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Wal-Mart and America
Wal-Mart is an exceptional American success story. From humble origins in rural Arkansas, Wal-Mart has become the largest company and largest private employer in America, with annual sales of $285 billion and a US workforce of 1.2 million people.
In 1962, Wal-Mart began as one man's dream. Target and Kmart started the same year, bankrolled by established retailers. Wal-Mart founder Sam Walton, who had owned a number of smaller variety stores, didn’t have a large company behind him. But he saw mass market discounting as the wave of the future.
Walton’s approach was to buy merchandise at low prices, keep markups low, pass on the savings to customers, and make money on volume selling. From the start, he wanted to lower the cost of living and boost the standard of living for his customers. And he succeeded beyond all expectations.
Today, 100 million Americans shop at Wal-Mart each week. Thanks to Sam Walton’s quintessentially American vision, Wal-Mart is saving its US customers an estimated $16 billion a year, which they are free to save, invest, pay bills or spend on something else.1
The savings are far greater when calculated over time. Given the cumulative downward pressure on prices exerted by Wal-Mart between 1985 and 2004, the company last year saved US consumers $263 billion – or $2,329 per household.
For all the good it does, Wal-Mart has attracted more than its fair share of critics. The top company in America has become our most criticized. This is, in part, a reflection of Wal-Mart's marketplace position. Everyone, after all, wants to take a shot at number one.
More ominously, however, the relentless and largely baseless attacks on Wal-Mart reflect a small but disproportionately influential viewpoint that is suspicious not only of our greatest economic success stories – but also the free enterprise system that is the engine of our prosperity, growth, and economic vitality.
Some critics see Wal-Mart as emblematic of all that is wrong with our free enterprise system and our broader American experiment. At americansforwalmart.org, we believe there is precious little wrong with our nation, our economic system, and our most successful company. [back to top]
Wal-Mart and competition
Free market competition works – and real people benefit. Enormously. Competition delivers the most goods and services at the best prices to the greatest number of people. It creates better, more efficient companies and gives buyers more value. That’s the magic of the free market.
Wal-Mart has always been competitive. Even when it was a small start-up, founder Sam Walton would continuously compare his stores to those of other retailers. And, from the beginning, Walton made every effort to keep customers coming back by making shopping fun and giving people more for their money.
Today, critics claim competition from Wal-Mart harms other retailers. The media, piling on, mentions Wal-Mart whenever a retailer that even tangentially competes with the company hits a tough patch. Low-price, no-frills Wal-Mart, for example, was even blamed for the bankruptcy of high-end toy seller FAO Schwarz in late 2003.3
In a market system, customer choice is king. Wal-Mart is only successful when millions of Americans choose its products or prices to those of the competition. In recent years, Wal-Mart has done well in, among other areas, groceries, toys, and CDs. In each case, its success has been fueled by millions of individual consumer choices.
Even with a large, successful company, customers have the final word. After all, when Wal-Mart challenged Netflix in the subscription DVD market, the company failed, despite its size and experience. Why? Because, in a market system, the people decide what succeeds and what doesn't. And would-be customers chose to get movies elsewhere.
As a strong competitor, Wal-Mart doesn't harm the retail industry. Instead, it lifts everyone's game. All companies and stores must strive for their best. As a result, customers of Wal-Mart benefit, as do customers of its competitors. [back to top]
Wal-Mart and America’s bottom line
Wal-Mart’s growing success has been a great benefit to the American people, particularly those of modest means. By buying low, selling low and selling a lot, Wal-Mart has enriched millions of Americans by lowering the cost of living, boosting the standard of living, and helping keep inflation in check.
Some critics claim Wal-Mart costs US taxpayers as much as $1.5 billion a year. That may or may not be an accurate figure, but, even if it were, Wal-Mart’s public benefit is many, many times greater.
Consider:
– Wal-Mart employs 1.2 million Americans – and supports 3 million US supplier jobs.
