Wal-Mart Licks Its Wounds

Poor Wal-Mart, it just can’t seem to catch a break anymore. There they are, the monks of Bentonville-- who, according to company legend, share hotel rooms on business trips rather than drive up the price of pantyhose—toiling away to make the good life affordable to the impecunious masses. And what do they get? Nothing but grief. The Democrats are running against Wal-Mart in the fall Congressional elections, and not just the wild-eyed progressive ones. Centrist Hillary Clinton returned a $5000 donation from the company, citing its inadequate health benefits, and Joe Biden just attacked it because he doesn’t see “any indication that they care about the fate of middle-class people.”

Then Andrew Young, the former civil rights leader-turned-Wal-Mart-flack, pulled a Mel Gibson, lashing out at the company’s small business, ethnic, competitors: “I think they've ripped off our communities enough. First it was Jews, then it was Koreans and now it's Arabs, very few black people own these stores." Wal-Mart quickly distanced itself from the remark, as did Young himself. He stepped down from his Wal-Mart job, though he has not yet followed Mel’s example by seeking counseling from leading Korean fruit vendors.

The Young meltdown aside, Wal-Mart blames its troubles on the unions it has worked so hard to bar from its stores. They’re so touchy, those unions! They take offense just because the Wal-Mart orientation for new hires includes a 12 minute video on the evils of unions, portraying them as little better than extortionists. They get all bent out of shape every time a union sympathizer is fired by Wal-Mart on some trumped up charge like using profanity or being discourteous to customers. They jump up and down when Wal-Mart is caught making its associates work overtime for no pay, or locking them into the stores at night.

But the cruelest blow to Bentonville is a sudden decline in profits – down 26 percent in the second quarter of 06 – the first decline in 10 years. Wal-Mart blames, first, the failure of its attempted expansion into Germany, where apparently folks didn’t cotton to smiley faces and people greeters, and, second,  high gas prices in the U.S.A. According to the New York Times, Wal-Mart CEO H. Lee Scott “hinted that those [gas] costs seemed to be prompting consumers to shop less frequently.” There’s one big advantage to the little Jewish, Korean or Arab-owned shop: Usually, you can walk to it.

The profit drop suggests a deep contradiction in Wal-Mart’s seemingly altruistic goal of bringing abundance to the American working class. According to Wal-Mart defenders, those low prices hinge, not only on improvements in productivity, but on the low wages and benefits offered to Wal-Mart’s workers. In other words, you’ve got to squeeze one part of the working class – the 1.3 million Wal-Mart employees – to fill the shopping carts of the others. How much the employees are squeezed is hard to determine: Wal-Mart claims to pay an average of $9.68 an hour, which doesn’t sound all that bad. But Wal-Mart has a record of falsifying data on employee hours to conceal unpaid overtime work, so why should we believe them about anything?

There were signs, even before the recent profit drop, that Wal-Mart was beginning to be priced out of the reach of its own employees. I was surprised, in my brief stint as a Wal-Mart associate, that our ladies’ wear was too costly for many of my co-workers. (In Nickel and Dimed, I told the story of a  $7 an hour associate who could not afford a $7 polo shirt of the kind we were required to wear.) If you earn $7, $8, or even $9 an hour, you’re not buying new clothes anyway; you’re going to Goodwill or consignment stores. As for the offerings of Wal-Mart’s Electronics and Lawn and Garden departments: For my co-workers, these weren’t even on the distant horizon.

Then there are Wal-Mart’s sagging Christmas sales. Christmas is of course a retailer’s defining moment, and in the last two years, Wal-Mart desperately slashed its  prices as the holiday approached. But both in 04 and 05, Wal-Mart’s Christmas take was disappointingly low (Target and Costco did better, as did the luxury stores like Nordstroms.) Who buys their Christmas presents at Wal-Mart? It’s the $7-10 an hour crowd that dreams of Christmas shopping at Wal-Mart, and for the last two years, there hasn’t been much under their trees.

Now of course Wal-Mart associates are not a special breed of celibates who have taken a vow of poverty. They are the spouses and live-in grown children of carpenters, home health aides, baggage-handlers and truck drivers. When Wal-Mart workers can’t afford health insurance or new school clothes, the whole working class begins to flail.

Furthermore, the Wal-Mart business model increasingly betrays what was once the operating principle of American capitalism, as explained by Henry Ford the First: You’ve got to pay your workers enough so that they can buy your product; that’s what keeps the system going. When the American majority can’t buy the very goods they manufacture or sell, that system is cruising for a bruising.

