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As the supermarket showdown in California wears on, labor unions
across the country are at a crossroads.
By Nora Maculso
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Special to SunSpot
December 29
Negotiations to end a months-old strike against two grocery store
chains owned by Safeway Inc., Vons and Pavilion are at an impasse.
Meanwhile, contracts for workers in other regions -- including
Baltimore -- are set to expire early next year.If, in the end,
grocery store clerks prevail on the retailers to continue to pay for
health-insurance coverage, union negotiators in other areas will
have an advantage.
But if Safeway -- which is based in Pleasanton, Calif., and has
about 6,000 workers in Maryland -- is able to successfully shift
most of the costs to workers, "it's going to be like raw meat for
the chains here," said Bill Barry, director of labor studies at
Baltimore County Community College.
At the center of the dispute with the United Food and Commercial
Workers Union is the growing influence of Wal-Mart Stores Inc., the
world's largest retailer. Based in Bentonville, Ark., Wal-Mart is
squeezing retailers' profit margins on products ranging from toys to
groceries.
The company, the parent of the Sam's Club wholesale grocery
chain, plans to open food stores in California next year.
And as supermarkets prepare to battle Wal-Mart, they are
struggling to find ways to keep costs low without cutting payrolls.
Self-checkout machines and weekly specials, however, can only go so
far.
More broadly, the California labor struggle is considered a
microcosm of the current state of the nation's economy and for that
reason it is being watched by both union leaders and industry
officials.
The latest round of talks with a federal mediator ended in
impasse on Dec. 19. Workers have been on strike at the Safeway-owned
stores since Oct. 11. In addition, Albertson's Inc., a grocery chain
based in Boise, Idaho, and Ralphs, owned by Cincinnati-based Kroger
Co., bargain with Safeway. They locked out their union workers the
next day.
Neither Albertson's nor Kroger has Maryland stores. The UFCW has
1.4 million members nationwide, including about 50,000 locally.
The strike "has profound implications for consumers that go
beyond just having your supermarket picketed on a Saturday
afternoon," said John Brouder, managing consultant with Boston
Benefit Partners, an employee benefit consulting firm that works
with employers and labor unions.
Baltimore area eyed
Locally, striking California workers have picketed some Safeway
supermarkets in the Washington area to bring national attention to
their cause. Contracts in the Baltimore-Washington region expire in
March, and union leaders have told members to expect a strike if the
California dispute is not resolved and management here wants workers
to make similar concessions.
The Washington pickets have received a good response so far, and
there are plans to expand the campaign to Baltimore soon, said Jill
Cashen, a local UFCW spokeswoman. The union also represents
employees at Giant Food Inc. and Super Fresh here.
"Every contract is different," said Craig Muckle, public affairs
manager for Safeway's Eastern region. "I don't know what the issues
are on the table, and what they might end up being here. It's
difficult to speculate on what's going to occur in March."
While some stores are being picketed, "customers are still coming
in," Muckle said.
At Giant, the Landover-based subsidiary of Dutch grocer Royal
Ahold N.V., spokesman Barry Scher said officials are monitoring
developments in California.
"As a matter of course, we always follow labor contract
discussions involving the food industry, and other industries, too,"
he said. "It provides us with an opportunity to follow issues and
how they are resolved."
The Teamsters union added its support to strike last month,
stopping work at 10 distribution centers in Central and Southern
California. The pressure on the companies is stepped up, said
Brouder of Boston Benefit Partners.
"The stores have been facing an economic loss, but they still
have food on the shelves," he said. "If it gets to the point where
there's no food on the shelves, then I think the real question is:
'Are they going to settle? Is there ground for compromise?'
"The next two weeks are going to be telling," Brouder speculated.
"It's also going to tell what's going to happen in the
Baltimore-Washington area.
"Both sides claim to be hunkering down for a long job action," he
said. "If the California job actions are still ongoing, as other
affiliates of the companies have contracts come up they're probably
going to have to take the same strong stand.
"Both parties will," Brouder added. "It's conceivable you could
see this sort of job action go from coast to coast."
'Wal-Mart is the killer'
The steady advance of Wal-Mart, with its cheap prices and low
wage-and-benefit packages, has so far not had a big effect on the
Baltimore region, where shoppers have a number of alternatives.
But with its move in recent years into groceries, Wal-Mart has
become a direct competitor to Safeway, Giant and the other chains,
putting pressure on those companies to cut costs and offer lower
prices.
"The same issues that we're seeing in California we're going to
see here," said BCCC's Barry. "It's the Wal-Marting of America.
Wal-Mart is the killer."
Health-insurance costs are at the center of the California
dispute. In the early 1990s, the supermarket operators changed the
way they financed health benefits contributing to a trust fund to
ensure that benefits would be available to workers.
But the change also meant that the trust could be operated with a
smaller cash reserve, and the supermarket chains withdrew hundreds
of millions of dollars from that reserve fund.
Meanwhile, health-insurance costs have skyrocketed in recent
years, and the supermarket chains have proposed doing away with the
trust fund altogether. This would make workers responsible for
paying for any increased benefit costs.
"Over the last four years, we've seen the return of very
significant health-care inflation," Brouder said. Health-care costs
generally have grown at three to four times the inflation rate, and
"lots of employers have been making people pay more for insurance,"
he said.
Cashen, of the UFCW, sees the issue differently.
"Safeway is pushing an agenda in California and across the
country to eliminate health benefits for workers at its stores," she
said. "Chief Executive Officer Steve Burd has publicly proclaimed
this is a priority for them."
But Cashen pointed to a recently reached settlement between
Kroger and workers in West Virginia, who also had been striking over
health-care benefits. They are protected in the final agreement,
reached Dec. 9 and approved two days later.
"Hopefully, [the settlement] sends a message that when an
employer is looking to sit down and negotiate and work out an
agreement, you can bring an end to disruption."
Wake-up call for unions
BCCC's Barry says unions should view the California standoff as a
wake-up call to increase their ranks.
"For a long time, Wal-Mart was not a competitor for the unionized
grocery stores," he said. As a result, "unions have been kind of
slow about getting out to organize."
While the Baltimore area has greater union penetration than much
of the country, "that balance has been tipped," Barry said.
At Giant Food, its structure includes "tiers" of employee
benefits, with newer workers receiving lower wages and fewer
benefits than those with more seniority, Barry said.
Ahold, Giant's parent, could face pressure to cut costs at the
grocery chain as it recoups from a $1.1 billion accounting scandal
at its Columbia-based US Foodservice Inc. subsidiary, Barry said.
Meanwhile, Scher, the Giant spokesman, said the advance of
Wal-Mart and other "big-box" retailers in the grocery business is
having some impact.
"These new, non-union, lower-cost retailers are trying to take
our customers away not with better service or better-products but
with lower operating costs and a constant emphasis on advertised
pricing specials," he said. "These tactics ultimately hurt us and
other established local food stores by challenging our ability to
grow our business and continually provide good jobs."
Cost issues loom
Safeway has declined to estimate the strike's potential cost.
Mark Hugh Sam, an equity analyst at Morningstar Inc. in Chicago,
said the company could lose about $40 million per month. That
amount, he added, is "not a lot for a company like Safeway," with
$800 million in free cash flow.
The health-care issue, however, is "huge," he added. "What
exacerbates Safeway's problems in California in particular and
throughout the supermarket industry is the competitive pressures
placed by the continued expansion of Wal-Mart."
Giant expects health-care costs will rise 24 percent next year,"
Scher said. And even as costs rise, Giant, like other supermarket
chains, is under relentless pressure to cut prices. The retailer's
efforts include stepped-up promotional activities in recent months
to attract and keep customers, he said.
Mustering support
If local supermarket employees end up on strike, public support
could be tough to muster. Many people at the Safeway stores being
picketed in the D.C. area seemed unaware of the California dispute.
But store managers aren't taking any chances. One Safeway store
in Bowie in Prince George's County that recently was picketed had a
sign immediately inside the store saying, "Safeway employees here
are not on strike."
"I don't think they're going to get that much sympathy here,"
said David C. Martin, professor of human resource management at the
Kogod School of Business at American University in Washington.
Shoppers in the Baltimore-Washington area can shop at such non-union
chains as Sam's Club, Food Lion or Costco Wholesale Corp.
Yet Jackie Mills, a union worker from California in town just
before Christmas for the Washington effort, said local shoppers'
reaction to the strikers' presence at the stores has been "really,
really good.
"They're really surprised," she said. "They heard about this in
California and the other states. They didn't realize they were going
to be affected by it."
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A foot soldier's march to unionize
By Adam Fifield -Philadelphia Inquirer Staff Writer
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December 26,
2003
You might call her South Jersey's Norma Rae.
For several weeks in the summer, from 7 p.m. until midnight, a
pregnant Donna DiIenno sat in a parking lot in front of the
Washington Township Wal-Mart, where she had once worked.
Managers stepped out of the store and asked her to leave.
Occasionally, a former coworker walked over and surreptitiously
picked up a union authorization card.
DiIenno, who had worked at the store for nine years and once was
an ardent Wal-Mart defender, became troubled in recent years by what
she described as the unfair treatment and intimidation of employees.
When the 40-year-old Monroe Township woman voiced concerns over
staff changes, she was called into a meeting with a manager and
subsequently fired for "insubordination."
It was then that she became a foot soldier in the growing battle
between the nation's largest corporation and the United Food and
Commercial Workers International Union, which is striving to
organize Wal-Mart's 1.2 million employees.
"Somebody needs to fight the fight," DiIenno said this month.
A national Wal-Mart spokeswoman said the company prohibited the
mistreatment of employees - called associates - and listened to
their concerns.
The union acknowledges that taking on the retail colossus will be
an uphill battle, but says it has no choice because the stakes are
enormously high.
"We can't just walk away and let Wal-Mart take over working
America as we know it," said Peg Michalowski, the Wal-Mart
coordinator for the union's Local 1360, based in West Berlin. If
Wal-Mart expands unchecked, union officials say, it will threaten
labor's livelihood and lead other companies in a "race to the
bottom" of wages, benefits and worker treatment.
Wal-Mart says that is not the case. "There's a lot of
misinformation out there," national spokeswoman Christie Gallagher
said. "Because of our size, we're a target. There are numerous
groups out there who do not want us to succeed for their own
reasons."
Describing the company as "pro-associate," Gallagher said
Wal-Mart provided very competitive wages and benefits as well as a
401(k) plan, a profit-sharing program and stock purchases.
"There are many industries where unions are right for the
industry," Gallagher said. "But, honestly, unions are certainly not
right for Wal-Mart. We don't believe that a third-party
representation would improve anything with our relationships. And we
value our culture, and we don't think it would add anything to our
culture."
With $244.5 billion in sales during fiscal 2003, Wal-Mart Stores
Inc. is the country's top private employer, with more than 3,000
stores nationwide, including 25 in the Philadelphia area. Although
it has earned the admiration of many economists and consumers,
critics say it shutters mom-and-pop stores and sends manufacturing
jobs overseas.
The drive to unionize reaches across the Philadelphia region. The
United Food and Commercial Workers Union has targeted three other
stores in southern and central New Jersey - Burlington Township,
Pennsville, and Hamilton Township in Mercer County - and three in
Pennsylvania, including a South Philadelphia Wal-Mart.
Leonard Purnell, who oversees the union's organizing efforts at
eastern Pennsylvania Wal-Marts, said that if it secured a contract
at one store, others might follow suit. "Winning one store wall to
wall and then getting a contract would create a domino effect," he
said. "It would show people, 'Hey, yes, it can be done.' "
In Washington Township, DiIenno and local organizers say a union
could provide better pay and benefits for employees, and give them a
common voice to help set up grievance procedures and job-protection
rules. She said that if she had union protection, her termination
"would never have happened."
In August, her position as support manager was eliminated and she
was offered a choice of new jobs with the same pay and hours. She
was upset, she said, because she had worked so loyally and felt the
company didn't appreciate the work she had done. So she used
Wal-Mart's "open-door" policy and wrote a letter to the store
manager expressing her frustrations.
Less than a week later, she was summoned to the district
manager's office. According to DiIenno's exit interview, signed by
another manager who was present, "Donna showed disrespect and
insubordination by refusing to speak with [the district manager].
Donna was asked to please sit down two times and then instructed to
sit by [the district manager] or speak with him. Donna stormed out
the door and was very disrespectful."
DiIenno said the district manager would not tell her why she was
there, so she said she'd rather stand. " 'Tell me why I'm in here so
I can decide if I have to get somebody else in here,' " DiIenno
said. "He said, 'Why are you being insubordinate?' I said, 'I'm not
being insubordinate for refusing to sit down.' He pushed the door
shut and said, 'You're not leaving until you sit down.' "
DiIenno opened the door and left, saying she had to finish her
job. At that, the manager yelled: "You don't have a job."
DiIenno, whose baby is due next month, still does not know why
she was called in for a meeting, but figures her letter was a
factor. She said a Wal-Mart manager who has moved to a different
store told her that the letter had "screamed union."
Store manager Frank Pellicori and district manager Don Fann did
not return calls seeking comment. Gallagher, the national
spokeswoman, said she could not comment on current or former
employees but stressed that Wal-Mart was not antiunion and did not
prohibit workers from discussing unions or retaliate against those
who did.
Gallagher said Wal-Mart's open-door policy permitted workers to
"go to any level of management, up to and including the CEO, and to
discuss any ideas they have, any concerns, without fear of
retaliation."
She added that Wal-Mart employees were free to unionize but had
chosen not to.
The 1.4 million-member United Food and Commercial Workers Union
sees it differently. Members say Wal-Mart has kept labor out with an
aggressive strategy, including videos shown to new employees that
portray unions as greedy and dishonest. And at the first hint of
union activity, they say, the company dispatches special teams from
corporate headquarters in Bentonville, Ark., to dissuade workers
from signing up.
"Once you start organizing, they put the hammer down, and the
suits come in from Bentonville," said Brian Covely of Local 1360.
Gallagher acknowledged that such teams were used, but said their
purpose was not to browbeat workers but rather "to answer questions
the associates might have about the promises the union has made to
them." She added that the meetings were voluntary.
A half-dozen employees at the Washington Township store, who did
not want to be identified for fear of reprisal, said they had
attended some of those gatherings. "It was mandatory that you go to
these meetings," one said. "They said the union's going to come in
and take your money and talk for you because they think you can't
talk for yourself."
The union's effort to organize Wal-Mart comes amid a backdrop of
labor complaints against the company and steadily declining
membership among American unions.
Wal-Mart is facing about 40 lawsuits contending it forced
employees to work off the clock, and a grand jury is investigating
whether the company knew about alleged undocumented immigrants
working in its stores.
Off-the-clock work is strictly prohibited by Wal-Mart, Gallagher
said in response. The company is cooperating with the grand jury's
investigation, another representative said.
As for organized labor, membership has dropped from 20.1 percent
of the national workforce in 1983 to 13.2 percent last year,
according to the Bureau of Labor Statistics.
Local organizers, who began the Washington Township effort in
July, said they would keep trying to get a foothold. Representatives
handed out cards at the store last week and will visit workers'
homes. DiIenno plans to continue her union work once the baby is
born and she gets settled.
They hope to petition for an election with the National Labor
Relations Board by the summer.
Michalowski said that even if the union did not prevail, it would
still have an effect.
"As long as we're campaigning, it keeps Wal-Mart accountable,"
she said. "They're going to have to watch their p's and q's a lot
more closely."
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Wal-Mart rollout - or rollback?
By
Daniel B. Wood Staff writer of The Christian Science Monitor
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23
December 2003
LOS ANGELES – It is the world's
largest company and America's top private employer. Analysts say it
saved US consumers $20 billion last year in its stores alone and
another $100 billion by forcing other retailers to slash prices to
compete.
But as Wal-Mart stores continue to
spread across the US, community opposition is also mounting from
critics who say its "always low prices" mean always low wages for
nonunion workers and that its famous "rollbacks" on goods roll over
local businesses and economies.
The latest legal battleground is
California. The retail giant wants to place the first of several
dozen grocery/retail superstores in California. Faced with a rebuff
in Inglewood, near Los Angeles, the company got enough signatures to
put its plans to a special ballot vote. But last week, two community
groups filed suit to stop the vote, which would bypass the usual
City Council oversight of such developments.
Analysts say the skirmish is a
window into the kind of fights Wal-Mart can expect elsewhere in
coming years. Already, the firm faces some 40 lawsuits regarding
allegations such as forced overtime without pay and gender
discrimination. But such backlashes may not stop the larger trend
that Wal-Mart represents: catering to consumers that flock to
big-box stores for deep-discount values.
