Magazine

Wal-Mart: The Good, The Bad, And The Ugly


Wal-Mart Stores Inc. is far from a zero-sum game ("Is Wal-Mart too powerful?" Cover Story, Oct. 6). A lot of money flows into each Wal-Mart, but very little trickles back out. The communities, large and small, that Wal-Mart invades were built by many years of investment through taxes and private investments, so residents could have infrastructure for a community that is a good place to live.

Once upon a time, there were small stores with small owners who spent most of their profits in their own local community. With Wal-Mart, those profits are now shipped off to headquarters and invested in faraway places. Local communities may be getting the zero-sum gain of sales tax (when they didn't cut a bad deal for the giant box to land in their town), but the great bulk of the sales revenue never touches Main Street again.

Jim Reilly

Beverly Hills

I find it unsettling that, in the article on Wal-Mart, the company is labeled a right-wing, conservative, small-town cultural gatekeeper. If Wal-Mart is, in fact, the largest company of its kind, how did it get that way? By pushing some supposed moral agenda? How about by thumping Bibles? No. Of course not. It got that way it by out-competing rivals. It beat them because it had what the customers want at the price that allows them to keep more of their money than the other guy does. Simple.

Keith Brison

Wailuku, Hawaii

This is the way I look at it: We either believe in free enterprise in America or not. We can't have it both ways. I own 10 shares of Wal-Mart and plan to buy more. That's called free enterprise, folks, and it's what made America great!

Martin Mayberry

Bartlesville, Okla.

In my 20-year career in the packaged-goods industry, I've had the opportunity to work with dozens of retailers, including Wal-Mart. Very few -- and I can count them on one hand -- are as concerned with value for their customers as Wal-Mart. Every meeting, every conversation, every issue discussed comes down to what can we (the supplier and Wal-Mart) do to provide a better value to the customers. In my opinion, that's what made them successful.

Brahim Zabeli

Shorewood, Minn.

Those of us who struggle to lead this country's smallest businesses have felt the wrath of Wal-Mart's efforts to cut costs out of the procurement process. My family's business is in a completely unrelated industry (aerospace products), but we have been affected dramatically because the Wal-Mart "playbook" is read by my customers and their customers, too. It's going to be interesting when the Wal-Mart story is revisited in 5, 10, and 20 years because it looks as if it still has room to grow.

Scott Livingston

East Hartford, Conn.

I buy goods that go to Wal-Mart for my living, and I travel to China once a month to find these products. The figure given for material purchased from China (by Wal-Mart) is only a low-end estimate, at 15%, and is likely much higher. That's because when they aren't "buying direct," they are forcing American manufacturers (like mine) to magically transform into desperate "Asian distributors."

It should be pointed out that Asia, and therefore all of us, owe our 15% Wal-Mart savings to the backbreaking labor of 15-year-old girls working for $3 to $4 a day. At the end of the day, further savings will only come from squeezing poor people in China and in America.

Mike Phillips

Chicago

I used to love shopping at Wal-Mart when Sam Walton was alive because the merchandise was mostly USA-made, people were important (both workers and customers), and there seemed to be a connection with the community in which the store was located. Now the store itself is this big monster that has no connection with anyone.

Susan Walter

Colorado Springs

I get savings for my family at Wal-Mart and will happily give up my ability to buy a copy of Maxim for that, especially since I've never bought one.

Ranjit Prabhu

South Orange, N.J.

While 82% of us may have purchased something at Wal-Mart last year, millions willingly pay more to purchase higher-quality products in stores that are smaller, cleaner, less cluttered, and more convenient than Wal-Mart.

Christine P. Schaller

Penfield, N.Y.

I have lived in small towns and understand firsthand the importance of having a Wal-Mart located close by. I now live in a large city and am eagerly awaiting the opening of a new Wal-Mart supercenter three miles from my house, so that I can save money on groceries. Wal-Mart is cheap, close by, and typically has the everyday items I'm looking for. This is an excellent formula for winning my business.

Kevin Ingolfsland

Woodstock, Ga.

Your attempt at gloom and doom missed the mark by an Arkansas mile.

Brian Olson

Highlands Ranch, Colo.

