so cheap on so many that it can justify the labor standards, labor abuses, or hostility to unions. This isn't a competition issue, it's a branding issue. And progressives shouldn't let it be rephrased into a liberal hostility to lower prices.