"Whatever the skirmishes look like
on the surface, the vast majority of people vote with their purses,"
says Ira Kalish, global director for Deloitte Research. "The
American and global consumer has internalized discounting as
important to them."
Fearing the foothold of Wal-Mart in
Inglewood, the city last year attempted to pass an ordinance that
would have blocked the company from building a combination grocery
and discount store. Such superstores are typically twice the size -
180,000 to 225,000 square feet - of a typical Wal-Mart. Under
pressure of a Wal-Mart lawsuit, the ordinance was rescinded and
pro-Wal-Mart groups qualified an initiative for an April vote.
Critics say it is a violation of
state law for the retailer to go around elected officials to the
voters and worry that the special election sets a dangerous national
precedent for companies to circumvent long-established rules on
matters such as environmental oversight and public hearings.
Wal-Mart officials say the
Inglewood fight is not backed by the majority of residents, but
rather is fueled by money and union activists who don't like the
store's nonunion policies.
More fights are coming within
California alone, San Diego next month will consider a ban on retail
stores that exceed 130,000 square feet. Contra Costa County in
northern California already passed one, though it is being
challenged by Wal-Mart officials. And San Marcos recently deadlocked
on whether or not to rescind approval of a second Wal-Mart there,
forcing a referendum on the issue to a March vote.
"So far a disproportionate amount
of Wal-Mart's country-wide expansion has been in the South, which is
fairly non-union," says Mr. Kalish. "Now that they are moving into
more populated, industrialized and more unionized regions, they are
going to come up against ... opposition."
All this moves the giant retailer
into unknown territory, because no other American retailer has ever
gotten so big. But they say the disputes not likely to deter
Wal-Mart from growing, because Americans have gotten used to the
giant "rollback" discounts offered by the store.
"Many workers might make less
money, but to the extent that millions of consumers pay less, they
free up money to buy other stuff - making them and society in a
sense wealthier," says Kalish.
Such assessments are anathema to
labor unions and social justice organizations who say that
Wal-Mart's cheap prices come at the expense of decent wages and
benefits for workers. "Wal-Mart has a track record of decimating
locally owned small business," says Lizette Hernandez, of the
Coalition for a Better Inglewood.
Joining the fight are other
citizens and area officials who say they are concerned about the
preservation of neighborhoods, traffic congestion, and retail
sprawl. They say the Inglewood initiative requires only a majority
for approval, but will require a higher standard - two-thirds of
voters - to challenge specifics of the building phase once it
begins.
"Wal-Mart is trying to muscle its
way into the community by taking advantage of loopholes in the law
that are inappropriate," says Gerome Horton, state assemblyman from
Inglewood.
Part of the increased spotlight on
Wal-Mart in California has come because of protracted contract
disputes between southern California grocery workers and three major
supermarket chains. Vons, Ralphs, and Albertsons have repeatedly
said union concessions are needed for them to compete favorably with
Wal-Mart's new grocery stores. Wal-Mart sales clerks reportedly make
$8.23 to $10.00 per hour, compared with a reported $17.90 for senior
clerks at Vons, Ralphs, and Albertsons.
Strikers have won much public
support. Similar grocery strikes are in planning stages in other
states, making the California confrontation with Wal-Mart a sort of
national battleground.
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Lumps of Coal Piling Up for Wal-Mart
Maquila Solidarity Network
(MSN)
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December 22, 2003
For Immediate Release
TORONTO - With three days remaining in its "Send Coal to
Wal-Mart" campaign, the Toronto-based Maquila Solidarity Network
(MSN) announced today that close to 4,000 people have already sent a
virtual lump of coal to the world's biggest retailer and largest US
employer. Wal-Mart is the target of an on-line campaign calling on
the retail giant to respect the rights of women and men who toil for
"everyday low wages" making and selling Wal-Mart products.
According to MSN spokesperson, Ian Thomson, people concerned
about Wal-Mart's treatment of workers around the world have until
midnight Christmas Eve to send their virtual lump of coal and
holiday greetings to Wal-Mart. "We're hoping these holiday messages
will serve as a wake-up call to this modern-day Scrooge and convince
it to treat its workers fairly in 2004," says Thomson.
On December 9, MSN declared Wal-Mart the winner of its fourth
annual "Sweatshop Retailer of the Year" award. According to Thomson,
Wal-Mart was this year' overwhelming favourite because of its
"disregard for the rights of workers who make and sell its
products."
While most of the coal sent to Wal-Mart has come from consumers
and workers in the US and Canada, according to Thomson, virtual
lumps of coal have also been sent from several other countries,
including Kenya, India, Israel, Hong Kong, the UK, and Germany.
"Wal-Mart is well-known worldwide for its exploitation of immigrant
workers, intolerance of worker organizing, and use of sweatshop
labour to make its bargain basement products," says Thomson.
To access MSN's Wal-Mart holiday season campaign, and to read a
short selection of holiday protest messages sent to the company by
concerned consumers, go to:
www.SendCoalToWalmart.com
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City must go back, assess urban decay issue related to
supercenter, judge rules
By JAMES BURGER, Californian staff writer
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Monday December 22nd, 2003
A yearlong battle over a Wal-Mart Supercenter in south
Bakersfield ended in defeat for the city and developer Monday.
Kern Superior Court Judge Kenneth Twisselman ruled that the city
of Bakersfield didn't do an adequate job evaluating the
environmental impacts of a major shopping center at Panama Lane and
Highway 99 early this year. He ruled the project's environmental report invalid, and sent the
city back to fix its mistake.
A 220,000-square-foot Wal-Mart Supercenter was the most
controversial of the two big-box stores proposed for the shopping
center. The other store will be a Lowe's.
Members of the United Food and Commercial Workers union and other
Wal-Mart opponents mounted a spirited opposition to the supercenter
on Panama and a second one at Gosford and Harris roads.
They said the mega-retail centers -- which would include a
full-service grocery store in addition to a regular Wal-Mart --
would steal jobs from grocery workers and the city's small-business
community. Even so, the City Council approved the supercenters in February.
Both projects have since been challenged in court.
Twisselman said the environmental report for the Panama shopping
center had done a good job of reviewing the project's impact on air,
traffic, general health and the San Joaquin kit fox.
But, he said, the city failed to study whether the huge stores
planned for the project would cause an economic chain reaction that
would leave other "big box" buildings around Bakersfield vacant.
City staff had argued, at the time the two Wal-Marts went before
the council, that economic impacts of a project were not an
environmental concern.
But Twisselman ruled that vacant, unattractive buildings have an
environmental impact -- an urban decay that the City Council should
have evaluated before clearing the Wal-Mart project for
construction.
Lawyers for the Bakersfield Citizens for Local Control, the group
that filed the lawsuit, cheered Twisselman's decision and hailed it
as a critical step in fighting similar mega-projects in California's
Central Valley.
"The judge has rebuked the city and said they can't play 'zoning
for dollars,'" said Bakersfield Citizens' lawyer Steven Herum.
"Major retail developers cannot promise sales tax and low-paying
jobs without considering the impact to long-term businesses."
Panama and Highway 99 project developer Lee Jamieson, who also
built the Northwest Promenade project on Rosedale Highway, would not
comment about Twisselman's decision on Monday.
City Attorney Ginny Gennaro said the city will need to study the
impacts outlined in Twisselman's decision, add them to the original
environmental report and bring it back to the Bakersfield City
Council for re-certification.
"This isn't the first time an EIR has been invalidated and it
won't be the last," said City Councilman Mark Salvaggio, referring
to the report. "We just have to go back to the well and do better on
that point."
She also said that the city will have to re-evaluate the way it
looks at all major commercial projects in light of Twisselman's
decision.
"We'll begin to look at 'urban decay'" as an environmental
impact, she said.
Monday's decision might also affect the second Wal-Mart
Supercenter project at Gosford and Harris roads.
Bakersfield Citizens for Local Control has also sued the city
over that project, which goes before Twisselman on Jan. 16.
In the meantime, construction on the Panama Lane and Highway 99
project is continuing. Herum asked Twisselman, as soon as the ruling against the project
was handed down, to halt ongoing construction at the site. But Twisselman refused to block construction immediately.
Instead, he scheduled arguments on a temporary restraining order
for a Wednesday morning hearing. Gennaro said the city doesn't want to see 250 jobs frozen by such
a restraining order.
"We think it would be a shame to put these workers out of
business at any time of the year -- but especially this time of
year."
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Grocery industry's labor woes are rooted in Wal-Mart expansion
By
Alan Zibel BUSINESS WRITER - Oakland Tribune
[back to top]
Sunday, December 21, 2003
FROM OAKLAND to Contra Costa County to
the Central Valley city of Turlock, Wal-Mart is facing off against
unions, government officials and community groups as it tries to
roll out 40 new mega-stores in California.
It's a battle that the Arkansas-based discount giant is taking
very seriously. California is the largest American market in which
Wal-Mart has no Supercenter stores, which contain Wal-Mart's
traditional discount department store and a full-fledged
supermarket.
These monster stores range from 180,000 to 225,000 square feet,
employ about 500 people and sell everything from ground beef to lawn
chairs. The first in California is scheduled to open early next year
in La Quinta, near Palm Springs.
In Northern California, three Wal-Mart Supercenters have been
approved by local officials in Stockton, Redding and Chico. The
company has filed applications for stores in Tracy, Lodi, Turlock,
Gilroy, Willows, Red Bluff and Yuba City.
The implications for California's supermarket industry are
serious.
Wal-Mart already sells more groceries than any of the nation's
largest food retailers, according to a study by consulting firm
Retail Forward. The company recorded $82 billion in grocery and drug
sales in 2002, compared to $52 billion for Kroger, the country's
largest grocer, and $29 billion for Pleasanton-based Safeway Inc.,
the study said.
Unlike grocery competitors such as Safeway and Albertsons,
Wal-Mart is not unionized and has lower labor costs than
conventional grocers. Lou Mellet, a retail analyst with the New
York-based Strategic Resource Group, said the prospect of competing
with Wal-Mart is the underlying reason behind grocery companies'
hard line in their ongoing labor dispute with the food workers union
in Southern California.
Executives at leading grocers such as Pleasanton-based Safeway
Inc., must reduce their labor costs to be able to compete with
Wal-Mart, Mellet said.
"It's not coincidental that the strike is happening right before
Wal-Mart starts to invade," Mellet said. A Safeway spokesman did not
respond to calls for comment.
For each Wal-Mart Supercenter that opens in the next five years,
two conventional supermarkets will shut their doors, Retail Forward
said. The study projected that Wal-Mart's rapid expansion of
Supercenters will increase its share of the nationwide supermarket
business from 19 percent last year to 35 percent in 2007.
"They're coming," said analyst Jason Whitmer of FTN Midwest
Research. "It's inevitable, they'll find their way in."
When a Wal-Mart Supercenter enters a market, Whitmer said, prices
tend to drop as existing supermarkets start price wars.
While these lower prices may be good for consumers, Bay Area
labor groups, environmentalists and some elected officials argue
that the benefits aren't worth what they see as the negative social
impacts of a giant Supercenter.
An increasing number of local governments have decided to
confront Wal-Mart. On Tuesday, the Alameda County Board of
Supervisors followed the lead of Martinez, Contra Costa County and
Oakland in passing an ordinance that restricts superstores. It bans
stores of more than 100,000 square feet that devote more than 10
percent of their space to non-taxable items such as food. The ban
would apply to unincorporated Alameda County communities such as
Castro Valley and San Lorenzo.
While Wal-Mart is not specifically named in the ordinance, the
company's plans to expand its Supercenter business in California
clearly were the impetus behind the measure, as well as similar
ordinances in other communities.
"We're really concerned about these large-scale retail stores,"
said Supervisor Alice Lai-Bitker. Traffic congestion that would
result from a super-store is worrisome, she said, and local small
businesses should be protected.
Wal-Mart spokeswoman Amy Hill said the company is considering
taking the issue to Alameda County voters in a referendum as well as
suing the county.
In neighboring Contra Costa County, county officials' battle with
Wal-Mart will hit the ballot box in March. Last summer, supervisors
passed an ordinance that would ban retail stores of more than 90,000
square from devoting more than 5 percent of their space to
non-taxable goods in unincorporated areas.
Wal-Mart successfully blocked the measure from taking effect,
obtaining more than 30,000 signatures to force a March referendum on
the measure. "I think both sides are taking it very seriously and
investing a lot of time and resources," Hill said. "These types of
ordinances are anti-competitive and anti-consumer ... and clearly
aimed at preventing the growth of our company."
John Gioia, a Contra Costa supervisor and co-author of the
ordinance, said he expects Wal-Mart could spend up to $1 million on
the ballot measure. Public records show that the company gave
$175,000 in the first half of the year to a group the company formed
to oppose the county's restrictions.
"This is really about local control," Gioia said. "Do you want
your zoning decisions to be made by a corporation in Arkansas?"
Gioia and other supporters of the Contra Costa ordinance say a
Wal-Mart Supercenter or a similar store owned by Target or Kmart,
would not raise enough sales tax revenue to compensate for the
increase in traffic that would come from customers making several
trips a week.
Jeremy Madsen, field director of San-Francisco-based
environmental group Greenbelt Alliance, argues that so-called
big-box superstores are inherently troublesome because they increase
auto traffic, take up a lot of land and tend to be put on the edge
of communities.
"Let's put the facilities that people need where the people are,"
Madsen said. He called it "offensive" that Wal-Mart would hire paid
signature-gatherers to put Contra Costa County's ordinance on the
March ballot.
But some officials don't have a problem with Wal-Mart. David
Hudson, a member of the San Ramon City Council, opposes the Contra
Costa ballot measure. He believes the county would benefit from
increased sales tax revenues Wal-Mart would bring for non-grocery
items and said traffic would be mostly during non-commute hours such
as Friday nights and weekends.
"I'm trying to figure out where the citizens are benefiting from
this," he said. "Competition brings prices down and protectionism
brings prices up."
The Contra Costa ballot measure does not affect conventional
supermarkets, discount stores that don't sell groceries and
warehouse clubs such as Costco. While supporters of the ordinance
argue that the super-store format causes more traffic jams than
warehouse stores, Wal-Mart says it is being unfairly singled out.
Wal-Mart, which has long been hostile to labor unions, says
unionized workers at competing grocers such as Safeway and
Albertsons are the real force behind efforts to block its expansion
plans.
"In reality, this is really about one thing, and that's labor
unions and their efforts to stop Wal-Mart's growth," Hill said.
Richard Benson, president of United Food & Commercial Workers
union Local 870 in Hayward, emphasized that a broad coalition of
groups are opposed to Wal-Mart's expansion plans.
"It will take business away from union and non-union stores," he
said. "You're taking dollars from existing businesses and not
creating new businesses."
Benson said an average unionized grocery worker in Northern
California makes about $14.50 an hour, and receives a benefit
package worth more than $5 an hour. By contrast, Wal-Mart workers in
Northern California make about $8.50 an hour, Benson said, and many
workers don't receive health benefits because they can't afford the
required co-payments.
Hill said that all of Wal-Mart's employees qualify for health
benefits, and more than 50 percent participate in the health plan,
with another 40 percent receiving health insurance through a spouse
or parents. The company's health plan costs $13 every two weeks for
an individual and $57 every two weeks for a family, she said.
"People are joining our company for the benefits despite what the
unions may say," she said.
Wal-Mart says that in many of its markets with Supercenters,
wages are higher than its union competitors. In Las Vegas, for
example, a Wal-Mart bakery worker starts at $8 an hour, while a
comparable position at a unionized supermarket pays $7.10, according
to the company.
Mark Wolfe, a lawyer who represents unions and other groups
opposed to Wal-Mart's expansion plans, calls the company's tactics
"heavy-handed and bullying." "This is a corporation that is the
largest and richest in the world that is used to getting its way,"
Wolfe said.
In Turlock, Wal-Mart's plans for a Supercenter met resistance
from city officials who argued that it would increase traffic and
put existing supermarkets out of business, which could lead to
economic blight at neighborhood shopping centers. On Tuesday night,
the Turlock City Council approved an ordinance that would block the
Supercenter.
Charlie Woods, the Central Valley city's community development
director, accused Wal-Mart of "attempting to intimidate and
overwhelm the (city) council" by meeting with council members,
reviewing their financial disclosure forms and asking when they were
running for re-election.
Wal-Mart spokesman Peter Kanelos said the company had not asked
local officials when they are running for re-election and said that
disclosure forms are public documents that anyone may examine.
In Tracy, officials are studying the company's proposal as well
as a plan for a WinCo mega-supermarket near Interstate 205, but the
plan hasn't generated much controversy so far.
In Gilroy, Wal-Mart was a major issue in the Nov. 4 city council
election. The company sent a flier to all registered voters urging
them not to support candidates supported by a union group critical
of a proposed Supercenter.