With their business model crashing down around them, the monks of Bentonville are already moving on to Plan B. Forget the working class, which was so ungrateful anyway, and move up-market. They’re redesigning their stores to be more appealing to the J. Crew and Whole Foods crowd. They’ve added organic foods and $2000 flat-screen TVs to their wares. The poor will have to fall back on those Jews, Koreans and Arabs.

Comments

[Rhea]

For folks who must shop at Walmart (either because everything else in the area has been put out of business, or because it is the 'only game' in town) there is a very enlightening article in the Co-op America magazine about ways you can do as well or better on Walmart prices. (Not sure if you can get the mag without joining up.)

[Stephen]

You speak of "speezing" employees to fill up shopping carts. How about squeezing Mr. Scott's $1.2m/year salary. Actually, 1.2 is actually pretty reasonable for a CEO of the world's largest retailer, how 'bout instead, we squeeze the $22m in bonuses that he made in 2004 (and probably every other year). Maybe thats where we should start to strengthen the grip!

[BlondebutBright]

As an American living in the Netherlands, I couldn't help but smile when I heard it wasn't "working out" for Walmart in Germany. In Holland, although chain stores abound, the tiny corner shops have a strong following and add a wonderful international flavor to the cities. I shudder imagining that even here, Walmart aspires to replace the entrepreneurial spirit of so many.

I loved Nickel and Dimed, by the way. I read it over Thanksgiving last year - really, a perfect time to be made more aware of the reality of the working poor. Keep up the great blogging.

[Terry Vermeylen]

Yes so right. Up here in Canada they made employees search for the bomb during a bomb scare. And the quality of products don't last anymore. Toasters lasted 20 years, now maybe a year or two. TV's are going out of style every two years.
The younger folk unwittingly give the consumer treadmill fodder by wanting cool over quality.

[syfr]

Here's the Co-op America issue (I think):
http://www.coopamerica.org/PDF/WalMartCAQ68.pdf

[Arrow]

In Michigan, where I grew up, there is a box store called Meijer (many may know it already, there are also stores in Ohio and Indiana). I worked there one summer during college, and earned over minimum wage (back in 1998), and I was also part of a union. In Michigan, even with it's failing economy, the Meijer's stores tend to chase out the Wal-Mart's because their goods are slightly higher quality, the prices aren't much different, and the work is better.
Just thought I'd mention that: there are working models of unionized box stores out there, and it's obvious they haven't fallen apart over the years. Hm.

[eddy]

**The younger folk unwittingly give the consumer treadmill fodder by wanting cool over quality**

Well said. Every 'new' gadget or gizmo or trend that comes out is aimed at the young for this reason. That's also the reason easy credit is offered to kids barely out of high school.

To be fair, parents could do more on this end, but in their defense, many of THEM are far too busy working 60 plus hour weeks to be there for the kids. And if they don't do the hours, their job is at risk. It's a Catch 22 from hell.

So the one-eyed babysitter teaches them how to think, and how to want. They have degreed courses in how to market to kids. It's a science. So you have teens who by any measure have it very well, complaining of being 'deprived'. Huh? No one bought ME a Corvette when I turned 16. STILL can't afford one in my supposed 'peak earning years'. That's the brainwashing in effect.

I have yet to buy an iPod, simply cuz I refuse to be a sheep. On the other hand, they 'update' it every six months or so, so no point anyway.

[lc2]

The sad thing is that by the time Wal-Mart finally takes a step forward wage and benefits-wise to balance out the hundred steps they've taken American workers backward, they will have priced the responsible, union or otherwise, retailers out of business. Sadly, big boxes like Meijer's or the one my husband works for are being forced to operate on Wal-Mart's terms, minus the locking-in and forced overtime bits, thankfully.

Though consciousness about the "low price everyday" trade-off is growing, there are now plenty of people who chuckle knowingly when the subject of their preferred shopping venue comes up, and then earnestly insist they're out of options. What people need to realize is that they made choices all along the way that eliminated those options -- from being absent at commercial zoning meetings when Wal-Mart came knocking in their town, to abandoning the local hardware store, to giving in to the lure of cheering up on a crappy day by walking out of there with 6 shopping bags for $50 -- when they went in for underwear [BTW, Barbara's right -- stuff like that that you actually need is not cheap].