– A 2005 Harvard study estimates – conservatively – that Americans are saving $16 billion a year by shopping at Wal-Mart instead of its competition and another $16 billion shopping at other retailers because of the competition Wal-Mart represents.1
– A 2005 Global Insight study found that the cumulative downward pressure on pricing exerted by Wal-Mart between 1985 and 2004 was now saving U.S. consumers $263 billion a year – or $2,329 per household.2
– When Wal-Mart comes to town, retail prices drop 8 percent in rural areas and 5 percent in urban locales.1
– A UBS Warburg study found that a cart of groceries was 17 to 40 percent cheaper at Wal-Mart than it was elsewhere.5
– Wal-Mart paid $5.5 billion in taxes last year.6
By creating and filling 100,000 new positions this year, Wal-Mart is providing important and welcome employment opportunities. As such, Wal-Mart is moving people off public assistance, not putting them on.
Fifty-seven percent of new Wal-Mart hires are coming from outside the ranks of the employed. When you create lots of entry-level opportunities, you are going to hire some people on public assistance. In this, Wal-Mart isn’t adding to the public burden but reducing it. For example, 7 percent of new Wal-Mart associates are enrolled in Medicaid before joining the company. After joining, the number drops to 5 percent. After two years, it falls to 3 percent. [back to top]
Wal-Mart and small town America
For decades, Americans have embraced the convenience, wide selection and consistency of mass retail chains. Others blazed a trail for Wal-Mart in this regard, including Sears, Montgomery Ward, Kmart and others. Wal-Mart may have perfected mass retailing, but it hardly invented it.
Meanwhile, critics have tried to blame Wal-Mart for injuring the traditional downtown retail areas of small town America. Fact is, while some Main Street shopping areas are indeed struggling, the connection to Wal-Mart is tenuous at best.
Wal-Mart, after all, was founded in 1962, the same year as Target and Kmart. While Kmart quickly became a national retailer, Wal-Mart grew cautiously for a time, achieving nationwide prominence only in the 1980s and 1990s.
By contrast, many downtowns were in transition much earlier, as cars gave consumers greater mobility in the 1920s and as housing expanded into suburban areas after World War II. Retailers followed, establishing nearby strip centers and later malls.
Critics of modern retailers tend to idealize America’s retail history, sometimes beyond recognition. While some of yesteryear’s Main Street stores were truly great, others were, honestly, not so hot. In general, such stores carried limited selections of merchandise, didn’t offer attractive pricing, and were only convenient if you shopped during bankers’ hours.
In a market economy, change is constant. Stores, like other competitive businesses, come and go all the time. And retail outlets that don’t make it in the long run – from Main Street stores to defunct discounters to bygone boutiques – have one thing in common. In the end, they fail to meet the needs of customers.
With Wal-Mart and other highly efficient retailers leading the way and more than 1.4 million retail establishments across the country, we are living in the golden age of consumer choice in America. Never have more Americans enjoyed more retail value and selection in what they purchase and where. [back to top]
Wal-Mart and groceries
Wal-Mart’s expansion into groceries has been a success for the company and a tremendous boon to the American people. New competition from Wal-Mart has shaken up what had been a rather clubby and old-fashioned business, helping keep grocery prices down while boosting service, selection and innovation across the industry.
Consumers have been the big beneficiaries, with one study finding that a typical cart of groceries is 17 to 40 percent cheaper at Wal-Mart than at a traditional grocer.5 Another study found Wal-Mart’s grocery prices are 27 percent below those of traditional grocers–and that competition from Wal-Mart forces supermarkets to reduce their own prices by 5 percent.10 So even grocery shoppers who don’t shop at Wal-Mart are benefiting from increased competition, innovation, and retail price sensitivity.
Wal-Mart’s growing success in groceries has increased competitive pressure on traditional grocery store chains, many of which employ unionized workers. In response, union bosses eager to preserve their power and position are funneling millions of dollars into aggressive, campaign-style attack groups.
These well-heeled, professional critics are doing all they can to preserve the status quo in grocery retailing, mostly by attempting to smear Wal-Mart in the court of public opinion. Change happens in a market system, however, and Americans should be free to shop for groceries where they like without being harassed.
During the 1920s, A&P dominated the grocery business with more than 15,000 stores and an 80 percent market share. Today, the industry continues to evolve, with Wal-Mart, Kroger, Albertsons, and Safeway being the largest players. Ultimately, billions of individual consumer choices will determine the relative success of each – and that's as it should be in America. [back to top]
Wal-Mart’s employees
Attracting and retaining the right people is a big part of the success of just about any business, and Wal-Mart is no different. For better or worse, employees define a company to its customers and partners. Operating in the retail sector, Wal-Mart is particularly dependent on its employees, which it calls associates.