"Don't be fooled by the union propaganda," the flier read,
criticizing "outside labor groups that do not serve the citizens of
Gilroy."
The company's plans for its conventional department stores also
are not without controversy. In Richmond, community groups are
opposing the company's plans to convert a former Macy's into a
conventional Wal-Mart store. In Fremont, the city council voted 3-2
for a conventional Wal-Mart store, but the proposal is tied up in
its second round of litigation.
"They don't give a whole lot back to the community, and they
force out local merchants who have been part of the community for
years," said Fremont Mayor Gus Morrison, who opposed Wal-Mart's
plans.
Bob Wasserman, a member of the Fremont City Council, voted for
the Wal-Mart in his city, but said he would oppose turning that
store into a Supercenter. A combined grocery and department store
would threaten competing supermarkets that anchor the city's
successful Irvington and Warm Springs shopping districts, he said.
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Turlock council fights good fight vs. Wal-Mart
Modesto Bee
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December 18, 2003
The Turlock City Council stood behind local business and with a
lot of popular sentiment in its unanimous vote Tuesday to try to
prevent Wal-Mart from building a supercenter at the north end of the
city.
While the company already has threatened to sue or try to take
the issue to a citizen vote -- as it has in other cities -- the
council appears firm, recognizing the serious issues and impacts
associated with the arrival of such a huge retailer. These are the
same concerns surfacing around California as Wal-Mart pushes its
plan to open 40 supercenters in the state.
Communities that have few shopping opportunities welcome a
supercenter. But in most towns, the Wal-Mart supercenter enters as
an economic bully. While its low prices appeal to many consumers,
they come at a tremendously high price for the community as a whole.
Supercenters drive out other supermarkets, reducing the choices
for shoppers and eliminating good-paying, benefited jobs. One reason
that Wal-Mart prices are low is that it pays some of its workers so
poorly that they qualify for -- and need -- food stamps and
taxpayer-supported Medi-Cal coverage. The fallout extends beyond
other supermarkets to flower shops, bakeries and even to wholesalers
whose economic well-being hinges on whether they do or do not sell
to Wal-Mart.
All these fears have been expressed about the Turlock project,
along with concerns about increased traffic at the already-busy
Monte Vista Avenue interchange.
But local planning issues are only a small facet. The company has
gotten so big and so powerful that it is changing the face of retail
trade and the generally strong track record of the supermarket
industry as an employer. Those should be matters for deliberation at
the state and federal levels, not just the City Council in Turlock,
and food for thought for consumers.
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Suit Against Wal-Mart Can Proceed, Court Says
Carolyn Carlson Journal Staff Writer -Albuquerque Journal
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18
December 2003
Wal-Mart can be held liable for alleged malicious abuse of
process even though it was not a party to a lawsuit filed against
several West Side neighborhood associations, the state Court of
Appeals has ruled.
Ten individuals and Geltmore Inc., developer of the West Bluff
Shopping Center at Coors and I-40 that includes a Wal-Mart
Supercenter, in June 2000 filed a Strategic Litigation Against
Public Participation, or SLAPP, lawsuit against the neighborhood
associations and four opponents of the center.
A SLAPP lawsuit is a civil complaint in which an alleged injury
is the result of petitioning or free speech activities protected by
the First Amendment.
Geltmore's lawsuit claimed the neighborhood groups were used as a
front by Wal-Mart competitors to prevent the retailer from locating
in the center. Named in the lawsuit were the Grande Heights
Neighborhood, West Bluff Neighborhood and West Area Residents for
Aesthetic and Responsible Expansion associations.
In October 2000, District Judge William F. Lang threw out
Geltmore's lawsuit, saying the First Amendment protects the people's
right to petition the government for redress of grievances.
A year later, the four individual opponents filed a SLAPP-back
lawsuit against Geltmore, the 10 individuals who had sued them and
Wal-Mart.
Their claims included allegations that Wal-Mart was behind the
scenes in the 2000 Geltmore lawsuit, according to one of the
attorneys representing the individuals.
Wal-Mart's attorneys filed motions to dismiss the claims, saying
it could not be liable for malicious abuse of process because it was
not a party in the SLAPP lawsuit and the plaintiffs failed to state
a claim.
District Judge W. Daniel Schneider agreed, dismissing Wal-Mart
from the lawsuit.
In April, the four individuals appealed Schneider's ruling to the
Court of Appeals.
Friday's ruling reverses Schneider's decision and allows the
SLAPP-back lawsuit to move forward in district court with Wal-Mart
as a party.
The ruling said there are sufficient allegations against Wal-
Mart to state a claim for civil malicious abuse of process and for
civil conspiracy.
The opinion said allegations that Wal-Mart sanctioned, encouraged
and funded the Geltmore SLAPP lawsuit, together could be interpreted
as stating a claim that Wal-Mart played an active role in initiating
the underlying SLAPP lawsuit by providing the funding.
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Wal-Mart Workers Case Going to Grand Jury
By CHUCK BARTELS Associated Press
Writer
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December 10, 2003
LITTLE ROCK, Ark. (AP) -- A grand jury in Pennsylvania is to
convene Thursday to consider a case against Wal-Mart Stores Inc., in
which the world's largest retailer is accused of using illegal
workers to clean floors in its stores.
U.S. Assistant Attorney Wayne Samuelson, whose office in
Williamsport, Pa., is handling the case, said the grand jury would
meet Thursday but he would not discuss details of the case.
"All I can say is it's going to be a long investigation,"
Samuelson said Wednesday. "Don't anticipate anything (Thursday)
afternoon or in the next couple of weeks."
Grand juries meet in secret and can hand up indictments.
Wal-Mart spokeswoman Mona Williams said Wednesday that the
company was bound by federal rules surrounding grand jury secrecy
and could not comment. Earlier, the company acknowledged it was the
target of the investigation.
Janitorial companies hired by Wal-Mart were at the center of a
21-state sweep of 60 stores on Oct. 23. About 250 workers from 18
countries were arrested, and 10 of them were employed by Wal-Mart
itself.
Some of the workers have sued the Bentonville-based company
alleging that it conspired with the contractors to create a criminal
enterprise that violated the civil rights and wage protections of
immigrants who cleaned its stores. The lawsuit in federal court in
New Jersey seeks class-action status for perhaps thousands of
immigrants hired by companies that clean floors for Wal-Mart.
Wal-Mart has said federal prosecutors told the company it was the
target of a probe into whether it broke immigration laws by having
contractors that employed illegal workers.
Wal-Mart has not been charged with a crime. In the raids, the
office of an executive at the Bentonville headquarters was searched
and federal agents carted away boxes of files.
Arrests were made in Alabama, Arkansas, Arizona, Connecticut,
Delaware, Kentucky, Massachusetts, Maryland, Michigan, North
Carolina, New Hampshire, New Jersey, New York, Ohio, Oklahoma,
Pennsylvania, South Carolina, Tennessee, Texas, Virginia and West
Virginia.
Wal-Mart, which employs about 1.1 million people in the United
States and 300,000 in other countries, had sales last year of $244.5
billion. The company has 1,494 discount stores, 1,386 Supercenters,
532 Sam's Clubs and 56 Neighborhood Markets in the United States.
Shares in Wal-Mart were up 18 cents at $52.79 in Wednesday
trading on the New York Stock Exchange.
[back to top]
DISCOUNT NATION Is Wal-Mart Good for America?
By STEVE LOHR
[back to top]
New York Times -
December 7, 2003
The annual celebration of the American consumer economy — the
holiday shopping season — is just underway, and Wal-Mart, the
juggernaut of retailing, already seems to have claimed its first
victim. The corporate owner of F.A.O. Schwarz stores said last week
that it would file for bankruptcy. Bemoaning the news, analysts
explained that the F.A.O. Schwarz formula of selling premium-priced
toys in sumptuous surroundings could not withstand the steady
advance of Wal-Mart into the toy business.
"Will Wal-Mart Steal Christmas?" asked a Time magazine headline.
The toy war is merely the most recent manifestation of what is
known as the Wal-Mart effect. To the company's critics, Wal-Mart
points the way to a grim Darwinian world of bankrupt competitors,
low wages, meager health benefits, jobs lost to imports, and
devastated downtowns and rural areas across America.
Yet there is a wider, less partisan view of the company, which
perhaps more visibly than any other corporation marches to the
mandate of the global capitalist economy.
"Wal-Mart is the logical end point and the future of the economy
in a society whose pre-eminent value is getting the best deal," said
Robert B. Reich, the former labor secretary and a professor of
social and economic policy at Brandeis University.
To the company's supporters, Wal-Mart is an agent of economic
virtue, using its market power to force suppliers to become more
efficient and passing the gains on to consumers as lower prices. The
enthusiasts say Wal-Mart is a big reason for the country's almost
nonexistent inflation and impressive productivity gains.
There is a lot to be said for getting the best deal, economists
say. Prices, they note, are essentially a yardstick of efficiency,
translated into consumer terms. Prices are concrete and measurable,
while other values of consumer and social welfare — say, product
quality or job preservation — are often hard to quantify or require
costly intervention like protectionism or subsidies.
Moreover, some economists note, lower prices for the kinds of
basic goods on sale at Wal-Mart superstores, like food and clothes,
are of the greatest benefit to the less affluent. Grocery prices,
for example, drop an average of 10 to 15 percent in markets Wal-Mart
has entered, analysts say.
"Wal-Mart is the greatest thing that ever happened to low-income
Americans," said W. Michael Cox, chief economist of the Federal
Reserve Bank of Dallas. "They can stretch their dollars and afford
things they otherwise couldn't."
Wal-Mart is the largest American corporation in terms of sales,
$245 billion last year. It is now the nation's largest grocer, toy
seller and furniture retailer. More than 30 percent of the
disposable diapers purchased in the country are sold in Wal-Mart
stores, as are 30 percent of hair-care products, 26 percent of
toothpaste and 20 percent of pet food. Wal-Mart has nearly 3,000
stores in the United States, and plans to add an additional 1,000
over the next five years. Increasingly, the company is taking its
formula abroad; Wal-Mart is now the largest private employer in
Mexico.
The prospect of Wal-Mart amassing even more market power does not
worry free-market economists like Mr. Cox. Despite the company's
gains, the retail industry is still not highly concentrated, he
said, with Wal-Mart accounting for 20 percent of the sales of the
100 largest retailers. Its success has been built, Mr. Cox said, on
mastering the use of information technology to streamline its
operations — much like Dell Computer in the personal computer
business. Inevitably, less efficient rivals will be winnowed, he
added, and those that remain will compete aggressively for consumer
dollars.
"With the new technology of the information age," Mr. Cox said,
"we're moving to a new market structure in a lot of industries. And
the optimal number of firms has gone way down."
Antitrust has traditionally been the tool for insuring
competition and keeping a watchful eye on powerful companies. But
the evolution of antitrust policy over the last 30 years — to
emphasize price, not the number of competitors — has actually worked
to the advantage of businesses like Wal-Mart.
In the past, antitrust policy assumed that more companies meant
more competition, which was good for consumers. The Robinson-Patman
Act of 1936 — sometimes called the anti-chain store act — was passed
partly to protect small local retailers from the Great Atlantic &
Pacific Tea Company, the Wal-Mart of its time. It prohibited price
discrimination, or discounts, to different purchasers when the
effect was to lessen competition. At the time, the drift of
antitrust policy was to restrain big business and protect
mom-and-pop stores.
The populist tinge to antitrust continued for decades. In
ordering the break-up of the Aluminum Company of America in 1945,
Judge Learned Hand of the United States Court of Appeals for the
Second Circuit wrote that the purpose of antitrust was to
"perpetuate and preserve, for its own sake and in spite of possible
cost, an organization of industry in small units which can
effectively compete against each other."
In 1966, the Supreme Court sided with the Federal Trade
Commission in challenging a merger in the Los Angeles grocery
market, Von's Grocery and Shopping Bag Food Stores, which together
had only 7.5 percent of the local market.
But the intellectual tide shifted by the 1980's, especially under
the growing influence of the so-called Chicago school of economics,
which emphasized prices as the fundamental gauge of consumer
welfare. Market concentration and company size meant little. If big
companies raised prices, they were bad. But if, like Wal-Mart, they
achieved greater efficiency from economies of scale and passed the
benefits onto consumers as lower prices, they were praised.
"Has our thinking on antitrust driven us toward an economic world
that Wal-Mart represents?" asked Andrew I. Gavil, a professor at the
Howard University law school. "I would say that it has. The harder
question is whether that is a good or a bad thing."
To keep cutting costs, Wal-Mart is tough on its suppliers.
Selling to Wal-Mart, by all accounts, is a brutal meritocracy.
Manufacturers have been forced to lay off workers after Wal-Mart
canceled orders when another vendor cut its price a few cents more.
Other suppliers have shifted to low-cost operations in China and
elsewhere when squeezed by Wal-Mart to cut costs further.
Yet here again, many analysts regard Wal-Mart's practices as
simply leading the way in the inevitable drive to making the economy
more efficient. "Wal-Mart is tough, but totally honest and
straightforward in its dealings with vendors," said Michael J.
Silverstein, a senior vice president at the Boston Consulting Group.
"Wal-Mart has forced manufacturers to get their act together and
forced them to compete internationally."
There is some evidence that the company's zeal for efficiency has
gone too far. Wal-Mart's detractors point to a trail of litigation
over pinch-penny issues like unpaid overtime, and to a federal
investigation into its use of poorly paid illegal immigrants as
janitors. Wal-Mart insists that any problems do not reflect the
culture of the company as a whole. "If there is valid criticism that
comes from these cases, we will own up to it and made improvements,"
said Ray Bracy, vice president of international corporate affairs
for Wal-Mart.
Wal-Mart's growing power has brought increased scrutiny from
federal and state regulators. But as long as the company keeps
delivering lower prices, they will most likely be reluctant to act,
beyond prosecuting employment infractions. The classic behavior of a
predatory corporation is to cut prices to drive out competition in
order to raise them later. There is no evidence yet that that is the
Wal-Mart strategy.
"Consumers get huge benefits from Wal-Mart as long as it has real
competition," Mr. Reich said. "The worry is that it becomes so
powerful that it can unfairly stifle competition."
[back to top]
Giant retailer under siege - Wal-Mart battles to build
grocery-carrying Supercenters
By Dale Kasler -- Sacramento Bee Staff Writer
[back to top]
December 5, 2003
PITTSBURG -- Facing a county ordinance blocking its growth,
Wal-Mart Stores Inc. recruited a powerful ally: shoppers. In just a
few weeks, more than 10,000 shoppers in Contra Costa County joined
the "Wal-Mart Customer Action Network." They'll receive newsletters
about the ordinance -- which prevents Wal-Mart from building a
combination supermarket-department store called a Supercenter -- and
will be mobilized when Contra Costa voters decide in March whether
to repeal the law.
"They will clearly be encouraged to participate in the electoral
process," said company spokeswoman Amy Hill.
The battle for Contra Costa is merely one skirmish in a statewide
guerilla war that may be unprecedented in California. From Chico to
San Diego, the mega-retailer's expansion plans are coming under
fierce legal and political attack from its chief antagonist, the
United Food and Commercial Workers, and a host of community
activists. Their complaint: Wal-Mart destroys local businesses, guts
communities and drives down wages.
Opponents are filing environmental lawsuits claiming Wal-Mart
contributes to community blight. They're prodding city councils and
boards of supervisors to pass ordinances, like Contra Costa's, that
ban Wal-Mart Supercenters by drastically limiting how much food can
be sold at "big box" retailers.
The war is just heating up.
With 170 Wal-Marts and Sam's Club warehouse outlets, the company
has barely scratched the surface in California (Florida, with half
the population of California, has 196 stores). Its planned entry
into the California grocery business stokes the fire even more.
Already the nation's largest supermarket chain, Wal-Mart plans to
open 40 Supercenters in the state -- and probably more -- including
in Northern California cities such as Woodland, Yuba City, Chico and
Redding.
That has helped provoke a major supermarket strike in Southern
California, as traditional grocers have demanded steep concessions
from the United Food and Commercial Workers to compete with
Wal-Mart's low cost structure. The scenario is likely to be repeated
when grocery worker contracts expire next summer in the Sacramento
area.
Granted, given Californians' growing concerns over traffic and
sprawl, plenty of big box retailers are having to fight lawsuits and
other challenges.
But increasingly the target is Wal-Mart -- with its anti-union
stance, its relatively low wages and its reputation for crushing the
competition and hollowing out local business districts. Recent
accusations that it employs illegal immigrants create more
ammunition for Wal-Mart's critics.