Wal-Mart ruined a beautiful 175-year old downtown where I grew up in a matter of months, not years. The company, however, is only one of the culprits. Our culture of recreational shopping is out of control and we must assume some of the blame for having had the souls sucked out of our small towns.

I don't know about the Wal-Mart workers, but my husband makes more than twice their average hourly pay, and we can't afford back to school clothes this year -- at least not until Halloween. Hope it's a late Indian summer. Unless Wal-Mart starts discounting gas for our 10-year old (non-SUV) car or heating oil for our 800 sq. ft. house, I'm just hoping that the shopaholics who are Wal-Mart's bread and butter give generously to Goodwill over the next couple of weeks.

[WereBear]

Wal-Mart is an addiction and a scam.

I think it's an addiction because it pulls people in with false low prices. Yes, a lot of what WM sells is cheap. But many of their prices are not. Those big signs are about the lowest prices. But as long as you are there, you are buying stuff no better, and sometimes more expensive, than what you can get elsewhere. That's why they advertise, "Always low prices, always," because they had to stop saying "lowest." It wasn't true.

And that's where the scam comes in. People are so brainwashed they think the brand name jeans they buy cheaply are the same brand name jeans that are more expensive elsewhere. But they are not the same jeans. Manufacturers cut corners on their WM goods, to get to that magic price point where WM will take them. And so the clothes start looking ugly in a few months, the coffee maker stops working, and the victim goes back to WM!

Even when I stopped going to WM years ago, it was an easy decision to make. I didn't want to support them, true, but I have to admit they weren't supporting me. I didn't like what they had to offer, and in terms of variety, they decided what I would like.

From the stats, it seems more people might be realizing it.

[That Girl]

Im surprised no WM trolls have commented yet - there is a service for big-name companies.
It pays people to find blogs which mention their clients and make arguments for the client.
So if suddenly some unlinked person starts extolling the benefits of WM and capitalism here, my advice is, dont feed the professional troll.

[Jeannettee Spaghetti]

**Wal-Mart is an addiction and a scam.**

Couldn't agree more. Walmart has successfully engrained into American culture the notion that they are the cheapest retailer around. Consumers get locked into thinking that they have to go to WalMart because they can't afford anything else. This is false, and the consumer ends up paying in the long run, both by continuing to support the giant and by sacrificing quality that would ordinarily last them much longer.

[lc2]

All the consciousness-raising in the world won't bring back the family merchants or smaller, more responsible big box employers, space in landfills that are full of substandard WM merchandise (don't you just love seeing those blue plastic bags wrapped around trees in winter?), or a generation of people who knew something about assessing whether you really need something before you buy it.

Wal-Marts are relatively scarce where I live and are located right next to alternatives like Target, but I am told that in many places like the small town where I grew up, WM is the only game in town. There is zero consciousness about the choice to shop there, because there is no choice. A friend of mine talks gleefully about going in for motor oil and leaving with six pairs of $3 shorts on clearance that she didn't need but can give away to friends (huh?). I know she's not financially stupid and inherently materialistic. Instead, I believe that she is addicted. And like they say when you want to break an addiction, she cannot change her environment, because there are no other places to shop. It is a nasty, nasty habit that is increasingly difficult to break.

[A Canadian]

I have been boycotting Walmart for many years now. One day my son and I were shopping and I was tracked by an associate (who needed a lesson in being discreet) the whole time. I assume she thought I was shoplifting. When I went to the cash I asked to speak to the manager. When he came I asked him why this woman had been following me around the store (we were in there for at least an hour). He spoke to her and she denied following me (meanwhile she was hiding in the aisle next to the cash I was standing at). I told him that I didn't appreciate their intimidation tactics and that I would never shop there again. His response was (and I quote), "I don't give a shit whether you shop here or not!" Talk about outstanding customer service! I hate the place and will never, ever shop there. I don't care how low their prices are, I'd rather pay more somewhere else. P.S. The clothes I bought fell apart after three washings! Great quality!

[Patrick, Holland MA]

I have read some interesting comments about WalMart of late. Sadly, one of the posters above warns of anybody extolling the potential virtue of Walmart, calling them trolls. That is infortunate, for it dismisses a priori and rather anti-intellectually. Anyway, if intersted in diversity of opinion, check out this link lauding the accolades of WalMart for rescuing millions from poverty in China.

http://www.tcsdaily.com/article.aspx?id=082206D
Peace

[Hattie]

Our local economy has proved resilient in the face of the Wal Mart onslaught. That's because by the standards of this place they are not cheap.