Wal-Mart is the largest private employer in the United States, employing 1.2 million Americans. No matter how you look at it, that’s a tremendous amount of people. And it translates into a lot of families who are counting on the retail giant’s continuing success.
With the scale of the company’s existing operations and pace of its new store openings, Wal-Mart is always hiring new associates. This year, the company plans to fill 100,000 new positions. Even so, Wal-Mart does not seem to have much trouble filling all these new positions. On the contrary, when new stores open, thousands of applicants routinely show up to apply for between 350 to 450 positions.
Americans join Wal-Mart – and leave Wal-Mart – all the time, just as they do other companies in a free market. Some stick with the retailer, others work for a season, others move on to work elsewhere. Some get ahead by going to another company; others get ahead by rising through the ranks at Wal-Mart.
And people do get ahead at Wal-Mart. They work hard as hourly associates, learn the business, take on more responsibility, become more valuable to the company, and move up into store management. In fact, more than 75 percent of Wal-Mart store managers began as hourly associates.4 [back to top]
Wal-Mart’s wages and benefits
Wal-Mart’s average hourly wage for full-time US employees is $9.68 an hour, nearly twice the national minimum wage. In some cities, average Wal-Mart wages are higher. In addition, more than half of Wal-Mart’s hourly store employees work full-time, compared to 20 to 40 percent of workers in the broader retail business.
Wal-Mart’s wages and benefits are competitive in the retail industry. If they weren’t, the company wouldn't be able to maintain a workforce of 1.2 million people, fill 100,000 new positions a year, or routinely attract thousands of applicants for hundreds of positions when new stores open.
In a recent survey, 52 percent of hourly Wal-Mart associates said company wages were better than those elsewhere. Just 23 percent said the wages were worse. In terms of overall job quality, 36.5 percent of hourly workers described their Wal-Mart position as "much better" than their previous job. By contrast, only 3.7 percent selected "much worse."7
This year, Wal-Mart will spend over $4 billion on employee benefits, which include profit-sharing, paid vacations, discounts, and a 401k plan. The company offers more than a half-dozen different health insurance plans with individual premiums starting at $17.50 every two weeks. Historically, the company has paid for two-thirds of employee health insurance costs.
Wal-Mart is in the retail business. Wages and benefits for entry-level retail positions are not as high as those in industries requiring professional skills or higher education. To recommend it, most entry-level retail work does not require a college degree or extensive experience. And the conditions of most retail work in America today are not at all unpleasant.
Retail firms tend to operate with narrow margins, and Wal-Mart is no exception. With its buy-low, sell-low and sell-a-lot approach, Wal-Mart made $10 billion on sales of $285 billion in its most-recent fiscal year. That’s roughly a 3.5 percent profit.
One group of Wal-Mart critics is demanding that the retailer arbitrarily increase wages across the board by $3.50 per hour. But a 2005 Harvard study concludes that boosting hourly Wal-Mart wages by $2 an hour would wipe out the company’s profit, spelling trouble for shareholders, customers, and, yes, employees.1
In a market economy, wages and benefits are established by those old free enterprise standbys of supply and demand. The apparatchiks may have done things differently in the old Soviet Union, but, in a market economy, this is the way things work. [back to top]
Wal-Mart and China
Wal-Mart, like many American companies, has business relationships with companies around the world. As a retailer, Wal-Mart purchases goods manufactured in many countries, including China.
In 2004, Wal-Mart bought $18 billion worth of goods from China. By contrast, the company spent $150 billion with 61,000 suppliers here in the United States, supporting some 3 million supplier jobs in this country.12 Wal-Mart’s purchases from China represent about 9 percent of that nation’s exports to America, which totaled $196 billion in 2004.
US trade policy is set in Washington, DC, not Bentonville, Ark. And there is broad bipartisan consensus in America’s foreign policy community that engagement and trade with China is in the best long-term interests of both nations. For 30 years, policymakers in Republican and Democratic administrations alike have concluded that a policy of engagement and trade with China makes strategic sense.