"Wal-Mart strikes at the emotional and financial heart of a lot
of issues," said Larry Kosmont, a Southern California land-use
consultant. "They particularly are a lightning rod."
Yet Wal-Mart, with its deep pockets and customer loyalty, doesn't
fold easily.
It spent a reported $140,000 persuading voters in Calexico to
overturn a ban on big box grocery sales last year. It won.
By threatening litigation, it got Inglewood's City Council to
repeal a similar ban -- and now it's pushing a voter initiative that
would let it open an Inglewood Supercenter without City Council
approval. The only time it's been completely shut out of a community
came when Eureka voters rejected plans for a traditional, nongrocery
Wal-Mart in 1999.
"When they've run into opposition before ... they just gut it
out," said Jeffrey Foltz, city manager of Yuba City, where labor is
trying to block a Supercenter. "They're going to have the staying
power to make it happen."
Wal-Mart organized its first Customer Action Network last spring
in Tucson, Ariz., where it faced another ordinance limiting big box
grocery sales. So far it's been unable to repeal the Tucson
ordinance, but decided to give the concept a try in California after
the Contra Costa County Board of Supervisors passed the anti-Supercenter
ordinance in June.
First, the company spent $100,000 gathering signatures over the
summer to put the issue on the March 2004 ballot. Then it started
the Customer Action Network this fall. It enticed shoppers to join
by holding a drawing for a $500 donation to their favorite charity.
Wal-Mart is confident it will prevail.
"We certainly believe that at the end of the day, consumers will
speak loudest," said spokeswoman Hill.
The union views Wal-Mart as a threat to its members' middle-class
existence. Experiencing no success organizing Wal-Mart's workers,
the UFCW is working to try to halt the company's growth in
California.
"Wal-Mart is exploiting communities by promising good jobs. What
they're really doing is gutting these communities," said Adam
Loveall, legal affairs director at UFCW Local 588 in Roseville.
Unions and others lobby city councils and boards of supervisors
to restrict the amount of space a big box retailer can devote to
groceries.
The ordinances ostensibly are designed to safeguard the municipal
treasury: Because grocery sales aren't taxed, the argument goes, a
mega-supermarket places enormous traffic burdens on a community
without generating much sales tax revenue.
But the real intent is to keep out Wal-Mart Supercenters.
In an era during which cities and counties drool over new stores,
this strategy has gained remarkable traction. Besides Contra Costa
and Oakland, ordinances have been passed in Simi Valley, Paso Robles
and a few other communities, and are being proposed in San Diego and
unincorporated Alameda County.
"More and more, people are talking about the Wal-Mart effect,"
Loveall said. "Today, when you say Wal-Mart, people don't
automatically jump up and start talking about how great it is. These
city councils are entertaining proposals to limit those kinds of
stores."
Some of Wal-Mart's rivals have stepped into the fight -- and make
no bones about their attempts to try to limit the competition. Jim
Watt, a vice president with Modesto-based Save Mart Supermarkets,
has urged city councils from Redding to Bakersfield to reject
Supercenters.
"Obviously, we're not real excited about having Wal-Mart as a
competitor, particularly because of what we call the uneven playing
field," Watt said. Save Mart would have to slash wages if it had to
compete against Supercenters, he said.
Retail analysts say Wal-Mart wages are at least 20 percent lower
than those in union supermarkets.
Litigation also plays a role. Citing California's environmental
laws, local residents file lawsuits to block approval of
Supercenters, claiming the stores would cause blight by wiping out
existing retailers.
"It's more than an economic issue -- it's actually a physical
environmental issue," said attorney Brett Jolley, who represents a
citizen suing to block construction of a Supercenter in Chico.
Wal-Mart's Hill called such lawsuits "a misuse of environmental
laws."
Some public officials side with the company. Desley Brooks, the
only Oakland City Council member to vote against an ordinance that
keeps out Wal-Mart Supercenters, said she isn't a Wal-Mart fan but
felt her community would benefit from the store.
"I'm talking about the real-life needs of the constituents I
represent," she said.
Yet the company's opponents feel they're making headway in an
effort to portray Wal-Mart as a negative force in a community.
"Wal-Mart is really, almost universally held as a Death Star,"
said Madeline Janis-Aparacio of the Los Angeles Alliance for a New
Economy, which is fighting the Inglewood Supercenter.
[back to top]
On the Side | Californians weigh cost of a grocery 'bargain'
By Rick Nichols Philadelphia Inquirer
[back to top]
December 4, 2003
Inquirer Columnist
LOS ANGELES - It is the week before Thanksgiving, balmy by day,
cool after sundown, proper weather for sampling the roadside
attractions.
They are bountiful and endless here, and in large measure
independent - the first sighting near the airport involving an
adobe-colored, two-story, plaster doughnut looming from the low-rise
roof of Randy's Donuts.
Randy's Donuts are fried and crispy crusted and very good. But if
you miss them, there are plenty of other doughnut joints, neon
smiles flashing, open all hours.
If you cruise as far as the palmy, bungalow-lined residential
streets of Hollywood, you will encounter the rest of the street-food
canon: There is Pink's Famous Chili Dogs, currently serving the
jaw-unhinging Martha Stewart Dog ("10-inch stretch dog, mustard,
relish, onions, bacon, chopped tomatoes, sauerkraut and sour cream,
$4.40"); and chrome-domed Jay's, home of the fried-egg-topped
Jayburger; and in successive waves, cafes and delis offering the
fare of Iran and Armenia, Ethiopia and Thailand, Korea and Cuba,
and, memorably, mini-Mexican tacos of cactus salad and chicken in
mole poblano, the corn tortillas warm and made by hand.
Soon, though, another roadside attraction steals the show. It is
the ranks of placard-waving grocery clerks who have been picketing
since early October outside the city's major supermarkets - Von's,
Ralph's, Albertsons and Pavilions.
Occasionally, you'll hear a honk of solidarity. But the pickets
have become a fixture themselves, less a novelty than familiar
furniture set out by the curb.
The inspiration for the strike - California's longest involving
grocery clerks - has been the plan of mega-discounter Wal-Mart to
open 40 new supercenters (each with a full-service food market)
across the state.
Scared to death of crushing competition, the chains are
preemptively asking unionized clerks for concessions, including
steep health-benefit cuts.
Wal-Mart's bargains, of course, come at a price. Its nonunion
workforce makes roughly $9 an hour, about half the pay of the 70,000
organized clerks.
By slashing wages, Wal-Mart can easily undercut competitors on
grocery prices (often by as much as 20 percent), dominating the wage
and retail landscape.
But the state ultimately will end up poorer, two independent
studies conclude - the result of generally lowered incomes and
higher outlays for health and other services shifted to the public
sector.
So as talks resume this week, the question that looms over the
city is as large as the iconic sign that defines the Hollywood
Hills.
It is not so much whether Wal-Mart will plant its big,
200,000-square-foot boxes in California - that seems inevitable -
but under what terms and whose conditions.
One answer will likely come in Inglewood, not far from Randy's
Donuts, where City Council stalled construction by voting to ban big
boxes over 155,000 square feet, then temporarily retreated under
threat of lawsuit.
Wal-Mart has won the latest round, gathering enough signatures to
put the dispute on the ballot this March.
If it comes to that in this city of inspired junk food and
passionate health kicks, Angelenos will have to make an
uncomfortable choice.
They will have to decide how much they are willing to pay,
finally, for a food "bargain."
Having their cake and eating it too will not be a ballot option.
[back to top]
Wal-Mart's move into groceries threatens union jobs
This is the last of a three-part series on how Wal-Mart does
business.
By ABIGAIL GOLDMAN and NANCY CLEELAND
[back to top]
Los Angeles Times
12/2/2003
Larry Allen had dreams of climbing the Wal-Mart ladder.
In the fall of 2001, he and his wife, Jacque, left Portland,
Ore., where the economy was sputtering, and headed to Las Vegas. He
was an executive chef and she worked in catering. They looked
forward to a fresh start in unionized casino jobs, making more than
$15 an hour, with health insurance and pensions.
But their timing was lousy. Recession and terrorism were hitting
the gaming industry hard, and work of any kind was scarce.
Just before their money ran out, the Allens lowered their
expectations and took jobs at the Serene Avenue Wal-Mart. Jacque,
then 43, worked the counter at the in-store restaurant, Radio Grill.
Larry, 46, stocked produce. They each earned $8 an hour.
Despite the letdown, Larry Allen said he attacked the job with
enthusiasm. Inspired by tales of well-paid Wal-Mart managers who had
started out as hourly employees, such as his manager Aaron Rios, he
figured on working his way up. That was Sam's way, he said.
"I've been following Sam Walton since the 1970s," he said. "He's
the American dream."
The glow faded quickly. At his 90-day review, Allen said, he
received an unenthusiastic write-up and an hourly raise of 35 cents.
His supervisor told him that if he continued working hard, in two
years he might make his way up to $10 an hour.
Allen thinks he knows why he received such mediocre marks. For
one thing, he was prone to question company policy. Then, Allen
committed the ultimate act of disloyalty: He openly promoted
unionization.
For decades, Wal-Mart has tantalized and frustrated union
organizers. But the company's move into the grocery business - a
labor stronghold - has raised the stakes dramatically.
Union organizers say the high wages and benefits of their members
are at risk, as Wal-Mart expands its Supercenters beyond the South
and Midwest. The company recently established a beachhead in Las
Vegas, with five centers.
Next stop: California, where Wal-Mart plans to open 40
Supercenters starting early next year. In a sense, it has already
arrived. Wal-Mart's low wages are a central factor in the labor
dispute between California's three major supermarket chains -
Ralphs, Vons and Albertsons - and the United Food and Commercial
Workers.
"They are the third party now that comes to every bargaining
situation," said Mike Leonard, director of strategic programs for
the UFCW.
Over many years of hard negotiating, the union has won and
maintained premier contracts for its 800,000 grocery workers. But
with the opening of each new Supercenter, the union's clout erodes.
Every one of the giant stores sucks away about 200 UFCW jobs,
said retail consultant Burt P. Flickinger III, who runs Strategic
Resource Group in New York. That means less power at the bargaining
table and less money to hire organizers.
Illegally influenced employees
On average, Flickinger says, Wal-Mart's wage-and-benefit package
is about $10 an hour less than those offered by unionized
supermarkets.
For shoppers, that makes a big difference. A cart full of
groceries is 17 percent to 39 percent cheaper at a Wal-Mart
Supercenter than at a unionized supermarket, according to a survey
last year in Las Vegas, Dallas and Tampa, Fla., by investment bank
UBS Warburg.
Wal-Mart's move into groceries has led 25 regional supermarket
chains around the nation to close or file for bankruptcy protection,
eliminating 12,000 mostly union jobs, Flickinger said.
From their first day on the job, Wal-Mart employees are advised
to avoid unions and to report any organizing activities to their
supervisors.
"If a union got in here, every benefit we've got could go on the
negotiating table, every one of them," says a man identified as
Russell, a veteran employee, in a video shown to new hires. "Unions
will negotiate just about anything to get the right to have dues
deducted out of paychecks. You see, they need big money to pay union
bigwigs and their lawyers."
Company policy prohibits any union talk in work areas, and
organizers say they routinely are asked to leave stores. The
retailer sought, and last year received, a court order keeping
organizers out of all of its stores in Arkansas. The state Supreme
Court nullified the order in July.
At the first hint of union activity, Wal-Mart managers are
supposed to call a hot line, usually prompting a team visit from
Bentonville.
Wal-Mart spokeswoman Mona Williams said the intervention was
meant to help store managers respond effectively and legally.
"Our philosophy is that only an unhappy associate would be
interested in joining a union," she said, "so that's why Wal-Mart
does everything it can to make sure that we are providing our
associates what they want and need."
But dozens of times in the last four years, attorneys for the
National Labor Relations Board have claimed that the company
infringed on the supermarket union's legal right to organize.
Although some of those claims have been thrown out, others have
been upheld by administrative law judges, who have ruled that
Wal-Mart illegally influenced employees with offers of raises,
promotions and improved working conditions just before they were to
vote on whether to join a union.
Workers can't afford health insurance
Judges also have found that Wal-Mart illegally implied that
workers could lose benefits such as insurance and profit sharing if
they unionized.
What's more, managers illegally confiscated union literature,
threatened to close down a store if workers voted to join the union,
fired several union supporters and failed to promote others,
according to rulings from Minnesota to Florida.
Larry Allen got his first glimpse at a union pamphlet last year
as he carried it to the garbage at the Serene Avenue Supercenter. He
was hooked, and began advocating for an election to bring in the
union.
"Somebody has got to step up and fight for what is right," Allen
said.
Unlike small towns with boarded-up commercial centers,
fast-growing Vegas quickly loses track of its Wal-Mart victims.
Wal-Mart's costs to the community tend to show up in subtler
ways.
In an informal survey in the late 1990s of people who used Las
Vegas emergency rooms for routine medical care, patients who said
they were employed but uninsured were asked where they worked.
"Wal-Mart came up more than any other," said Dr. Raj Chanderraj,
a Las Vegas cardiologist and chairman of the Clark County Health
Care Access Consortium, a group that works to provide medical
services to the uninsured.
The reason, say critics: Because Wal-Mart pays such low wages,
many employees can't afford the health insurance the company offers.
And those who do have health coverage through the company often
can't afford deductibles that run as high as $3,000 a year.
"Their employees are ending up at the county hospital and become
the burden of the county," said Clark County Manager Thom Reilly.
Wal-Mart disputes that. Williams, the company spokeswoman, said
that 48 percent of employees are covered by Wal-Mart's health
insurance plan. Among those who aren't, 26 percent have coverage
from another source such as a spouse's employer or Medicare,
Williams said.
The notion that Wal-Mart doesn't provide adequate health coverage
is "just rhetoric," she said. "It's simply not true."
Those who accuse Wal-Mart of shortchanging its employees,
Williams suggested, don't understand the modern service economy.
"Retail and service wages are what they are," she said, "whether you
look at a department store, a discount store, the local dry
cleaners, the bakery or whatever.
"Wal-Mart is a great match for a lot of people," Williams added.
"But if you are the sole provider for your family and do not have
the time or the skills to move up the ladder, then maybe it's not
the right place for you."
Larry Allen was fired
Larry Allen spent about a year advocating for the supermarket
union while working at Wal-Mart.
In the parking lot and in the break room, he passed out fliers
and talked up the benefits of unionizing. But he and his fellow
union backers didn't get as far as they hoped. About 42 percent of
workers in the grocery department at Serene Avenue signed UFCW cards
- not enough for the union to feel confident about winning an
election.
In August, Allen was fired. NLRB attorneys said it was because of
his union activities and filed a complaint against Wal-Mart, seeking
his reinstatement.
On a recent afternoon outside the Supercenter, dozens of union
members rallied to support Allen. "Larry, Larry, Larry," they
chanted. Over at the store entrance, the demonstration was a
muffled, distant bit of noise. Store managers watched on a screen as
surveillance cameras scanned the crowd.
Asked about the commotion, a gray-haired Wal-Mart greeter named
Robert just smiled. "They want to make the store union," he said.
"But that would make the prices go up for our customers. We can't
let that happen."
On some level, even Larry Allen understands. "I still believe in
Wal-Mart," said Allen, who now is on the union payroll as an
organizer. "I like the idea of it - give a quality product at a low
price. It's what the American public wants."
[back to top]
Wal-Mart set to super-size in
California
By Bob Walter -- Sacramento Bee
Staff Writer
[back to top]
November 30, 2003
The first Wal-Mart Supercenters
won't open in California until spring, but their impending arrival
is already changing the state's retail landscape.
The looming presence of these
super-sized grocery stores, which are about half the size of Arco
Arena and offer 100,000 products at cut-rate prices, is roundly
blamed for the supermarket strike/lockout that has idled 70,000
workers in Southern California since October.
That strike/lockout has been
underscored by efforts among unionized supermarkets to cut costs
while competing against nonunion powers such as Wal-Mart.
Union and supermarket officials say
a similar strike is all but inevitable next summer when labor
contracts expire in Northern California.
In preparation for Wal-Mart's
arrival, the Raley's and Bel Air supermarket chain has cut
administrative costs with an early retirement offer and some
layoffs. At the same time, the West Sacramento-based company is
planning unprecedented growth, with 25 new stores scheduled to open
in the next four years, said William J. Coyne, president of Raley's.
Like most of the supermarket
officials and representatives interviewed, Coyne was reluctant to
talk about specific competitors. But he acknowledged that Raley's is
trying to become leaner, gearing up for a more competitive
environment that includes everything from Supercenters to specialty
grocers such as Trader Joe's and Whole Foods.