For a company that pinches pennies until they squeak, it smacks of complete cost oversight or a corporate directive -- or possibly both -- to treat employees as if they were so much disposable paper. Does anyone at Wal-Mart really understand what [employee turnover] costs the bottom line?

Frank Hansen

Alpharetta, Ga.

A bad consumer confidence number was released today (Sept. 30), causing the stock market to tumble. Each week, Wal-Mart gives us real-time numbers with their same-store sales report. This week's report (Sept. 29) was at the high end of their forecast. The markets should watch this number and ignore the other confidence reports. As Wal-Mart goes, so goes the economy.

Neil Gambell

Kearny, Ariz.

Why isn't Wal-Mart opening stores in China? If it is O.K. for the rest of the world to have a Wal-Mart economy, then it should be O.K. for China as well. When those empty containers headed back to China are filled with goods made in America and other countries, it will be a true "Wally-World."

Stan Blankenship

Wichita

After an absence of 30 years, I have returned to live in the Midwest, and after driving through the Main Streets of many small towns, I can make the following observation: When Wal-Mart comes to town, they get to sell the new stuff. The only thing left for Main Street to sell is -- antiques.

John Gochenouer

Marshall, Minn. In "The high cost of low prices" (Editorial, Oct. 6), you objurgate Wal-Mart for its business practices. But the examples you cite all seem to be legitimate instances of dealing by mutual consent. When entry-level workers come to Wal-Mart, they freely choose to accept a low wage because on balance they see it as a good deal. Competing "mom-and-pop shops" go out of business -- as they should -- if they fail to draw enough customers. Manufacturers sell to Wal-Mart because it is advantageous to do so.

Finally, to the extent that Wal-Mart's "Southern-style cultural conservatism" is distasteful to potential customers, there are opportunities for other retailers to capitalize on this and use a different cultural style to market goods.

Barry A. Liebling

New York

Your Editorial Notes with approval that Wal-Mart has agreed not to sell guns in its first inner-city location in Los Angeles. Did it conduct scientific survey research to reach that decision? The answer, of course, is no. But what if it had and found that a majority did in fact wish to have the option of buying a gun there -- what then?

Could it be that a little cultural gate-keeping meets with your approval?

David Light

Maynard, Mass. As Mayor of Winston-Salem, I must respond to the picture of layoffs at R.J. Reynolds Tobacco Co. painted in "Blues for a company town" (News: Analysis & Commentary, Oct. 6). Winston-Salem began diversifying its economy in the late 1980s and has made solid progress in that regard.

The best proof of this is that each of the major credit-rating firms rates the City of Winston-Salem and the County of Forsyth as AAA. Only a few cities and counties throughout the country enjoy this level of credit rating. Obviously, we have been able to demonstrate satisfactorily to these objective organizations that our economy is healthy and appropriately diversified.

The workforce in our county is in excess of 160,000. A loss of 1,600 jobs, while substantial, is not overwhelming.

Allen Joines, Mayor

Winston-Salem, N.C. Paid inclusion is no different from product placement in supermarket aisles, where companies pay -- either in the form of margin or hard dollars -- to have their product placed exactly where they want it in the shopping aisle ("Web searches: The fix is in," Information Technology, Oct. 6). No one is berating the supermarket chains for their equivalent of paid inclusion, and even less consumer education has been done in the supermarket world than in online search.

Chris Zaharias

Menlo Park, Calif.

Paid inclusion is only part of the problem. Any site selling old jalopies can hire specialists called keyword optimizers. For a price, they can dress up the site to make it look downright alluring to the robot crawlers -- which now "think" they've come across a page selling Cadillacs. This may be another reason why, as stated in the article, Web surfers are starting to "dismiss Internet search as nothing but a pile of ads."

Joe Chiffriller

New York

Without commenting on the merits or otherwise of paid inclusions for Internet searches, the notion put forward by the proponents of this concept that their search results are nevertheless displayed in order of relevance is laughable. If this were true, then by definition the incentive for companies to pay for such inclusion would be eliminated since their relevance to the search query, and hence their relative ranking to other Web pages, must remain the same. Since most profit-seeking businesses are not in the habit of paying for a service from which they derive no benefit, one can't help feeling that certain proponents of paid inclusions are being somewhat economical with the truth here.

