Ahhh.. The Walmart bashers are going to love this.
BY JAMES PRESSLEY
Few suppliers can rebuff Wal-mart Stores inc. and thrive. Jim Wier did both. Soon
after his company bought lawnmower maker Snapper Inc. in 2002, Wier traveled to Wal-mart's headquarters in Bentonville, Arkansas, recounts Charles Fishman in “The Wal-mart Effect”.
Inside, the executive landed in a vice president's office so cheaply furnished that Wier had to perch on a lawn chair. His message: Snapper wasn't making money selling lawnmowers at Wal-Mart's "everyday low prices," so he planned to stop deliveries and focus on higher end dealers. He was sacrificing almost a fifth of Snapper's business.
"Once you get hooked on the volume, it’s like getting hooked on cocaine," he said later.
Manufacturers, workers, even Wal-Mart itself are suffering from an addiction to low prices, according to The Wal-Mart Effect and another new book on the world's biggest retailer. The Bully of Bentonville by Anthony Bianco. Read both if you want to know why Americans are "shopping themselves out of jobs."
Consider Vlasic Foods International Inc., which sought bankruptcy protection after Wal-
Mart began hawking 200,000 gallons of Vlasic pickles a week. The gallon jars were priced so low — $2.97 apiece — that it "chewed up" profit margins and cannibalized Vlasic's other products, writes Fishman, an editor at Fast Company.
Low prices mangled bicycle marker Huffy Corp., too. Though Wal-Mart ordered 900,000
bikes at a time, it paid so little that Huffy had to shut U.S. factories and subcontract production to China, where workers earned 41 cents an hour or less, Bianco writes. Even then. Huffy skidded into bankruptcy court.
Less understood is how the retailer has revolutionized non-suppliers. Snapper, for example, is still building all its lawnmowers in McDonough, Ga. Yet the "Wal-Mart effect" on prices remains so pervasive that Snapper has introduced robots, lasers and computer-driven equipment, Fishman says. Productivity has tripled: 650 factory workers make more lawn mowers, leaf blowers and snow blowers than 1,200 made a decade ago. Snapper reschedules production every week to match the pace of sales. "It operates, literally, in Wal-Mart time," Fishman says.
Wal-Mart is so big that 90 per cent of Americans "live within 15 miles of a Wal-Mart," Fishman says. It's so big that it can dictate terms to Procter & Gamble Co. and Unilever.
Fishman excels in explaining how Wal-Mart cuts prices on everything from lingerie to fresh salmon from Chile sold for a baffling $4.84 a pound. "If you were so inclined, you couldn't mail a pound of salmon back to Chile for $4.84," he says. Yet Fishman doesn't rush to judgment.
"The question of whether Wal-Mart is good or bad for America is the wrong question because, like the car, Wal-Mart isn't going anywhere," he says.
For Bianco, Wal-Mart isn't a car; it's a steamroller. "In the name of the shopper, Wal-Mart systematically bullies its workers, its suppliers and the residents of towns and cities," he writes. Bianco, a writer at Business Week, paints a Dickensian picture. He offers examples of how Wal-Mart managers have locked workers in at night, smashed union activity, violated child labor laws and hired illegal immigrants.
Though Wal-Mart was always demanding, the company lost its human touch with employees after founder Sam Walton stepped down in 1988, the author argues.
Workers became "component parts" in a merciless retail machine. Bianco shows how Walton inspired employees, pinched pennies and loaded bird dogs into his pickup truck to go quail hunting.
Walton was a "Rockefeller of the Ozarks" — a frugal man who built a company that changed how business was done in America, the author says. The model, in Walton's case, was unpretentious, tightfisted and geared to the Protestant work ethic. Backward it wasn't, at least not technologically. Wal-Mart was among the first retailers to use computers to track inventory, adopt bar codes and exchange data electronically with suppliers. Walton's successor, David Glass, created a digital brain (capacity: 460 terabytes) able to devise work schedules that pare payroll costs by matching staffing to store traffic.
"Socially responsible" investors are pressing Wal-Mart to clean up its record. In 2004, |
Wal-Mart suspended purchases from 1,200 contractors that failed to fix labor violations and permanently banned more than 100 other plants, Bianco writes. Wal-Mart's image took a beating after Hurricane Katrina, when thugs rampaged through New Orleans armed, as Bianco says, "with guns looted from Wal-Mart stores." In response, volunteer Wal-Mart truck drivers hauled emergency supplies to shelters. The company donated $17
million to other relief efforts.
Since then, chief executive H. Lee Scott has called for increasing the U.S. minimum wage of $5.15 an hour. This comes as no surprise. Wal-Mart's core" working-class customers are struggling, squeezed by high oil prices and flattening pay scales caused partly by Wal-Mart itself, Bianco writes. The question, he asks, is whether "even Wal-Mart can thrive in a Wal-Mart world."
Bianco spins a narrative that traces Wal-Mart's roots back to the Ozark hills, showing how regional strengths became national liabilities. Fishman offers a more thematic and less editorial look at how the company affects everything from workers at a sprinkler factory in Illinois to U.S. imports from China.
GarryS ---- "We learn from experience that men never learn anything from experience."