"We try to work every day with a
sense of urgency," Coyne said, "to become more efficient in every
area, from logistics and distribution to buying and service."
Starting in the Coachella Valley
desert, Supercenters are coming to Southern California in the spring
and to the rest of the state as fast as Wal-Mart can get permits.
Confirmed targets in Northern
California include Lodi, Woodland, Stockton, Tracy, Yuba City,
Turlock and Redding.
The Supercenters will employ
thousands. Most of them will have $1 million in sales every 10 days
or so, analysts say, a third higher than the typical Raley's and
about double the average Safeway in the capital region.
Their low prices will reduce the
cost of food, especially in the Sacramento area, which has some of
the highest grocery prices in the nation, retail analysts say.
Some analysts say each of the
Supercenters, which morph together a Wal-Mart discount department
store and a large supermarket, will result in the closure of two
traditional grocery stores. Others say entire supermarket divisions
may flee the region.
And still others, mostly union
officials and their supporters, say the Supercenters will spur
economic policies that lower the standard of living for tens of
thousands of supermarket employees. For those reasons, municipal and
grass-roots forces have been marshaling from Calexico to Chico to
keep the Supercenters from being built.
Bentonville, Ark.-based Wal-Mart
says it plans to open 40 Supercenters in California in the next four
years -- none of them closer to Sacramento than Lodi or Woodland.
Analysts and Wal-Mart watchers say the number will be much higher
and undoubtedly will include the capital.
David S. Rogers of suburban
Chicago, a grocery analyst and academic who has done research on
Wal-Mart for more than 10 years, said the company wants to open "100
to 200 stores" in California.
"With Wal-Mart," he said, "you have
to look at what they do rather than what they say."
And what Wal-Mart has done -- using
a combination of low prices and saturation -- in market after market
is dominate or at least become a major player.
In Dallas, for example, Wal-Mart
has 51 Supercenters, discount stores, neighborhood markets and Sam's
Clubs, and has moved from being the sixth-ranked grocer to the top
spot in less than five years, according to consulting firm Retail
Forward.
In the Oklahoma City metropolitan
area, where Wal-Mart operates 11 Supercenters, it went from
capturing about 6 percent of that region's grocery business in 1997
to more than 30 percent in 2002, the latest year for which such data
are available.
Such dominance helped push
Wal-Mart's annual sales in 2002 to $247 billion, which is greater
than the combined sales of the 10 largest supermarket chains in the
United States.
When Wal-Mart topped the Fortune
500 for the second time this year -- by $60 billion over runner-up
General Motors -- the magazine pondered whether anybody ever would
displace the Bentonville behemoth.
The conclusion: not in this
lifetime, barring something as unlikely as a merger of GM and Ford
or Exxon Mobil and ChevronTexaco.
With about 1.45 million employees,
Wal-Mart has more people in uniform than the U.S. Army (480,000 on
active duty).
The company expects to hire more
than 600,000 people next year, based on growth (160,000 new jobs)
and turnover, said Christi Gallagher, Wal-Mart's human resources
specialist in Bentonville.
Gallagher says Wal-Mart's turnover
rate is about 45 percent. The industry average is 65 percent,
according to the National Retail Federation.
Wal-Mart says it offers competitive
wages in all of its markets and that 90 percent of its employees
have health benefits, half of them through Wal-Mart. Most analysts
estimate that Wal-Mart employees are paid a quarter to a third less
than unionized workers in supermarkets and other retailers.
And in part because of lower labor
costs, the company's relatively new Supercenters have turned
Wal-Mart into the country's biggest grocer in less than a decade.
In 1992, Wal-Mart had 34
Supercenters that generated about $1 billion in sales, according to
Retail Forward. By the end of 2002, the company's 1,258 Supercenters
topped $100 billion.
As Wal-Mart has grown, so has its
clout with suppliers. According to Retail Forward, the company
accounts for 28 percent of Dial Corp.'s total sales. For Del Monte
Foods, the proportion is 24 percent. Other totals, according to
Retail Forward, include Clorox and Revlon at 23 percent, and Procter
& Gamble at 17 percent.
And all those percentages are
rising.
"If you are Procter & Gamble," said
Jim Watt, a vice president at Modesto-based Save Mart Supermarkets,
"and in five years, 30 percent of your business is Wal-Mart, then
who owns whom?"
Wal-Mart says its relationship with
its suppliers, plus its legendary distribution system, allows its
Supercenters to sell groceries that cost 10 percent to more than 30
percent less than groceries at most warehouse and conventional
supermarkets.
For much of the competition, the
results of Wal-Mart's success are often brutal.
In Oklahoma City, more than two
dozen supermarkets have closed or been converted to other uses in
recent years. And the former market leader, Homeland Foods, though
it still has more than 20 stores, has been in and out and back into
bankruptcy protection.
In Sacramento, Raley's says it is
waiting and ready. "Tom Raley would have relished this competition,"
Coyne said.
Raley, who died in 1991, started
the $3.2 billion company that bears his name and has grown to 134
stores in California, Nevada and New Mexico. In the greater
Sacramento region, Raley's controls nearly 35 percent of the grocery
market share, according to Trade Dimensions, a Connecticut-based
retail analyst.
Coyne said Raley's will compete not
only with its "core competencies" such as service, quality products
and community involvement, but also with aggressive growth.
Along with the 25 new stores in the
pipeline, he did not rule out even faster growth through
acquisitions of the kind that put Sacramento's Bel Air Markets and
Bay Area-based Nob Hill Foods under the Raley's flag.
Raley's ultimate advantage, he
said, comes from being "local," whether the store is in Land Park,
Reno, Elk Grove or the Bay Area.
"We just have the ability to know
our customers better than competitors that are based in Cincinnati
or Boise or elsewhere," he said. "At the end of the day, I can
assure you that Raley's will be standing tall."
Analysts agree with the Raley's
president, though they say the company undoubtedly will lose some
market share to Wal-Mart.
But not even the Supercenters will
knock Raley's from the top of the charts in the Sacramento area,
said Burt P. Flickinger III, a noted New York-based retail analyst.
Wal-Mart will move from nowhere
into the second spot, he said, mostly at the expense of Ralphs,
Albertsons and Safeway.
"The national chains will be caught
in the middle," unable to compete with Wal-Mart's low prices or the
loyalty of Raley's customers, he said.
Safeway spokesman Alexander Winslow
wouldn't talk about competing with Supercenters but said Sacramento
is a major market for Safeway, which has grown to two dozen stores
in the capital region.
Trade Dimensions said Safeway has
increased its market share in the last two years from about 13
percent to 17 percent.
Ralphs
spokesman Terry O'Neil said his Kroger-owned firm has not grown as
fast as planned in the Sacramento area and, in fact, closed five
stores last year. Ralphs' market share dropped from almost 9 percent
in 2001 to about 5 percent this year, Trade Dimensions said.
But O'Neil said Sacramento still
holds an important place in Ralphs' long-term plans. Kroger has
plenty of experience against Wal-Mart in other states, he said, "and
we'll compete with what we do best: higher quality, better variety
and better service."
Albertsons declined to comment.
David S. Rogers, the Chicago-area
academic, and Paul Adams, an Olathe, Kan.-based analyst, agreed that
the national chains were the most vulnerable.
"I think you will see significant
division closures," Rogers said. "There is no God-given reason that
anybody will survive, big chain or not."
Graphic: Wal-Mart overview
[back to top]
Activists to protest Wal-Mart on
Friday
By DOUG HARLOW Staff Writer, Blethen Maine
Newspapers Inc.
[back to top]
November 27, 2003
WATERVILLE -- Members of a local
peace action group plan to distribute leaflets Friday protesting the
use of overseas sweatshops making cclothing for Wal-Mart stores, the
Disney corporation and other American companies.
Waterville Area Bridges for Peace
and Justice will hand out informational leaflets beginning at 9:30
a.m. at the Wal-Mart store on Kennedy Memorial Drive, according to
organizers.
"Members will wear sandwich boards
and hand out leaflets until Wal-Mart sends someone out to ask the
social justice group to leave," organizer Peter Sirois said. "At
being invited to leave, the group will move on to Elm Plaza and
continue leafleting in the common parking area.
"The action will not call for a
boycott. It will ask that shoppers contact state legislators and
private CEOs to suspend all support of sweatshops and the laws that
make them possible."
Members will hand out 400 two-sided
leaflets with information about Disney and Wal-Mart support of third
world sweatshops, Sirois added.
"We are simply calling attention to
sweatshops," organizer Claire Prontnicki said. "There is quite a lot
of evidence for it. It's pretty horrible."
Prontnicki
said the group showed a film on the subject last week in Waterville.
Footage showed sweatshops in Bangladesh where workers are paid 11 to
17 cents per hour, an unlivable wage even in the poorest of nations,
she said.
The rain date for the leafleting is
Saturday.
"We started this winter when we
were doing the bridge demonstrations against the war in Iraq on KMD,"
Prontnicki said. "There were some from that group who wanted to
carry on peace and justice work."
Since starting up in the spring,
the expanded group has sponsored a film and discussion series
devoted to peace and justice at the Waterville Public Library.
Members participated in Madison's Father Rasle Day parade with the
theme Peace Around the World.
Members are planning a Peace &
Justice Garden in Castonguay Square and the group is putting
together an informational program dealing with militarism for local
schools , according to Sirois. The group also supported the
anti-Patriot Act resolution at a recent Waterville City Council
meeting.
The group has approximately 25
active members from several surrounding towns and a mailing list of
over 200 area supporters.
[back to top]
THE WAL-MART EFFECT
Grocery Unions
Battle to Stop Invasion of the Giant Stores; Wal-Mart plans to open
40 of its nonunion Supercenters in California. Labor is fighting the
expected onslaught, but the big retailer rarely concedes defeat.
Nancy Cleeland and Abigail Goldman
Times Staff Writers [back to top]
Los Angeles
Times
25 November 2003
Inglewood seemed to offer the
perfect home for a new Wal-Mart Supercenter, with low-income
residents hungry for bargains and a mayor craving the sales-tax
revenue that flows from big-box stores.
But nearly two years after deciding
to build on a 60-acre lot near the Hollywood Park racetrack,
Wal-Mart is nowhere near pouring concrete. Instead, the world's
biggest company is at war with a determined opposition, led by
organized labor.
"A line has been drawn in the
sand," said Donald H. Eiesland, president of Inglewood Park Cemetery
and the head of Partners for Progress, a local pro-business group.
"It's the union against Wal-Mart. This has nothing to do with
Inglewood."
Indeed, similar battles are
breaking out across California, and both sides are digging in hard.
Wal-Mart Stores Inc. wants to move into the grocery business
throughout the state by opening 40 Supercenters, each a
200,000-square-foot behemoth that combines a fully stocked food
market with a discount mega-store -- entirely staffed by non-union
employees. The United Food and Commercial Workers and the Teamsters
are trying to thwart that effort, hoping to save relatively
high-paying union jobs.
The unions have amassed a
seven-figure war chest and are calling in political chits to fight
Wal-Mart. The giant retailer is aggressively countering every move,
and some analysts believe that Wal-Mart's share of grocery sales in
the state could eventually reach 20%. The state's first Supercenter
is set to open in March in La Quinta, near Palm Springs.
"If we have an advantage," said
Robert S. McAdam, Wal-Mart's vice president for state and local
government relations, "it's that we are offering what people want."
In fact, Wal-Mart has won allies by
providing people of modest means a chance to stretch their dollars.
"We need to have retail outlets
that are convenient and offer quality goods and services at low
prices," said John Mack, president of the Los Angeles Urban League.
"I really think that there are potential economic benefits for this
community with the addition of a Wal-Mart."
Yet the Supercenters also threaten
the 250,000 members of the UFCW and Teamsters who work in the
supermarket business in California.
For decades, the unions have been a
major force in the state grocery industry and have negotiated
generous labor contracts. Wal-Mart pays its grocery workers an
estimated $10 less per hour in wages and benefits than do the big
supermarkets nationwide -- $19 versus $9. As California grocery
chains brace for the competition, their workers face severe cutbacks
in compensation.
"We're going to end up just like
the Wal-Mart workers," said Rick Middleton, a Teamsters official in
Carson who eagerly hands out copies of a paperback called "How
Wal-Mart Is Destroying America." "If we don't as labor officials
address this issue now, the future for our membership is dismal,
very dismal."
The push for concessions has
already started, prompting the longest supermarket strike in
Southern California's history. About 70,000 grocery workers employed
by Albertsons Inc., Kroger Co.'s Ralphs and Safeway Inc.'s Vons and
Pavilions have been walking the picket lines since Oct. 11, largely
to protest proposed reductions in health benefits. The supermarkets
say they need these cuts to hold their own against Wal-Mart, already
the nation's largest grocer.
Rick Icaza, president of one of
seven UFCW locals in Southern California, has taken issue with much
of the supermarkets' rhetoric since the labor dispute began. But he
doesn't doubt that Wal-Mart is the biggest threat ever posed to the
grocery chains -- and, in turn, his own members.
"The No. 1 enemy has still got to
be Wal-Mart," he said.
The unions and their community
allies have stopped Wal-Mart in some places and slowed it down in
others. They have persuaded officials in at least a dozen cities and
counties to adopt zoning laws to keep out Supercenters and stores
like them.
Homeowner groups, backed by union
money, sued to stop construction of two Supercenters in Bakersfield,
arguing that the stores would drive local merchants out of business.
Contra Costa County and Oakland also have passed measures that could
block Supercenters.
In Los Angeles, several City
Council members are drafting an ordinance to require an examination
of how large-scale projects such as Supercenters would affect the
community, including the possible loss of union jobs. As envisioned
by supporters, the measure would allow the city to insist on higher
wages as a condition of project approval.
"We want Wal-Mart to be able to
help us with our economic development," said Councilman Eric
Garcetti, who is co-sponsoring the measure. "We just want to be able
to do it on our terms and not theirs."
Wal-Mart, however, can more than
match its foes in resources and resolve.
To soften its outsider image, the
retailer has hired local political insiders to coax projects through
planning bureaucracies. It has promised jobs and sales-tax bonanzas
to cities struggling with deficits and unemployment.
When the answer is "no," Wal-Mart
rarely concedes defeat. At least nine times during its latest
California push, the company has responded to legal barriers by
threatening to sue or to take its case straight to local voters by
forcing referendums.
That's what happened in Inglewood
after the City Council in October 2002 adopted an emergency
ordinance barring construction of retail stores that exceed 155,000
square feet and sell more than 20,000 nontaxable items such as food
and pharmacy products. The measure was tailored to block a
Supercenter.
Icaza
declared victory. "Wal-Mart's plans to enter the retail grocery
business in Inglewood are dead!" he crowed in a union newsletter.
But they weren't. Within a month,
Wal-Mart gathered 9,250 signatures on petitions, more than enough to
force a public vote. The company also threatened to sue the city for
alleged procedural violations. Looking at a possible court battle or
an embarrassing failure at the polls, Inglewood officials withdrew
the ordinance they had passed a month earlier.
Furious with the council, Icaza ran
his own candidate in city elections in June. Ralph Franklin, a
former supermarket clerk and manager and now a UFCW business agent,
won with 70% of the vote, ousting a council member who had gone
against the union.
Worried that the council might try
to trip it up again, Wal-Mart went on the offensive. In late August,
the company, through a group called the Citizens Committee to
Welcome Wal-Mart to Inglewood, began gathering a new batch of
signatures to force a popular vote on the Supercenter. The
initiative, which calls for building permits to be issued without a
public hearing or environmental impact study, is expected to be on
the March 2004 ballot.
"When people feel they're not
getting a fair shake with the legislative process, they take things
to a vote" of the electorate, said McAdam, the Wal-Mart vice
president.
Wal-Mart's opponents have vowed to
sue to block the initiative on the grounds that it oversteps the
limits of the ballot process.
UFCW
and Teamsters locals have raised dues or diverted funds from other
programs to bankroll anti-Wal-Mart campaigns. With more than $1
million now available, thousands of members to draw from and
encouragement from national leaders, local labor would seem to be in
a strong position.
But union efforts have been
hampered by personality conflicts and disagreements over strategies
and goals, according to people close to the situation.
As in Inglewood, many union locals
have focused on so-called site fights, winning zoning restrictions
at the local level. That strategy can temporarily save union jobs
and give leaders victories to celebrate, but it does little to stop
the long-term march of Wal-Mart, critics say. After all, there are
478 cities in California, 88 in Los Angeles County alone.
Pushing for zoning restrictions
also can backfire, stirring resentment among consumers and business
owners -- even those who directly compete with Wal-Mart.
Wal-Mart opponents "try to use the
government to accomplish things that they may not be able to
accomplish in the marketplace," said Alan Zaremberg, president of
the California Chamber of Commerce. "It's not government's role to
interfere with what consumers want."
