Shopping Our Way to the Unemployment Line: The Big-Box Impact

By MissBiz aka Jackie Howatt
Published and Copyright November 1, 2006
Saint Mary's University, The Journal


Last week, on October 16, 2006, I read about the Wal-Mart Supercenter strike in Hialeah Gardens, Florida on businessweek.com. Coincidentally, my Retail Management class was simultaneously doing an in-depth assignment regarding big-box retailers and their detrimental sociological and economic affects. Like many, I’ve been aware of the negative impacts of power-retailers, like Wal-Mart. But with so much of it in the news lately, and even right now as I flip through this collection of Wal-Mart news articles compiled by my professor, it is literally making me sick to think about the future of retailing, and the monster we have all created.

When brainstorming this article, I couldn’t find a concrete storyline, or a cohesive way in which to write it. I concluded, however, that my goal is simply to expose some of you to the political issues taking place right now regarding the unbelievable power that big-box retailers (namely Wal-Mart) inflict upon our economy, and our lives. Wal-Mart seems to be making headlines every day. I cannot possibly cover every damaging account, but I want to highlight some of the more notable instances that might make you think twice about this retail goliath (and others like it).

First, Wal-Mart has made an art of “squeezing” their suppliers and streamlining their inventory and channel distribution so perfectly that it is basically impossible to compete with their intelligence. This is the main strategy that their company is built upon. It was a genius approach of retailing ten years ago, and they grew exponentially because of it. Their share price peaked in 2000 at $70 (signonsandiego.com). Analysts believe that the popularity of Wal-Mart came at a time when the baby-boomer generation also peaked at retirement age. This extensive demographic found it convenient to buy almost every necessity under the sun, underneath one roof, and at a price that was compatible with their fixed income. But now that Wal-Mart has accumulated an established market-base, and as the severe decline in one of their largest target-markets (the baby-boomers) looms ahead, their operational strategies are severely impacting everyone – even you – the taxpayer.

The most prevalent and ongoing political issue regarding Wal-Mart is unionization, or the lack there of. Simply put, Wal-Mart cannot “afford” to deal with a unionized workforce. By “afford” I don’t mean that they literally cannot pay their employees a decent salary, because they can; Wal-Mart is the largest company in the world - period. They can’t “afford” it because their entire business is based upon the lowest guaranteed prices. Unionization would cause wages to increase, therefore inflating product prices. Unionization has been a major sore spot for Wal-Mart and they have generated negative publicity because of their determination to avoid the subject altogether. A milestone example of this can be seen in the case of Wal-Mart store number 3643 in Jonquiere, Quebec in 2004/2005. The employees of this small town Wal-Mart location obtained union certification, but soon after they did, Wal-Mart shut its doors - for good. Wal-Mart claimed that the location wasn’t making any money. This left 190 people unemployed, not to mention the physical concrete void they left standing in the middle of a small forestry town.

Refusing unionization and paying their employees minimal hourly wages with inadequate benefits is somewhat old news, but gives an idea of where the company and its employees stand. Making recent headlines, however, is that Wal-Mart is clamping down even harder on their operations with a new set of employee rules and restrictions just issued within the past few months. These new policies are a direct reaction to their stagnating same-store sales, and therefore, their need to cut costs across the board to remain profitable.

Several of the new policies are not sitting well with Wal-Mart employees, for example, pushing the part-time workforce from 20 percent to 40 percent, wage capping, strictly monitoring employee absences, and hiring “healthier” and subsequently younger employees (marketplace.publicradio.org). These procedures would be desirable for any cost-leader company, as implementing these strategies will “trim the fat” from the bottom line. However, because Wal-Mart already provides little compensation (or empathy) to their employees, the backlash was expected - and arguably justified.