The basic idea is that openness toward China will help keep it on the path toward a free market economy and that freedom in economic matters may lead to positive steps in other areas. Trade is also seen as a way to increase general prosperity in China, giving the government and citizenry a growing incentive to maintain good relations with the rest of the world.
For its part, Wal-Mart is interested in buying quality products at good prices and passing on the savings to customers. Today, China is but one source for such products. When China was considering a currency revaluation in 2005 that might have made its goods more expensive, Wal-Mart and other US retailers began looking for new low-cost suppliers elsewhere. [back to top]
Wal-Mart’s size
Wal-Mart is the largest company in the United States, with the most employees and highest revenues. It is important to remember, however, that Wal-Mart is not successful because it is big. Rather, Wal-Mart is big because it is successful.
Wal-Mart is sometimes criticized for its size, but large scale retailers have been part of the American economic landscape for decades. Even as we like the personalized service that smaller, independent retailers sometimes offer, Americans also appreciate the convenience, selection, and predictability of buying from a large retailer.
In fact, as long as there have been chain stores in America, consumers have liked them – and would-be intellectuals have criticized them. In the 1920s, for example, A&P had 15,000 stores and 80 percent of the grocery market.
A 1922 book entitled Meeting Chain Store Competition denounced chain stores as "cut-rate competitor(s) managed from the outside by a soulless corporation.13" The over-heated rhetoric hasn’t changed in 80 years. Even so, appealing retailers large, small and in-between continue to flourish.
It doesn't make a lot of sense, but size has also been a public relations liability for other American companies, including Microsoft, GM and McDonald’s. Some critics seem to think large firms are bad merely by virtue of their size.
In reality, large companies often do a great deal of good. They tend to employ lots of people, serve lots of people, and wouldn’t be where they are without winning the repeat business of lots of loyal customers.
Bigger is not always better. But bigger is sometimes better, particularly if it grows from the positive character of an organization. Wal-Mart has flourished and grown because it has consistently appealed to the American people’s desire for quality and convenience at attractive prices. [back to top]
Wal-Mart’s critics
Wal-Mart has plenty of critics, but, with 100 million weekly customers in the United States, the company has far more fans than detractors. Unfortunately, Wal-Mart’s fans are much less likely to be heard from than its critics.
Some of Wal-Mart's critics are just honest, good-hearted Americans who don’t like large stores or may have been misinformed or misled. Others, many of whom are broadly critical of America’s free market system, have a habit of trying to tear down our most successful companies and industries.
A few years ago, political critics and opportunistic trial lawyers attacked Microsoft, essentially for being successful. Today, the same crowd blames our farmers, food companies, soda bottlers and restaurants for creating a so-called "epidemic of obesity." The sunny reality is that, as consumers of computing power and food, we’ve never had it so good.
Other critics have narrow economic reasons for slamming Wal-Mart. Labor leaders, for example, don't like their unionized grocery workers having to compete against union-free Wal-Mart. Union bosses would also love to organize – and begin collecting union dues – from Wal-Mart's 1.2 million employees. Most of the retailer's most well-funded critics seem to be in this category.
Some self-appointed arbiters of taste and culture don’t like Wal-Mart because it represents the triumph of mass market capitalism and the rise of a so-called consumer culture. These snobbish elites don’t appreciate Wal-Mart providing the great American middle class with countless cartloads of affordable goods.
Other Wal-Mart critics include blame-America-first political radicals. This smaller but intensely motivated group would include extreme, anti-growth environmentalists as well as the sort of self-styled anarchists who routinely try to shut down international conferences on world trade.
Wal-Mart is also a regular target of journalists who make their living spreading doom-and-gloom economic reports. While Americans have continued to prosper in recent decades, reporters are well aware that they are unlikely to score ratings points or win journalism awards for reassuring people that things are going well. [back to top]
Wal-Mart’s community impact
Wal-Mart is the largest corporate donor to charitable causes in the United States, giving away more than $170 million last year.
In an effort to maximize benefits to the communities it serves, about 90 percent of Wal-Mart’s corporate giving is earmarked for local organizations and causes. A typical Wal-Mart Supercenter raises or gives back $30,000 to $50,000 per year to the surrounding community.