For their part, national labor
strategists want local leaders to focus less on zoning campaigns and
more on the daunting, long-term goal of unionizing Wal-Mart
employees. Few take the advice, and those who do quickly realize
just what they are up against.
George Hartwell, president of UFCW
Local 1036 in Camarillo, hired 18 organizers to hit the nine
Wal-Mart stores in his jurisdiction. With few leads to go on and
employees in stores forbidden to talk about unions, progress was
slow. Then in mid-summer, a group wearing union T-shirts was served
with trespassing papers and asked to leave a Wal-Mart in Lompoc.
Lawyers tussled over that for months. Now Hartwell and his crew can
enter the stores, but with strict limitations. "We go through and
say, 'good morning' or 'good afternoon,' just to be visible," he
said.
Despite the long odds in taking on
the company, many union activists insist they have no choice.
"I've put 29 years of my life into
this job, and now they're trying to pull the rug out from under me,"
said Diane Johnson, a union cashier at a Pavilions store in Los
Angeles who is helping to coordinate anti-Wal-Mart efforts in
Inglewood through the Los Angeles Alliance for a New Economy.
Johnson and co-workers have made
door-to-door visits and spoken from church pulpits, hoping to turn
public opinion against the discounter. "For me to go backwards would
just be hell," she said.
But Wal-Mart, the nation's largest
seller of everything from toys to DVDs, has plenty of defenders too,
some of them politically and financially powerful. They range from
prominent Los Angeles toy importer Charlie Woo, who recently took up
Wal-Mart's case before Los Angeles City Council members, to Jeffrey
Katzenberg, a co-founder of Hollywood studio DreamWorks SKG. He
lobbied former Gov. Davis against signing a statewide anti-big-box
measure passed by the Legislature five years ago; Davis vetoed the
bill.
McAdam said Wal-Mart doesn't order
its suppliers to lobby on the company's behalf. But it does spell
out for vendors the consequences of anti-Wal-Mart legislation.
"It's our belief that on certain
issues, they have a vested interest in seeing ... that our company
can continue to grow," McAdam said.
Wal-Mart also helps smooth entry
into new markets by cultivating relationships with civic groups.
As it prepared last year to buy and
renovate a former Macy's in the south Los Angeles community of
Baldwin Hills, corporate officials met with leaders of the Los
Angeles Urban League and arranged to hire some employees through the
organization.
Allies in organized labor tried to
dissuade the Urban League's Mack from cooperating. Normally
pro-union, Mack turned them down, saying the community badly needed
jobs and low-cost shopping options.
"I'd rather have a person on
somebody's payroll -- even if it isn't at the highest wage -- than
on the unemployment roll," Mack said. "We're not going to punish job
seekers by refusing to refer them to Wal-Mart for a job."
By the time the Baldwin
Hills-Crenshaw Plaza Wal-Mart opened in January, Wal-Mart had doled
out thousands of dollars, mostly in $1,000 grants, to local
institutions such as schools and youth programs. The company cut the
Urban League a $3,000 check. It also provided $10,000 for new lights
at the Martin Luther King Jr. Little League Baseball field.
The ordinance being considered in
Los Angeles would ask planners to weigh the "community benefits" of
a mega-store in any zone that receives federal, state or municipal
funding or incentives -- essentially the entire city.
Like an environmental impact
report, the community-benefits study would consider possible
negative outcomes and propose ways to mitigate them. Wages could be
held to "prevailing standards." If supermarkets were deemed the
standard, that would mean union scale.
Backed by Garcetti and Councilman
Ed Reyes, the ordinance could be ready for a council vote next
month.
Several studies commissioned in
recent years by independent groups, including the Orange County
Business Council and the San Diego Taxpayers Assn., found the state
would suffer a net economic loss if union jobs were traded for jobs
at Wal-Mart.
Wal-Mart had declined to respond
with numbers of its own until a few months ago, when it commissioned
the Los Angeles County Economic Development Corp. to measure the
effect of Supercenters on the region. Researcher Gregory Freeman
said the study balanced wage losses with consumer savings, noting
that Supercenter prices are typically 20% lower than at union
markets.
The study was completed two weeks
ago, Freeman said, but hasn't yet been released.
As he began his study in
mid-summer, Freeman told council members that other analyses haven't
fairly measured all the pros and cons of the Supercenters. For one
thing, he said, savings from lower grocery prices could be used by
working-class shoppers for other things, such as buying homes.
As for those merchants who won't be
able to compete with Wal-Mart, others say, progress always carries a
price.
"I grew up in Pennsylvania; my
father had a corner market there. When I was 3 or 4, the A&P moved
in and put him out of business," recalled the Chamber's Zaremberg.
"That was tough for us, but I don't think anyone would go back and
say we shouldn't have supermarkets."
[back to top]
Wal-Mart Discounts the American
Dream
25 November 2003
[back to top]
Los Angeles Times - Home Edition
Re "An Empire Built on Bargains
Remakes the Working World," Nov. 23: Wal-Mart represents a
corporation that has gone amok. Its domination shows why elements of
the civil society need to balance capitalism if it is to work for
the entire population. When we save 7 cents on the toothpaste we
buy, we don't realize that some of that 7 cents we save goes to
taxes to pay for Medicaid, food stamps and emergency room visits for
low-paid Wal-Mart workers. Wal-Mart has driven many companies out of
business and has had the reverse effect of General Motors, which
brought people into the middle class.
If Wal-Mart becomes even more
dominant, it could enter a phase where it no longer needs to provide
deep discounts in some areas because it will so dominate retailing.
We will then have higher prices and low-wage workers. Not a pretty
picture. It needs to be curbed.
Larry Wiener Alhambra
*
Your article highlighting
Wal-Mart's wage, benefits and anti-union policies explains why I am
honoring the supermarket workers' picket lines. Led by Wal-Mart,
American business is in a globalized race to the bottom, keeping
worker compensation low and increasing productivity, which only
means having one worker do the job of two. Even that
archconservative Henry Ford realized that he had to pay his workers
more in order for them to buy his cars and for the economy to grow.
What we are witnessing today is tooth-and-claw competition that is
leading to the sunset of the middle class in America.
Carl Martz Redlands
*
With the huge and ever-increasing
profits that Wal-Mart reaps, it most certainly can afford to pay its
employees living wages and full health insurance benefits. The
Walton family would probably not even notice a change in lifestyle
if its profits were reduced by one-half because it decided to take
better care of its employees. It's all about greed.
Carol May Los Angeles
*
One shudders for the future of
commercial America and, particularly, free-enterprise employment
when reading your article on Wal-Mart. Our nation was built upon the
foundation that anyone had the opportunity to build an enterprise to
supply competitive goods to eager customers -- a concept that
Wal-Mart itself so successfully exemplifies. However, in prior
years, competition in most cases meant like comparisons conducted
within the American environment of good wages and high standards of
living.
Now, manufacturers and
free-enterprise workers in our nation must compete against
manufacturers and workers from some of the lowest-wage areas of the
world. Little wonder there will soon be no meaningful manufacturing
conducted in the United States. All the "good" jobs and professional
opportunities in the future will go to those who have access to
government resources: direct government workers, the medical
profession and, of course, teachers and others involved in our huge
educational establishment.
No surprise, therefore, that
economists from institutes of higher learning are so supportive of
Wal-Mart's constraints upon costs.
Daniel Eliason Santa Barbara
*
Reading about Wal-Mart's relentless
efforts to cut prices while providing quality products and listening
to its customers leads me to one thought: I hope it decides to get
into providing health-care services nationwide.
Ed Kushins Hermosa Beach
*
In your long story on Wal-Mart you
missed the bottom line: While the average "associate" is paid
poverty-level wages, Sam Walton's five heirs are worth a combined
total of more than $100 billion. Wal-Mart is a national disgrace.
John Horne Redondo Beach
[back to top]
Wal-Mart stirs up grocery industry
By MARINA STRAUSS
[back to top]
November 25, 2003
From Monday's Globe and Mail
A labour dispute at 15 Loblaw Cos.
Ltd. stores in Newfoundland highlights a trend that is transforming
the North American grocery industry as retailers race to lower costs
and compete with the mighty Wal-Mart Stores Inc.
Last week, Loblaw locked out about
1,600 workers at its 15 Dominion stores after the employees staged
rotating walkouts to protest the company's demand for wage and
benefit concessions. Underlying the fight is Loblaw's view that it
needs to rein in wage and benefit expenses in order to take on
non-unionized, lower paying rivals - with much of the focus on
Wal-Mart.
The issue has already reared its
head in Ontario where Loblaw succeeded this summer in getting the
United Food and Commercial Workers Union, which represents employees
in that province, to agree to concessions at new, discount Real
Canadian Superstores.
In Newfoundland, the Loblaw
employees are represented by a different union, the Canadian Auto
Workers, which refused to accept the company's wage and benefit
proposals.
"This is simply about greed," CAW
president Buzz Hargrove said in an interview, adding that Wal-Mart
should not set labour standards for Canada. "We're not going to let
the lowest common denominator dictate what's going to happen to our
members."
Indeed, Wal-Mart appears to be
gradually setting employee compensation standards in the North
American grocery sector as it aggressively bolsters its food
offerings at its conventional stores, its Sam's Clubs and its
mammoth U.S. supercentres that sell everything from food to
furniture. Already the supercentres have pushed some U.S.
supermarkets out of business.
The Wal-Mart supercentres have
triggered a wave of labour protests as competing U.S. supermarkets
try to gain concessions from employees to take on the non-unionized,
low-wage Wal-Mart outlets.
The latest U.S. wrangle is in
Southern California where 70,000 grocery workers are on strike,
unhappy with supermarket chains' demands for concessions as the
retailers brace for the arrival early next year of the first of 40
Wal-Mart supercentres.
In Canada, Loblaw has been no
slouch in trying to head off Wal-Mart's challenge since the world's
largest retailer entered this country more than nine years ago.
Loblaw's battle plan is to expand
its own discount stores, led by the Real Canadian Superstore,
already a successful format in Western Canada.
The superstores are a
one-stop-shopping destination with general merchandise along with
food, and are designed to compete head-on with Wal-Mart. Last month,
Wal-Mart launched its first four Sam's Clubs in Ontario with an eye
to opening many more across Canada. Sam's Clubs carry a full range
of groceries.
Loblaw president John Lederer told
analysts last week that the chain - this country's largest grocer -
envisages between 30 and 50 Real Canadian Superstores in Ontario
"over the next number of years." (A spokesman said later some of
those stores will be in Quebec, too.)
Mr. Lederer praised the UFCW for
its "strong collaborative" work with Loblaw . "We think that will
lead to more union jobs and still allow us to compete toe-to-toe
with global players."
Not everyone agrees with this
collaboration. The UAW's Mr. Hargrove said Loblaw shouldn't pay
"starvation wages" just to keep up with Wal-Mart, but rather should
force Wal-Mart to raise its standards.
He said Loblaw is offering a
25-cent-an-hour raise in the first year of the contract for pay that
starts at $6.25 an hour - 25 cents an hour above minimum wage - and
ranges to $8.32 an hour. (The company spokesman wouldn't comment.)
In Ontario, where wages are
considerably higher, a dissident group of UFCW members has
challenged the secretly negotiated concessions for superstores at
the Ontario Labour Relations Board, and is awaiting a decision.
Michael Fraser, national director
of UFCW Canada, said Loblaw threatened to open non-unionized stores
under the Real Canadian Superstore banners if the UFCW didn't agree
to the contract cutbacks.
The alternative for union members
could have been losing their jobs entirely, Mr. Fraser said in a
recent interview.
"Loblaw is being somewhat forward
thinking," Mr. Fraser said. "They realize Wal-Mart is probably going
to come into Canada in a big way with Sam's Club. Loblaw is the only
employer in Canada that's prepared to try to compete with them on
the same basis ..... If we had sat back and done nothing .....
eventually we would be watching a lot of our members be put out of
work by non-union competition."
But even The New York Times has
weighed in about the potential dangers of what it called in an
editorial last week "the Wal-Martization of America."
" Wal-Mart likes to wrap itself in
American values," it wrote. "It should be reminded that one of those
is paying workers enough to give their families a decent life."
[back to top]
WORKERS IN WAL-MART SUIT APPLY FOR
CLASS ACTION STATUS WORK HOURS, PAY PRACTICES CALLED UNFAIR
24 November 2003 -
[back to top]
The Associated
Press South Florida Sun-Sentinel
PANAMA CITY
Lawyers are asking a judge to
decide whether as many as 230,000 Floridians can sue Wal-Mart Stores
Inc. in a class action lawsuit that alleges the world's biggest
retailer doesn't pay low-level employees for extra work.
A former night shift manager in the
Panama City Beach Wal-Mart Supercenter and several former employees
of Chipley Wal-Mart sued the company in 2001. They said they were
forced to work through breaks, skip meals and return to unfinished
tasks after they had clocked out.
They want to include all the hourly
workers Wal-Mart has employed in Florida since 1997 in a class
action suit -- a type of suit that combines the complaints of people
with similar claims and damages against the same company. Wal-Mart
said that would include 232,358 people.
Circuit Court Judge Glenn Hess will
determine whether the arguments meet the legal criteria of class
action suits. If he allows the suit to continue, it could open the
door for greater claims against Wal-Mart, and possibly punitive
damages. If he rejects the request, each employee could file
individually, probably in small claims court.
Requests to file similar lawsuits
in other states have met mixed success. Minnesota and Indiana
allowed class action lawsuits. Seven other states -- California,
Georgia, Louisiana, Michigan, Ohio, Oregon and Texas -- did not.
The attorney for Farris Cobb, the
former night shift manager, said Wal-Mart files show the company
understaffs its stores, pressures managers to overwork employees and
strictly prohibits overtime. The attorney, Russell Lloyd, said the
company pressures managers to keep wages at 8 percent of each
store's sales totals. Competitors allow wages to reach 15 percent to
16 percent of sales, he said.
Lloyd says Wal-Mart provides
incentives for the managers to reach these goals, including bonuses
that are higher than managers' $50,000 base salary.
Lloyd said Florida employees lost
900,000 hours of pay because of these practices in one year.
Wal-Mart attorneys Bradley Johnson
and Weyman Johnson said there are too many different allegations to
make this case a class action lawsuit and argued most of the
plaintiffs signed onto the suit only after seeing a law firm's
advertisement.
They said many of the plaintiffs
acknowledged they were only asked to work through breaks during busy
times, and one man admitted the store would probably have paid him
for extra work if he had pushed harder.
[back to top]
Wal-Mart versus the workers
By Neil Buckley -
Financial Times
[back to top]
November 19, 2003
For Victor Zavala, the American
dream ended at 7am on a chilly Thursday last month. As he walked
across the car park of the Wal-Mart superstore in Piscataway, New
Jersey, where he had spent an overnight shift scrubbing floors, two police cars
and two unmarked cars sped towards him. Within seconds, he was in
handcuffs.
Mr Zavala, an illegal immigrant
from Mexico, says he had worked for three years cleaning Wal-Mart
stores seven nights, or 60 hours, a week, earning about $6 an hour.
He got no overtime pay, health insurance or sick leave; he also paid no taxes
or social security. He never got a day off; his request for a week's
honeymoon leave in February was denied.
Now facing deportation, Mr Zavala,
28, was employed by a cleaning contractor, not by Wal-Mart. But he
is one of nine cleaners suing the world's largest retailer in what
they aim to make a class action suit. It alleges Wal-Mart knew the
workers were illegal and violated federal racketeering laws by
conspiring with cleaning contractors to pay them low wages.
The nine are among 250 illegal
workers arrested in raids on October 23 outside 61 Wal-Mart stores
in 21 states, in one of the biggest operations of its kind.
Immigration officers also searched a mid-level manager's office at Wal-Mart's
Bentonville, Arkansas, headquarters, taking boxes of documents.
Wal-Mart has since confirmed that a federal grand jury is
determining whether it should be charged with knowingly employing
contractors who were using illegal workers.
"This is a case of the strongest
company in the world preying on the most vulnerable poor people,"
says James Linsey, a lawyer representing the nine illegal workers. "What is
heartening is that the federal authorities are not just picking on
the littlest of the little, but have sent Wal-Mart a letter saying
they are the target of a criminal investigation. This is very
serious stuff."
Wal-Mart says it has no evidence
that employees at any level knew illegal workers were being
employed, and is co-operating fully with investigators.
"We are as eager as anyone to see
what evidence federal officials might have," says Mona Williams,
vice- president of communications. "If anyone at Wal-Mart has broken a law, we
want to know who it is, and we will make sure that the person will
no longer work for our company."