Nick Piquito

Johannesburg John Rossant's Commentary, "The real war is France vs. France" (International Business, Oct. 6), misses one essential point: One can be both "pro-American" and "anti-Bush Adminis- tration." I have been a subscriber to BusinessWeek for 24 years, both in France and in the U.S., where I studied and worked as a professional for 10 years. I have always deeply admired this beautiful nation of yours, which is, without any doubt, the best democracy in the world.

The current Bush Administration is, however, doing a disservice to the nation with the Iraq invasion, setting back the country in the worst years of worldwide anti-Americanism since the Vietnam war. Thus, you have a third category of French people, besides the "anti-Americans" and the "anti-anti-Americans": the "anti-Bush pro-Americans" to whom I proudly belong. I am sure you'll catch the nuance here, a little bit like being "anti-Saddam pro-Iraqis."

Christophe J. Nijdam

Paris

The rift between France and the U.S. is more the clash of American optimism and old European pessimism. While Americans are eager to give bold new ideas a chance, old Europeans, always fearing the worst, are quick to beat them down. Giving Iraq and the troubled region a shot at freedom and democracy is just one example. Optimism vs. pessimism is playing out today in a host of other issues, such as how to best govern people. Old Europe tends to distrust a free population, and therefore subjects its citizens to heavy regulation.

The U.S., to the contrary, views an unshackled population as a source of economic dynamism and prosperity. Although we ought not be foolishly optimistic, the dangers of pessimism are real, as it leads to inaction and missed opportunities. Worse, it is often exploited to frighten populations into accepting taxation, regulation, and nannyism, which without coincidence leads precisely to the economic problems dogging Old Europe today.

Pierre Gosselin

Quakenbr?ck, Germany If venture capitalists are doing what you say they are doing, they are setting themselves up for failure -- if our recent research into first movers and followers in 27 e-business technology markets is any guide ("All cashed up with no place to go," Finance, Sept. 29). The "first new thing," as one venture capitalist was quoted as saying, is not where to expect future market leadership. We found that around 10% of the first movers are currently market leaders. Most first movers (about two-thirds) got bought out, but in most cases (still) not by the eventual market leader.

VCs are putting more money in "later-stage" projects. However, to the extent that this means investment in late followers, it is not a strategy for success. Our research found that late followers can win (albeit in only about one-third of the markets we studied), but there were very few startups among the current leaders that were late followers. Most of the late followers were established companies venturing into new markets.

You report that "21% of all venture deals done in the 18 months through June were in early-stage investments." We found that 60% of the current leaders in the markets we studied were fast-followers (second, third, or fourth to enter the market). Compared with the research findings, VCs seemed to put too much money in strategies that didn't win, and not enough money in strategies that did. Have they become too risk-averse?

Gezinus J. Hidding

School of Business Administration

Loyola University

Chicago Two months ago, my credit-card statement showed a $6.45 "minimum finance charge fee." When I called to enquire as to the nature of the fee -- I don't carry a balance, never have -- I was told that it was because I had inconvenienced the staff by sending more money than was owed on the statement ("Fees! fees! fees!" Cover Story, Sept. 29). Silly me for giving BigBank an extra $200 (I had moved and wanted to be certain I didn't have any late fees if the statement didn't find its way to me on time).

Tracey L. Campbell

Seattle

I loved your story on hidden fees, and it holds true for utilities, too. Orlando Utility Commission, which bills for both lights and water, recently added a statement saying there would be a 1.5% charge for late payments and a $3 charge for all payments made on time. Shouldn't this be illegal? It's already outrageous!

Patricia Richey

Orlando

Corrections and Clarifications

Orlando Utilities Commission does not charge a $3 fee for on-time payments, as one reader suggested in a letter headed "Fees: Dunned if you do, dunned if you don't" (Readers Report, Oct. 27, in reply to "Fees. Fees. Fees!" Cover Story, Sept. 29). The OUC recently added a late-payment fee of 1.5%, or a minimum of $3, which applies only to past-due accounts.


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