In the wake of Hurricane Katrina, Wal-Mart dramatically demonstrated why it has been winning corporate citizenship awards for years. Showing a profound commitment to the American people, the company dispatched $3.5 million worth of emergency supplies, donated $17 million in cash to relief efforts, and provided $13.5 million worth of cash help to employees in the impacted areas.
In a broader sense, of course, Wal-Mart's community impact is even more spectacular. Not only does it provide jobs to 1.2 million employees and support 3 million supplier positions, but the company, according to a Harvard study, helps the American people save $16 billion in its stores and $16 billion in the stores of competitors.1 Another study, measuring Wal-Mart’s impact over the past 20 years, finds that Americans are saving $238 billion a year or $2,329 per household.2
Wal-Mart benefits poor people most of all. In fact, the company has 2.5 times as much store space per person in the poorest third of American states than in the wealthiest third. Within the poor states, 80 percent of Wal-Mart’s square footage is in the 25 percent of the zip codes with the greatest number of poor households.1
Talk about giving back to the community. By keeping prices low and passing on the savings to the American people, Wal-Mart is saving U.S. families thousands of dollars a year while contributing millions to a host of worthy causes.[back to top]
Wal-Mart and "censorship"
From its founding days in Arkansas, Wal-Mart has embraced the Middle American values of its customers. In recent years, Wal-Mart has continued to take deliberate steps to make sure that the media products it carries reinforce a family-friendly atmosphere in its stores.
Wal-Mart, for example, doesn’t carry some of the edgier mass market magazines. It places others in racks that hide the sometimes racy cover copy. The retailer also declines to carry movies and video games with adult ratings. And Wal-Mart chooses not to sell CDs that earn a parental advisory notice.
While Wal-Mart's decision to uphold family-friendly standards has been roundly criticized by self-appointed cultural arbiters in places like New York and Hollywood, no portion of that policy has drawn more sustained fire than the one on recorded music.
Since Wal-Mart doesn’t sell CDs carrying a parental advisory sticker, music companies have sometimes chosen to create edited, cleaner versions of music titles that otherwise wouldn’t be sold at the chain. Critics have been crying "censorship" over this practice for years, but Wal-Mart’s policy is nothing of the sort.
Censorship, by definition, is a restraint of free-expression by government. As a retailer, Wal-Mart is free to choose what it will carry and what it will not. The retailer has never edited a single obscenity or compromised the artistic integrity of a single foulmouthed singer. Any editing has been done by the music labels themselves.
Other retailers choose to do things differently – and that’s fine. In fact, there are plenty of stores selling CDs with parental advisory notices. Ironically, by refusing to carry warning-label fare, Wal-Mart actually increases consumer choice, giving people the option of buying bowdlerized versions of CDs that might not otherwise be made.
At times, Wal-Mart has been falsely accused of being driven only by profits. While we don’t believe there is anything wrong with companies in America earning profits, Wal-Mart might have made more money over the years if it had been willing to profit from more adult-oriented media fare. That the company has refused says something about its character. [back to top]
Wal-Mart and freedom
In the United States, the free market system has unleashed the great potential of the American people to build an economy that is the envy of the world. Today, Americans create 21 percent of the world's goods and services, yet represent just 5 percent of the global workforce.
Our free enterprise system fuels our economic success, our national prosperity, and our high standard of living. Ultimately, the free market bankrolls our military strength – and our ability to defend the cause of freedom at home and abroad.
The debate over Wal-Mart is fundamentally about freedom. It is about the freedom of Americans to shop where they want to shop – and the freedom of Americans in retail to serve their customers as they wish to be served.
Economic freedom works, providing the greatest opportunity and the greatest prosperity to the greatest number of people. Moreover, economic freedom is integral to freedom overall. No one, after all, can be truly free without economic freedom.
Wal-Mart’s more extreme critics would deny their fellow Americans the basic freedom to make their own economic choices, to do with their hard-earned dollars as they see fit. They would also deny Wal-Mart the opportunity to succeed or fail on the basis of how well it serves customer needs, not how well it handles implacable critics.
When the freedom of Wal-Mart and its customers is limited, all Americans lose a little freedom. And once we start down such a path, we can only wonder who is next – and where it ends. [back to top]
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