But the immigrant worker case is
throwing an uncomfortable spotlight on to the employment practices
of what is the world's largest company by revenues - with 1.4m employees,
$245bn sales and $8bn net profits last year - and is arguably the
most powerful.
Coupled with three dozen lawsuits
alleging that Wal-Mart forced employees to work unpaid overtime, it
raises questions over whether the retailer's relentless drive to cut
costs is causing it to stray too close to the boundary of legality.
On top of that, a strike by 70,000
supermarket workers in southern California over their employers'
plans to slash healthcare benefits - to compete with cut-price
Wal-Mart - has provoked a debate over the so-called "race to the bottom". The
US is already jumpy about domestic industry being undercut by cheap
labour overseas. Now many fear that
Wal-Mart's low pay and benefits are
undermining efforts by competitors and suppliers to pay their
workers a decent wage.
Wal-Mart's size and power make it a
magnet for criticism. It has long been accused of destroying Main
Street USA by shutting down "mom-and-pop" stores, and driving
manufacturing jobs abroad by aggressively screwing down
suppliers' prices and costs. That has not deterred the estimated
138m shoppers who visit its giant stores each week. But for a
company whose business model relies, in part, on a plentiful supply of willing,
non-union labour, controversy over its employment standards touches
a nerve.
Gary Balter, retail analyst at UBS
Warburg in New York, says Wal-Mart is a "very honourable company".
But he warns that many powerful businesses eventually run into an issue that
threatens to hold back their progress. With Microsoft, it was
regulation. Could labour issues become the kind of thorn in the side for Wal-Mart
that antitrust probes became for Microsoft?
"It is very hard to regulate a
company because they are giving you low prices," he says. "But there
may be someone looking for the one thing they did wrong, so that
they can use that, for example, to force them to let more unions in.
"In the public relations battle,
you have Wal-Mart on one side saying we want to cut prices for
consumers. And on the other side you have more and more people
saying Wal-Mart is hurting the fabric of America."
Wal-Mart's spartan "home office",
in a converted warehouse in rural Arkansas, presents an image of
thrift and propriety. Employees are reluctant even to let visitors
buy them a coffee, so strong is the policy against accepting gifts.
And vendors trying to persuade Wal-Mart to carry their products meet
buyers in bare rooms with signs proclaiming that Wal-Mart will not
accept bribes.
The company admits its workers'
basic pay is less than that of rivals, but it insists respect for
its workers - studiously referred to as "associates" - is central to
its philosophy. Employees carry cards bearing the three core values
of Sam Walton, the company's founder. Number one is "respect for the
individual".
Lee Scott, chief executive, says he
is committed to preserving the folksy culture of "Mr Sam", who died
in 1992. Mr Walton, he recalls, said there were only two people to
whom he would never give a second chance: "anyone who stole, or
managers who abused their people".
The challenge Wal-Mart faces is to
preserve Mr Sam's culture as it grows to 2m or even 3m employees,
and - with 4,700 stores worldwide already, two-thirds of them in the
US - to ensure that managers always meet the standards head office
demands.
A rash of lawsuits against the
company allege there have been abuses. The latest is from the
immigrant workers but Wal-Mart says 240 of the 250 workers detained
last month were employed by third-party contractors for which it
cannot be held responsible.
However, federal officials confirm
that they have recorded conversations indicating that Wal-Mart
employees knew illegal workers were being used.
Mr Zavala, the Mexican immigrant,
and his lawyers say it would have been hard for Wal-Mart staff, at
least at store level, not to know. Cleaners, they say, were
supervised by Wal-Mart assistant store managers.
"Whoever was in charge of making
these contracts with contractors knew what they were doing," adds
Gilberto Garcia, a lawyer representing the illegal workers. "The
people negotiating had to know that there was a reason why one [bid]
was cheaper than another."
Wal-Mart's Ms Williams says the
company cannot be expected to check every worker's papers at
hundreds of outside providers of services and products. She adds that the
immigrant workers' lawsuit is baseless, and Wal-Mart will move to
dismiss it.
But, she says: "We are especially
concerned about allegations that undocumented workers were not
treated properly, that contractors took advantage of [them]. That is
wrong. We would never condone such treatment and we are sorry it
happened in our stores."
The immigrant workers' case follows
37 suits pending against the company on a different issue. These
allege Wal-Mart tried to cut costs by making employees work unpaid overtime.
One verdict has already gone
against the company. A jury in Oregon last December found a "pattern
of practice" at Wal-Mart permitting 400 employees to work overtime
without pay between 1994 and 1999. Two similar cases have been
granted class action status this month, in Minnesota and California;
Wal-Mart is appealing against an earlier class certification in
Indiana.
Ms Williams says Wal-Mart's policy
- "to pay associates for every minute they work" - is clear. "Any
manager who requires or even tolerates off-the-clock working would be
violating company policy and is subject to disciplinary action up to
and including termination," she says. "We have had a huge education
effort to make sure that all of our managers and hourly associates
know that off-the-clock working isn't tolerated. . . We have fired
some managers who have been doing this."
A third area in which the company
faces a lawsuit - potentially the biggest civil rights class action
in US history - is over alleged sex discrimination. The suit, filed
by six women in 2001, claims Wal-Mart systematically denies promotion and
equal pay to women. If certified by the federal judge considering
the case, it would cover almost 1.6m current and former female
employees. The plaintiffs say that while two-thirds of Wal-Mart's
hourly employees are female, women fill only a third of store
management team jobs and fewer than 15 per cent of top store manager
positions. They also say women at all levels earn less than men.
Ms Williams says the case has no
merit. She says women are promoted in direct proportion - or better
- to the numbers applying for management jobs. Women workers have
sometimes been reluctant to apply for senior jobs that would require
them to move, or work antisocial hours, and Wal-Mart is working on
tackling that.
The retail group has also found
itself cited as indirect cause of the strike in southern California
by 70,000 workers for the three biggest US supermarket chains. The
companies, Kroger, Albertson's and Safeway, say they have to cut
healthcare costs and restrain pay increases to compete with
Wal-Mart, which plans to open 40 "super-centres" in California.
These, unlike older Wal-Mart stores, sell groceries and as well as non-food goods. The United Food and
Commercial Workers Union, the supermarket union, has seized on the
issue of health insurance - for which most Americans rely on their
employers to pay much of the cost - as a battleground.
It says that while two-thirds of
Wal-Mart employees qualify for company health insurance, fewer than
half participate, because they cannot afford the high contributions
Wal-Mart requires them to make. That leaves some uninsured or forces
either their spouses' employers, or federal government programmes,
to provide healthcare for them.
Wal-Mart disputes the figures,
saying 78 per cent of its workers are eligible for its healthcare
plan and 50 per cent participate. About 40 per cent of its workers,
it says, get healthcare through other sources; but this is partly
because, for example, they are students or senior citizens.
About 40 per cent of those in its
scheme had no health insurance before joining Wal-Mart. "These are
people who would have fallen through the cracks or been on the
public health rolls," says Ms Williams, noting that the company
provides cover to about 500,000 American families.
In the background of all of these
issues is a so far unsuccessful four-year campaign by the UFCW to
get a toe-hold in Wal-Mart stores (see below).
Wal-Mart says it is not anti-union,
but "pro-associate"; it does not believe its workers need unions
when it operates an "open-door" policy up to chief executive level,
allowing staff to voice complaints to managers. "When it comes to
our people, we think we are more effective if we're dealing with you
as an individual rather than having to go through some
intermediary," says Mr Scott.
Wal-Mart says stores are free to
vote to unionise, but none has done so. The UFCW says the reason is
that at the first sign of union activity, Wal-Mart dispatches labour
relations teams from head office that employ aggressive tactics to
persuade workers not to join. The company admits that these teams
exist, but only to explain their rights to staff and use legal means to get the
company's views across.
Al Zack, assistant director of
strategic programmes at the UFCW, says: "This is all about the fact
that the nation's number one employer is setting a lowest common
denominator standard - as opposed to the standard set by General Motors in
the past, when it was the number one employer, of setting the bar
higher," he says.
Yet however much unions and
competitors may attack Wal-Mart, an army of analysts and economists
readily defends it. Gary Stibel, chairman of New
England Consulting Group, a
marketing management consulting firm, says Wal-Mart is right to be
aggressive on costs, and should stand firm against anything that
would increase them.
"I've worked with Wal-Mart directly
and indirectly for 30 years," he says. "Are they coming close to the
boundary [of acceptability]? Yes. Are they stepping over the line?
Absolutely not. They are one of the most ethical companies we work with
anywhere," he says. "But the job of the retail industry is to stay
close to the boundary, because if you don't somebody else will go
round you."
Mr Stibel says the productivity
gains Wal-Mart has achieved - he estimates it saved US consumers at
least $20bn last year - have given a huge boost to the economy,
pushing down prices and creating wealth and jobs.
"In a world where new jobs are not
being created every hour, Wal-Mart is creating them every second. I
have walked into retail environments where staff are being paid
better than those at Wal-Mart and been given much worse service. At
Wal-Mart, the service I get is pretty good. People seem to enjoy
working there."
[back to top]
An Empire Built on Bargains Remakes
the Working World
Wal-Mart is so powerful that it
moves the economies of entire countries, bringing profit and pain.
The prices can't be beat, but the wages can.
By Abigail Goldman and Nancy
Cleeland
[back to top]
Times Staff Writers
November 23, 2003
LAS VEGAS -- Chastity Ferguson kept
watch over four sleepy children late one Friday as she flipped a
pack of corn dogs into a cart at her new favorite grocery store:
Wal-Mart.
The Wal-Mart Supercenter, a pink
stucco box twice as big as a Home Depot, combines a full-scale
supermarket with the usual discount mega-store. For the 26-year-old
Ferguson, the draw is simple.
"You can't beat the prices," said
the hotel cashier, who makes $400 a week. "I come here because it's
cheap."
Across town, another mother also is
familiar with the Supercenter's low prices. Kelly Gray, the chief
breadwinner for five children, lost her job as a Raley's grocery
clerk last December after Wal-Mart expanded into the supermarket
business here. California-based Raley's closed all 18 of its stores
in the area, laying off 1,400 workers.
Gray earned $14.68 an hour with a
pension and family health insurance. Wal-Mart grocery workers
typically make less than $9 an hour.
"It's like somebody came and broke
into your home and took something huge and important away from you,"
said the 36-year-old. "I was scared. I cried. I shook."
Wal-Mart gives. And Wal-Mart takes
away.
From a small-town five-and-dime,
Wal-Mart Stores Inc. has grown over 50 years to become the world's
largest corporation and a global economic force.
It posted $245 billion in sales in
its most recent fiscal year ? nearly twice as much as General
Electric Co. and almost eight times as much as Microsoft Corp. It is
the nation's largest seller of toys, furniture, jewelry, dog food
and scores of other consumer products. It is the largest grocer in
the United States.
Wal-Mart's decisions influence
wages and working conditions across a wide swath of the world
economy, from the shopping centers of Las Vegas to the factories of
Honduras and South Asia. Its business is so vital to developing
countries that some send emissaries to the corporate headquarters in
Bentonville, Ark., almost as if Wal-Mart were a sovereign nation.
The company has prospered by
elevating one goal above all others: cutting prices relentlessly.
U.S. economists say its tightfistedness has not only boosted its own
bottom line, but also helped hold down the inflation rate for the
entire country. Consumers reap the benefits every time they push a
cart through Wal-Mart's checkout lines.
Yet Wal-Mart's astonishing success
exacts a heavy price.
By squeezing suppliers to cut
wholesale costs, the company has hastened the flight of U.S.
manufacturing jobs overseas. By scouring the globe for the cheapest
goods, it has driven factory jobs from one poor nation to another.
Wal-Mart's penny-pinching extends
to its own 1.2 million U.S. employees, none of them unionized. By
the company's own admission, a full-time worker might not be able to
support a family on a Wal-Mart paycheck.
Then there are casualties like
Kelly Gray. As Wal-Mart expands rapidly into groceries, it is
causing upheaval in yet another corner of the economy. When a
Supercenter moves into town, competitors often are wiped out, taking
high-paying union jobs with them.
Wal-Mart's plans to enter the
grocery business in California early next year have thrown the
state's supermarket industry into turmoil. Fearful of Wal-Mart's
ability to undercut them on price, the Ralphs, Vons and Albertsons
chains have sought concessions from their unionized workers in
Southern and Central California, leading to a work stoppage now
entering its seventh week.
Half a century ago, the nation's
largest and most emulated employer was General Motors Corp. "Today,"
said Nelson Lichtenstein, a history professor at UC Santa Barbara,
"for better or worse, it's Wal-Mart."
GM brought prosperity to factory
towns and made American workers the envy of the world. With a
high-wage union job, an assembly-line worker could afford a house, a
decent car, maybe even a boat by the lake.
There was a bit of truth,
Lichtenstein said, to the famous assertion by Charles Wilson,
General Motors chief from 1941 to 1953, that what was good for GM
was good for the country.
With Wal-Mart, the calculus is
considerably more complex.
'We Have Split Brains'
Glenn Miraflor used to chide his
wife for shopping at Wal-Mart.
As a member of Ironworkers Local
416, the 50-year-old father of four is well aware of the retailer's
anti-union stance. But when the family's credit card debt topped
$10,000, Wal-Mart's deals suddenly looked irresistible.
"Where else are you going to find a
computer for $498?" he asked, looking for a PC with his wife,
Debbie, at the Supercenter on Serene Avenue, far from the glitz of
the Las Vegas Strip. "Everyone I work with shops here."
Surveys by the Teamsters and the
United Food and Commercial Workers ? the two unions most threatened
by Wal-Mart ? show that many of their own members shop at the
discounter.
"We have split brains," said Robert
Reich, U.S. secretary of Labor under President Clinton and now a
professor of economic and social policy at Brandeis University in
Waltham, Mass. "Most of the time, the half of our brain that wants
the best deal prevails."
The connection may be lost on many,
Reich said, but consumers' addiction to low prices is accelerating a
shift toward a two-tiered U.S. economy, with a shrinking middle
class and a growing pool of low-wage workers.
"Wal-Mart's prices may be lower,"
he said, "but that's small consolation to a lot of people who end up
with less money to spend."
Others insist there is a net
benefit whenever consumers can get more for less. "If you have lower
real prices, you're saving money," said Arthur Laffer, a key advisor
to President Reagan who is now an economic consultant in San Diego.
"The prices' falling, in effect, raises the wages of everyone who
buys their products."
That's basically the way the
Miraflors saw it as they cruised the aisles of the Supercenter ?
Wal-Mart Store No. 2593 ? and snapped up deals: Ragu pasta sauce for
89 cents, Aunt Jemima pancake mix for 48 cents, pork shoulder steaks
for $1.49 a pound and five cans of Del Monte vegetables for $2.
After making their way through the
groceries, the Miraflors turned their attention to the housewares
section, stopping in front of a 20-inch box fan. Glenn Miraflor
checked the price and made room for it in their cart.
"Ten bucks," he said. "You can't
beat that. That's why we come here."
Vendors' Alley
The fan was made 1,700 miles away
in Chicago at Lakewood Engineering & Manufacturing Co. A decade ago,
the same fan carried a $20 price tag.
But that wasn't low enough for
Wal-Mart. So Lakewood owner Carl Krauss cut costs at every turn. He
automated production at the red-brick factory built by his
grandfather on the city's West Side. Where it once took 22 people to
put together a product, it now takes seven. Krauss also badgered his
suppliers to knock down their prices for parts.
In 2000, he took the hardest step
of all: He opened a factory in Shenzhen, China, where workers earn
25 cents an hour, compared with $13 in Chicago. About 40% of his
products now are made in China, including most heaters and desktop
fans. The Miraflors' box fan was assembled in Chicago, but its
electronic guts were imported.
"My father was dead set against
it," Krauss said of the move overseas. "I have the same respect for
American workers, but I'm going to do what I have to do to survive."
Survival in an age when consumers
are hyper-vigilant about prices means shaving expenses again and
again. "Nobody wants to be on the shelf with the same item for $1
more," Krauss said.
All the retailers he supplies ?
including Home Depot Inc. and Target Corp. ? drive a hard bargain
with manufacturers. But none is as tough as Wal-Mart, Krauss said.
Twice a year, his sales
representatives travel to Wal-Mart headquarters to pitch their
products. There, competitors sit side by side, waiting to be ushered
into one of 60 glass-sided cubicles ? a space some call Vendors'
Alley.
Then the haggling begins. "You give
them your price," Krauss said. "If they don't like it, they give you
theirs."
The suppliers are at a
disadvantage. The Wal-Mart buyer can always go out to the waiting
room and find someone who will go lower. "Your price is going to be
whittled down like you never thought possible," Krauss said.