[Ryan M. Powell]

I think Trey Parker and Matt Stone hit the mark pretty well when "Wal-Mart" invaded their notorious cartoon town. Everyone in South Park believed "Wal-Mart" was bad for the town, but they kept shopping there anyway. They couldn't get enough "Wal-Mart," even after it turned their vibrant business district into a ghost town.

How many of you folks do the same thing?

If you do, you need to stop. By supporting Wal-Mart in ANY way, you support poverty. It's that simple.

No more "I tried not to shop there" excuses like I hear from my mom whenever I confront her about the recently acquired Wal-Mart bags in her house.

Like my mom, I try not to shop at Wal-Mart, except I succeed. It's easy. Step 1: I don't go there. Step 2: Hmmm, all I needed was Step 1.

Ryan M. Powell
http://www.aimlessmovie.com

[Bobby Decker]

Read your new editorial on Wal Mart today{ Im one of your nickle and dimed readers,and your one of the people who I recorded and saved every time you appeared on C SPAN along with some of my other heros like Ralph Nader. Was reading your responses on Wal Mart and would like to comit on Meijers,I presently live in a small Kentucky town a few miles from the Lovisville Metro Line boundries, Im 7 miles from the Super wall Mart and allmost never go there Meijers is allmost twice the distance but I,ve found It to be less expensive plus they double and every month or two they triple coupons,unfortunly Kentucky is the only Southern state thier located in and then only the Louisville Metro Area {4} and the one in Florence Ky.across the ohio River from Cincinatti.Oh and one last quick comenterie on Wall Mart one morning when I coun,dt sleep the only times Id go there thier was a women around my age [49 Oct.] I was geting my cheapie breakfast in the Mc Donalds in the frount of the store and noticed her requsting to only order scrambeld eggs only off the menu I also obsur ved she had a Wal mart shoping bag with her containing a bananna a small bag of pitta bread I assume she purchased in the store to fill with the scrambeld eggs,the first thing that came to mind was your book {NICKEL AND DIMED}the sad part thier are two Americas THE NICKEL AND DIMED,WHATS THE MATER WITH KANSAS.And THE ZERO SUM SOCITY....that exists in David Brooks BO BOS IN PARIDISE AMERICA who feel compleatly comfortable with some louser working at Wal Mart and living in thier car so long as thier 16 year old gets to drive a new BMW convertable to High School.

[JP Merzetti]

Walmart truly is a canker on the tender part of America, what?
The itch that just hovers out of reach of the scratch.

Basic economics say that the extra "mad money" (otherwise known as disposable) that's all disappearing in order to keep old Betsy running - tumbles through the bottom fed troughs in strange and wonderful ways. Joe McJob sells less burgers (Kraft McCheese at home tonite, kids!) subsequently Joey Mack ain't shopping for cheap trinkets quite so much.

I'm the first one to admit a deep and abiding love for Main Street. I've courted many a bustling downtown in my time. Walkable, sociable, and subdivided into astounding array of smallish and family enterprise.
Walmart (and its attending brethren) killed that.
For that I have no forgiveness.

Hoots and hollers - Wally will now court the Michael Jordan wannabes and cheap pretenders - who still have more cash by far than Joe McJob can ever dream of.
We will please now enlarge the parking spaces for Hummers (dinosaur alley) and ramp up the gold display counter...spewing diamond encrusted everything!

Old crusy Henry F. did get it right - for all his strange ways. He understood a basic thing that has since gone south - all the way to Mexico and beyond.

Imagine Wally doubling salaries? (that's what Henry did.) No doubt the Rocky fellers blanched somewhat - but it proved a smart move, nonetheless.
Look what happened: Highways to heaven (but especially straight to Wal*Mart.)

The last time I checked - the late great middle class was still the largest demographic in the country.
Discounting the desperately poor, and the stinking rich, this is where much of what actually drives our sad economy resides.
They have been McJobbed silly and sideways....and I suspect they are now beginning to fight back with their wallets (unbeknownst to even their glorious selves) - it takes no particular political rhetoric at all, folks. Just a wee bit of attention to the ledger. When the house has been refried to death, there ain't no more cash left, no matter how hard you squeeze the pig.

While Wally's big "just in time" warehouse keeps on rolling down the line - the profit margins just float off to China.

Who the hell ever thought this was a good idea in the first place?

I suspect that what used to be the rather proud "Buy American" has now morphed into "Bye - American!"
(and only an American would even notice the subtle difference in the vernacular.)