A policy I found particularly grabbing was the “hiring and promoting a healthier staff” initiative. Even though this is bad news for those older Wal-Mart employees who face being shafted due to their ailments, Wal-Mart is actually performing a service to us taxpayers by applying this procedure. Just to shed some light on the ramifications that Wal-Mart’s low wages combined with minimal to nil health insurance can impose on taxpayers: “Reliance by Wal-Mart workers on public assistance programs in California comes at a cost to the taxpayers of an estimated $86 million annually; this is comprised of $32 million in health related expenses and $54 million in other assistance” (http://www.dsausa.org). Even though this is an American statistic, the affects are mirrored throughout the global economy. This same study also reports that, “If other large California retailers adopted Wal-Mart’s wage and benefits standards, it would cost taxpayers an additional $410 million a year in public assistance to employees”. If Wal-Mart wants to hire healthier employees, it might lessen the impact on taxpayers, however, this faintly mitigates their burden on society, as their employees need to be subsidized in other ways due to insufficient wages.

The power that Wal-Mart bestows over its employees is devastating. But it doesn’t stop there. When a business becomes so pervasive and domineering as Wal-Mart has become, it sends a rippling affect throughout the community and the global economy as well. They wreak havoc on their suppliers and competitors wherever they go. It is almost impossible to compete with Wal-Mart, especially if a nearby business carries similar products or services, because they will consistently outdo any price point. A Wal-Mart supplier suffers greatly because their margins become almost non-existent due to Wal-Mart’s “squeezing” affect, as mentioned earlier. Suppliers find themselves in a tangled web. Wal-Mart’s business keeps manufacturing facilities at full capacity, which means consistent business, however, with little margin leeway and a full staff, it is hard to turn a profit.

“Therein lies the basic conundrum of doing business with the world's largest retailer. By selling a gallon of kosher dills for less than most grocers sell a quart, Wal-Mart may have provided a ser-vice for its customers. But what did it do for Vlasic? The pickle maker had spent decades convincing customers that they should pay a premium for its brand. Now Wal-Mart was practically giving them away. And the fevered buying spree that resulted distorted every aspect of Vlasic's operations, from farm field to factory to financial statement” (fastcompany.com).

Jim Wier, the owner of the Snapper lawn-equipment company, is otherwise famously known as “the man who said no to Wal-Mart”. While Wal-Mart was pressuring his company to supply more mowers, Mr. Wier was determined not to turn his decades-old company into a Wal-Mart pawn. “Why would you buy a walk-behind mower from Snapper that costs $519? What could it possibly have to justify spending $300 or $400 more? That's the question that motivated Jim Wier to stop doing business with Wal-Mart. Wier is too judicious to describe it this way, but he looked into a future of supplying lawn mowers and snow blowers to Wal-Mart and saw a whirlpool of lower prices, collapsing profitability, offshore manufacturing, and the gradual but irresistible corrosion of the very qualities for which Snapper was known. Jim Wier looked into the future and saw a death spiral” (fastcompany.com).

Wal-Mart is so convenient for the end-consumer. We can’t deny that. We’ve all shopped there at some point. But even though we’ve all heard bits and pieces of anti-Wal-Mart anecdotes, I think many of us choose not to look too far into it, for fear that we might feel compelled to “put ourselves out” a little bit, and to reconsider the convenience and gratification that Wal-Mart provides us. Like global warming, maybe if we ignore it and walk with our heads down, it’ll go away. This is so not the case. Every dollar you spend is comparable to a vote. Do you believe in the Wal-Mart “party”? Do you support their “platform”, their “campaign”, their values, their impacts, their actions? Would you vote for them?

Consolidation and acquisition is the most widespread fear among consumers in regards to big-boxes. With Wal-Mart providing everyday essential products (even groceries) at rock-bottom prices, and with Best Buy providing every gadget imaginable at rock-bottom prices, and with companies like Home Depot, Staples, Shoppers Drug Mart, and Costco following suit, will there be any room for competition (choice) in the future? Will we eventually be shopping at one giant Supercenter like mindless robots? Will any of us who will either work for a small company or start a small company ourselves stand a chance? “Are we shopping our way straight to the unemployment line?” (fastcompany.com).

We have to collectively understand the implications of walking into a Wal-Mart (or any big-box retailer) and purchasing toilet paper for the sake of saving fifty cents. The implications run far deeper than you think. Society has created a monster that feeds off of our physical and moral laziness. I’m not saying to never shop at a Wal-Mart again, but next time you find yourself walking into a big-boxed retailer, ask yourself, “is it worth it?”.