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One Nation under Walmart

One Nation under Walmart
Case 4.3 One Nation under Walmart
The huge corporations that produce our cars, appliances, computers, and other products— many of
them household names like Nike, Coca- Cola, and Johnson & Johnson— are a familiar feature of
contemporary capitalism. But Walmart represents something new on the economic landscape. Now the
world’s largest company, Walmart has achieved its corporate preeminence not in production but in
retail. No other retailer, at any time or in any place, has ever come close to being as large and influential
as Walmart has become. After years of nonstop growth, there are now more than 8,400 Walmart stores
worldwide, and 140 million shop-pers visit its U. S. stores each week. And the company is ­opening more
stores all the time as it moves beyond its stronghold in the rural South and Midwest and into urban
America. In fact, 82 percent of American households pur-chase at least one item from Walmart every
year. As a result, the company’s marketplace clout is enormous: It controls about 30 percent of the
market in household staples; it sells 15 percent of all magazines and 15– 20 percent of all CDs, videos,
and DVDs; and it is expected to control soon over 35 percent of U. S. food sales. For most companies
selling con-sumer products, sales from Walmart represent a big chunk of their total business: 28 percent
for Dial, 24 percent for Del Monte, and 23 percent for Revlon. Walmart is also responsi-ble for 10 percent
of all goods imported to the United States from China. 83 The good news for consumers is that Walmart
has risen to retail supremacy through the bargain prices it offers them. The retail giant can afford its
low prices because of the cost efficiencies it has achieved and the pressure it puts on suppli-ers to lower
their prices. And the larger the store gets, the more market clout it has and the further it can push down
prices for its customers. Everyone, of course, loves low prices, but not everyone, it seems, loves
Walmart. Why not? Here are some of the charges that critics level against the retail behemoth: •
Walmart’s buying power and cost- saving efficiencies force local rivals out of business, thus costing jobs,
disrupting local communities, and injuring established business districts. Typically, for example, within
five years after a Walmart super-center opens, two other supermarkets close. Further, Walmart often
insists on tax breaks when it moves into a community, so its presence does little or nothing to increase
local tax revenues. • Walmart is staunchly anti- union and pays low wages. Its labor costs are 20 percent
lower than those of unionized supermarkets; its average sales clerk earns only $ 8.23 an hour, and most
of its 1.4 million employees must survive with-out company health insurance. Small wonder that
employee turnover is 44 percent per year. Moreover, because of its size, Walmart exerts a downward
pressure on retail wages and benefits throughout the country. Critics also charge that Walmart’s hard
line on costs has forced many factories to move overseas, which sacrifices American jobs and holds
wages down. • Government welfare programs subsidize Walmart’s poverty-level wages. According to one
congressional report, a two-hundred- employee store costs the government $ 42,000 a year in housing
assistance, $ 108,000 in children’s health care, and $ 125,000 in tax credits and deductions for low-
income families. And internal Walmart documents, leaked to the press, confirm that 46 percent of the
children of Walmart’s 1.33 million workers are uninsured or on Medicaid. The docu-ment also discusses
strategies for holding down spending on health care and other benefits— for example, by hiring more
part- time workers and discouraging unhealthy people from working at the store by requiring all jobs to
include some physical labor. • As Walmart grows and grows, and as its competitors fall by the wayside,
consumer choices narrow, and the retail giant exerts ever greater power as a cultural censor. Walmart,
for example, won’t carry music or computer games with mature ratings. As a result, the big music
companies now supply the chain with sanitized versions of the explicit CDs that they provide to radio
stations and that are sold elsewhere. The retailer has removed racy magazines such as Maxim and FHM
from its racks, and it obscures the covers of Glamour, Redbook, and Cosmopolitan with binders.
Although many locations offer inexpensive fire-arms, Walmart won’t sell Preven, a morning- after pill—
the only one of the top ten drug chains to decline to do so. For these reasons, Walmart’s expansion is
frequently meeting determined local resistance, as concerned residents try to preserve their
communities and their local stores and downtown shopping areas from disruption by Walmart through
petitions, political pressure, and zoning restrictions. As one economist remarks, for Walmart “ the
biggest barrier to growth” is not competition from rivals like Target or Winn- Dixie stores but “
opposition at the local level.” As a result, Walmart has begun responding to the criticism that it is a
poor corporate citizen and miserly employer by improving employee health insurance coverage and
adopting greener business practices. And even its usual critics applauded when the company responded
rapidly to Hurricane Katrina, sending ­truckloads of water and food, much of it reaching residents before
federal supplies did. When it comes to Walmart, Professor John E. Hoopes of Babson College encourages
people to take a long- term view: “ The history of the last 150 years in retailing would say that if you
don’t like Walmart , be patient. There will be new models eventually that will do Walmart in, and Walmart
won’t see it coming.” And, indeed, in recent years the company’s sales growth has slipped as the
Internet has changed people’s shopping habits and as other discounters have done a better job of
attracting affluent consumers and providing higher quality and bet-ter service. In the meantime, where
you stand on Walmart probably depends on where you sit, as Jeffrey Useem writes in Fortune magazine:
“ If you’re a consumer, Walmart is good for you. If you’re a wage- earner, there’s a good chance it’s bad
for you. If you’re a Walmart shareholder, you want the company to grow. If you’re a citizen, you
probably don’t want it growing in your backyard. So, which one are you?
Discussion Questions
1. Do you like Walmart? Do you shop there? If so, how frequently?If not, why not?
2. Is there a Walmart store in your area? If so, has it had any impact on your community or on the
behavior of local consumers? If there’s no store in your area, would you be in favor of Walmart opening
one? Explain why or why not.
3. Is Walmart’s rapid rise to retail dominance a positive or a negative development for our society? What
does it tell us about capitalism, globalization, and the plight of workers?
4. Can a retailer ever become too large and too powerful?
5. Is opposition to Walmart’s expansion a legitimate part of the political process or is it unfair
interference with our market system and a violation of the company’s rights? Do opponents of Walmart
have any valid concerns?

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