[Rainshadow]

How many of you who posted here have shopped at Wal-Mart in the past 5 years? Enough said.

You get the impression from reading these things that they are offering something of value, but too bad they do it wrong. The food is no good, the stuff is not going to last a year, and the experience of being there is a step above (maybe) being in a parking garage.

We Americans are too much into THINGS. We collect them all our lives then spend the last 5 years of our lives trying to figure out how to redisburse it all.

P.S. I have been in one once, and they didn't have ANTHING in the store I would buy. Who needs this junk anyway?

[A Canadian]

J.P - Great post - very creative....

Where the heck is realpc? Conspicuously absent from this discussion.... :)

[Jan Chapman]

Could Walmart be deserting their base for more upscale customers? I guess that eliminates the standard Walmart apologia about providing cheap goods for the poor…

[fromthesubmergedtenth]

I think it shows rather shallow thinking to blame Walmart for what Congress did to our trade policies. NAFTA has made it possible for Walmart's present status.

It was President Clinton who ushered in NAFTA, assisted by "progressives" Democrats like loudmouthed Joe Biden, and John Kerry and Tom Harkin and many other Democrats. I think its so humorous and deceptive for congress members who voted for NAFTA to jump on the anti-Walmart bandwagon like Senator Joe Biden did in his roof top tirade against Walmart in Des Moines Iowa recently. Old Joe voted for NAFTA.

And before Walmart, the shopping centers all across the nation had pretty much wiped out the nostalgic Mom and Pop stores and had left many downtown areas to be like a ghostville.

Almost all retail stores are selling imported goods these days, even Dillards, and Younkers, and Tolbots, and you name them and you will find that they are mostly selling imports.

I doubt that wages and benefits at Walmarts are must different from other similar jobs at most retail stores. Retail low skill jobs have always brought low pay.

Jumping on Walmart misses the main bigger trade policy picture that has ruined US manufacturing.

[lc2]

submerged, I agree with you in almost every way ... particularly re Hillary (whom I try to cut a lot of slack b'c she's a sista, kwim?) jumping on the Anti-WM bandwagon. Give me a f-ing break! She was on its Board of Directors!

BUT, where you're wrong, very wrong, dangerously wrong, is in your assumption that all retail work is low-pay and no-benefit. My spouse makes almost twice the average WM salary and until leaving the union for mgt. ranks recently, had pre-paid health/dental/vision (as in no premiums charged to us per union negotiations), college tuition assistance, 13 weeks maternity leave at 80% pay, and a host of other benefits, including 5 weeks paid vacation. He did better financially and benefits-wise in the union for base pay, but would like to be in line for bonu$e$. Company is full of similarly loyal and productive employees.

It's worrisome to me that more people with progressive politics aren't aware of the huge range of pay and benefits in retail, the fastest growing sector of our economy.

[fromthesubmergedtenth]

1c2 -- Your husband may have had good pay in retail but I bet he was not working as a check out clerk or shelf stocker like **most** jobs at Walmart or Kmart or Target or non-owners working in little shops and kiosks in shopping centers.

I don't doubt that some high end retail stores are able to pay their sales staff well. But you have to compare similar jobs in order to be fair.

[eddy]

**We Americans are too much into THINGS. We collect them all our lives then spend the last 5 years of our lives trying to figure out how to redisburse it all.**

This sums up the beginning and end of the debate. If we did not allow ourselves to be brainwashed into consuming, places like Walmart could not be what they are. They'd still exist, but it would not be the devouring monster it is now.

From the time you are a wee one you are assaulted by advertising. The average young person sees over five years worth of commercials by the time they are 21 (assuming about four hours of TV a day). You think that doesn't carve a path in the brain?

And not even talking about the hidden advertising. Product placements in movies, videos and the like.

That being said, did you know WM charges outside truckers to have their trucks unloaded? You are bringing in THEIR stuff, and the driver has to PAY THEM to unload it. Little known fact about WM, and the truckers hate it, but companies keep doing business with them. It can cost anywhere from 60 - 200 bucks to unload, depending on what you are hauling in.

Keep in mind diesel is over 3.00 gallon now. Like these guys can afford it. There's drivers out there who have not been home in over a month, cuz they can't afford to stop the truck.

So that's another reason why their prices are so 'low'. The truckers are subsidizing WM. That's like you charging the UPS man to deliver a package to you. Exact same thing. Would UPS go for that?