After moving much of his
manufacturing abroad, Krauss doesn't see any way to push costs
lower. "If you're doing things legally, you can't," he said.
He may have to find a way.
At the Serene Avenue store, shopper
Sarah Saxon, 17, pulled a $40 Lakewood heater off the shelf. She
looked it over, then put it back in favor of an AirTech model
selling for $34.88. She said it looked better than the Lakewood.
"Besides," she said, "it's
cheaper."
Wal-Mart's culture of cheap
emanates from Bentonville, a town of 20,000 tucked into the low
green hills of northwest Arkansas, where a young Sam Walton opened
his first five-and-dime in 1950. Even then, Walton had a vision of a
different kind of retail.
Rather than charging a little less
than his competitors, Walton wanted to slash prices as much as he
could and still make a profit. Other stores would use price breaks
from manufacturers as a way to boost their bottom lines, paying less
at wholesale while leaving retail prices untouched.
Walton passed such savings on to
his customers as his discount business evolved into Wal-Mart stores
in 1962. He figured he would make up the difference in volume. He
was right.
By the mid-1980s, Wal-Mart's
success had catapulted Walton to No. 1 on the Forbes list of richest
Americans. Still, he drove an old pickup truck to haul around his
bird dogs, refused to fly first class and shared hotel rooms with
colleagues on business trips.
Bentonville, like the man who put
it on the map, is a combination of Southern charm and Midwestern
practicality. The town square is anchored by the original Walton's
five-and-dime (now a visitors' center) and dotted with small shops.
But the real action is down Business Route 71, where the Wal-Mart
Supercenter rises up, big enough to fit three 747s with room to
spare.
Across the street is the base of
Wal-Mart operations: the Home Office. The world's biggest company
occupies an industrial-looking hodgepodge of windowless work spaces,
connected by bunker-like hallways. The drab gray-and-blue walls
display the visage and sayings of Sam Walton, who died in 1992:
"Listen to your associates....
They're the best idea generators."
"To succeed, stay out in front of
change."
"Swim upstream. Go the other way.
Ignore the conventional wisdom."
Lists abound. The best-performing
stores. The worst-performing stores. Under a picture of the founder
asking, "Who's taking your customers?" is a roster of competing
retailers, including Costco Wholesale Corp., Circuit City Stores
Inc. and Target, with the name and picture of each company's chief
executive.
It's all part of the Wal-Mart
culture: a zealous attention to competition, customers and costs.
Wal-Mart employees, unlike their
counterparts at other retailers, are forbidden to accept so much as
a soda from vendors ? or anybody else the company does business with
? on the theory that such frills ultimately are paid for by
consumers. The company's meticulous management of the flow of goods,
from the factory floor to the store shelf, has shaved shipping and
inventory costs to a degree that retailing experts say is
unprecedented.
"You could argue that some of what
Wal-Mart does to cut costs has been win-win," said Richard S.
Tedlow, a professor of business administration at Harvard Business
School. "What's being squeezed out is waste."
The company is so ruthlessly
efficient that 4% of the growth in the U.S. economy's productivity
from 1995 to 1999 was due to Wal-Mart alone, researchers at the
McKinsey Global Institute estimated last year. No other single
company had a measurable impact. Wal-Mart also has forced
competitors to become more efficient, driving the nation's
productivity ? output per hour of work ? even higher.
Walton, who still is referred to as
Mr. Sam throughout the corporation, worked in a ground-floor office
barely big enough for a conference table. The current occupant,
Chief Executive H. Lee Scott Jr., is the keeper of Mr. Sam's vision.
Like all Wal-Mart executives, he empties his own trash and shares
budget hotel rooms when traveling. Everyone flies coach.
"We do not have limousines," said
Scott, who certainly could afford one, having made nearly $18
million last year in salary, bonus and stock, plus options with an
estimated value of $11.3 million. "I drive a Volkswagen Bug."
Wal-Mart's stinginess reaches from
the executive suite to the loading dock.
Some truckers complain that they
must unload their own cargo ? or pay Wal-Mart to do it. Other big
retail chains absorb that cost themselves. "They're awful," said
independent driver George Hauschild of Palm Springs. "They don't
even let you use the bathroom."
At every one of the 2,966 Wal-Marts
in the U.S., thermostats are kept at a steady 73 degrees in summer,
70 degrees in winter; raising or lowering the temperature is
considered a waste of money.
Such measures seem mild compared
with what Wal-Mart has done to cut payroll costs. In one case, a
jury in Oregon last year found that company managers had coerced
hundreds of employees to work overtime without pay.
The managers were driven by intense
pressure from Bentonville, witnesses said. Managers whose labor
costs were considered too high were singled out during the company's
weekly in-house satellite broadcasts. In response, managers tampered
with electronic time cards or bullied employees to work off the
clock, according to trial testimony.
The Oregon jury found last December
that Wal-Mart's behavior was illegal and willful. A separate trial
to determine damages for the 290 plaintiffs is set for early next
year.
Wal-Mart settled similar overtime
suits in Colorado and New Mexico for undisclosed amounts. More than
40 other cases are awaiting trial.
The company says it prohibits
off-the-clock work and blames the problems on a small number of
rogue managers.
Last month, Wal-Mart ran into
trouble because of another cost-cutting practice: using dirt-cheap
janitorial services.
A grand jury is investigating
whether Wal-Mart knew that janitors provided by subcontractors were
illegal immigrants cheated out of overtime pay. Federal agents
raided 61 Wal-Marts across the country and seized boxes of documents
from the Bentonville headquarters. Wal-Mart has denied wrongdoing.
Scott, the CEO, lauded Wal-Mart's
employment record. Even in tight labor markets, he said, the company
never has trouble finding workers.
"It is not forced labor," he said.
"The truth is, I go to the stores and shake hands with the
associates, and they like working at Wal-Mart."
On the Fast Track
Aaron Rios liked working at
Wal-Mart so much that he decided to make his career there.
Like two-thirds of Wal-Mart's store
managers, Rios started off as an hourly worker ? in his case,
stocking shoes on the graveyard shift at the Wal-Mart in his
hometown of Hanford in the San Joaquin Valley.
After two years, Rios was
recommended for management training ? the company's fast track ?
leading him to quit community college and pursue a climb through the
Wal-Mart ranks.
"There's just something about a
Wal-Mart environment," said Rios, who became manager of the Serene
Avenue Supercenter in Las Vegas at age 26. "It changed who I am,
where I was going and what my career goals were."
Wal-Mart store managers earn about
$95,000 annually, including bonuses, according to the company.
Supercenter managers earn $130,000.
A management position requires long
hours ? as many as 80 a week ? and, often, a willingness to
relocate. Rios worked at six California Wal-Mart stores before
taking the helm at Serene Avenue.
"It doesn't come free," said Rios,
a divorced father who shares custody of his 2-year-old son.
Still, he said, the benefits
outweigh the sacrifices.
"I have an open opportunity. I
could go into real estate for Wal-Mart. I could do systems,
analysis, accounting. It's endless," Rios said. "If I wanted to go
to Germany or Japan or Brazil or any of the markets we have, I
believe I could go."
A few weeks later, Rios snared
another promotion, moving back to California as a district manager
in the Antelope Valley, overseeing seven stores from Barstow to
Palmdale.
Larry Allen had his own dreams of
climbing the Wal-Mart ladder.
In the fall of 2001, he and his
wife, Jacque, left Portland, Ore., where the economy was sputtering,
and headed to Las Vegas. He was an executive chef and she worked in
catering. They looked forward to a fresh start in unionized casino
jobs, making more than $15 an hour, with health insurance and
pensions.
But their timing was lousy.
Recession and terrorism were hitting the gaming industry hard, and
work of any kind was scarce.
Just before their money ran out,
the Allens lowered their expectations and took jobs at the Serene
Avenue Wal-Mart. Jacque, then 43, worked the counter at the in-store
restaurant, Radio Grill. Larry, 46, stocked produce. They each
earned $8 an hour.
Despite the letdown, Larry Allen
said he attacked the job with enthusiasm. Inspired by tales of
well-paid Wal-Mart managers who had started out as hourly employees,
such as his manager Aaron Rios, he figured on working his way up.
That was Sam's way, he said.
"I've been following Sam Walton
since the 1970s," he said. "He's the American dream."
The glow faded quickly. At his
90-day review, Allen said, he received an unenthusiastic write-up
and an hourly raise of 35 cents. His supervisor told him that if he
continued working hard, in two years he might make his way up to $10
an hour.
Allen thinks he knows why he
received such mediocre marks. For one thing, he was prone to
question company policy. Then, Allen committed the ultimate act of
disloyalty: He openly promoted unionization.
West Coast Ambitions
For decades, Wal-Mart has
tantalized and frustrated union organizers. But the company's move
into the grocery business ? a labor stronghold ? has raised the
stakes dramatically.
Union organizers say the high wages
and benefits of their members are at risk, as Wal-Mart expands its
Supercenters beyond the South and Midwest. The company recently
established a beachhead in Las Vegas, with five centers.
Next stop: California, where
Wal-Mart plans to open 40 Supercenters starting early next year. In
a sense, it has already arrived. Wal-Mart's low wages are a central
factor in the labor dispute between California's three major
supermarket chains and the United Food and Commercial Workers.
"They are the third party now that
comes to every bargaining situation," said Mike Leonard, director of
strategic programs for the UFCW.
Over many years of hard
negotiating, the union has won and maintained premier contracts for
its 800,000 grocery workers. But with the opening of each new
Supercenter, the union's clout erodes.
Every one of the giant stores sucks
away about 200 UFCW jobs, said retail consultant Burt P. Flickinger
III, who runs Strategic Resource Group in New York. That means less
power at the bargaining table and less money to hire organizers.
On average, Flickinger says,
Wal-Mart's wage-and-benefit package is about $10 an hour less than
those offered by unionized supermarkets.
For shoppers, that makes a big
difference. A cartful of groceries is 17% to 39% cheaper at a
Wal-Mart Supercenter than at a unionized supermarket, according to a
survey last year in Las Vegas, Dallas and Tampa, Fla., by investment
bank UBS Warburg.
Wal-Mart's move into groceries has
led 25 regional supermarket chains around the nation to close or
file for bankruptcy protection, eliminating 12,000 mostly union
jobs, Flickinger said.
With this in mind, Safeway Inc.
recently aired a videotaped message to employees, whose contract in
Las Vegas expires next fall.
"Wal-Mart wants our customers and
your jobs," said Safeway executive Larree Renda. Total wage and
benefit costs represent 15% of sales at Safeway, Renda said. At
Wal-Mart, they account for 9%.
"If we don't change," Renda said,
"you bet we'll lose jobs ? and it will be in the thousands."
Staying Unorganized
From their first day on the job,
Wal-Mart employees are advised to avoid unions and to report any
organizing activities to their supervisors.
"If a union got in here, every
benefit we've got could go on the negotiating table, every one of
them," says a man identified as Russell, a veteran employee, in a
video shown to new hires. "Unions will negotiate just about anything
to get the right to have dues deducted out of paychecks. You see,
they need big money to pay union bigwigs and their lawyers."
Company policy prohibits any union
talk in work areas, and organizers say they routinely are asked to
leave stores. The retailer sought, and last year received, a court
order keeping organizers out of all of its stores in Arkansas. The
state Supreme Court nullified the order in July.
At the first hint of union
activity, Wal-Mart managers are supposed to call a hotline, usually
prompting a team visit from Bentonville.
Wal-Mart spokeswoman Mona Williams
said the intervention was meant to help store managers respond
effectively and legally.
"Our philosophy is that only an
unhappy associate would be interested in joining a union," she said,
"so that's why Wal-Mart does everything it can to make sure that we
are providing our associates what they want and need."
But dozens of times in the last
four years, attorneys for the National Labor Relations Board have
claimed that the company infringed on the supermarket union's legal
right to organize.
Although some of those claims have
been thrown out, others have been upheld by administrative law
judges, who have ruled that Wal-Mart illegally influenced employees
with offers of raises, promotions and improved working conditions
just before they were to vote on whether to join a union.
Judges also have found that
Wal-Mart illegally implied that workers could lose benefits such as
insurance and profit sharing if they unionized.
What's more, managers illegally
confiscated union literature, threatened to close down a store if
workers voted to join the union, fired several union supporters and
failed to promote others, according to rulings from Minnesota to
Florida.
Stymied in their previous attempts
to organize Wal-Mart workers, UFCW leaders adopted a new strategy in
2000. They decided to marshal their resources for a concerted
organizing effort in one place: Las Vegas.
The union reached out to workers
with a Web site and a weekly radio talk show, and posted organizers
outside Wal-Mart stores at all hours. When they could, UFCW members
would leave union literature inside stores, hoping that workers
would see it before managers ordered the material thrown away.
Larry Allen got his first glimpse
at a union pamphlet last year as he carried it to the garbage at the
Serene Avenue Supercenter. He was hooked, and began advocating for
an election to bring in the union.
"Somebody has got to step up and
fight for what is right," Allen said.
Ripple Effect
Less than a mile away from the
Serene Avenue store, another shopping center stands deserted, in
desperate need of an anchor.
A year ago, the Raley's grocery
store here drew thousands of shoppers who spilled out to neighboring
businesses, buying flowers, mailing packages, getting their nails
done. Today, the store is gone. The remaining shops are struggling.
"I'm probably down 45%," said
Bonnie Neisius, who owns a UPS Store franchise in the center. "I
just don't get the foot traffic anymore."
A few doors away, Windmill Flowers
owner Diana I. Murphy leaned on a table where she would have been
arranging bouquets ? had there been customers.
"There are a couple of things in
play," Murphy said. "The recession, terrorism. And Wal-Mart. It's
had a direct effect on me, because they sell flowers, too.... They
even deliver."
Unlike small towns with boarded-up
commercial centers, fast-growing Vegas quickly loses track of its
Wal-Mart victims.
Wal-Mart's costs to the community
tend to show up in subtler ways.
In an informal survey in the late
1990s of people who used Las Vegas emergency rooms for routine
medical care, patients who said they were employed but uninsured
were asked where they worked.
"Wal-Mart came up more than any
other," said Dr. Raj Chanderraj, a Las Vegas cardiologist and
chairman of the Clark County Health Care Access Consortium, a group
that works to provide medical services to the uninsured.
The reason, say critics: Because
Wal-Mart pays such low wages, many employees can't afford the health
insurance the company offers. And those who do have health coverage
through the company often can't afford deductibles that run as high
as $3,000 a year.
"Their employees are ending up at
the county hospital and become the burden of the county," said Clark
County Manager Thom Reilly.
Wal-Mart disputes that. Williams,
the company spokeswoman, said that 48% of employees are covered by
Wal-Mart's health insurance plan. Among those who aren't, 26% have
coverage from another source such as a spouse's employer or
Medicare, Williams said.
The notion that Wal-Mart doesn't
provide adequate health coverage is "just rhetoric," she said. "It's
simply not true."
According to the Employee Benefit
Research Institute in Washington, nearly 44% of workers in the
retail sector as a whole have employer-provided health coverage.
Among big companies in all industries, the figure is 66%.
Those who accuse Wal-Mart of
shortchanging its employees, Williams suggested, don't understand
the modern service economy. "Retail and service wages are what they
are," she said, "whether you look at a department store, a discount
store, the local dry cleaners, the bakery or whatever.
"Wal-Mart is a great match for a
lot of people," Williams added. "But if you are the sole provider
for your family and do not have the time or the skills to move up
the ladder, then maybe it's not the right place for you."
'I Still Believe in Wal-Mart'
Larry Allen spent about a year
advocating for the supermarket union while working at Wal-Mart.
In the parking lot and in the break
room, he passed out fliers and talked up the benefits of unionizing.
But he and his fellow union backers didn't get as far as they hoped.
About 42% of workers in the grocery department at Serene Avenue
signed UFCW cards ? not enough for the union to feel confident about
winning an election.
In August, Allen was fired. NLRB
attorneys said it was because of his union activities and filed a
complaint against Wal-Mart, seeking his reinstatement.
On a recent afternoon outside the
Supercenter, dozens of union members rallied to support Allen.
"Larry, Larry, Larry," they chanted. Over at the store entrance, the
demonstration was a muffled, distant bit of noise. Store managers
watched on a screen as surveillance cameras scanned the crowd.
Asked about the commotion, a
gray-haired Wal-Mart greeter named Robert just smiled. "They want to
make the store union," he said. "But that would make the prices go
up for our customers. We can't let that happen."
On some level, even Larry Allen
understands. "I still believe in Wal-Mart," said Allen, who now is
on the union payroll as an organizer. "I like the idea of it ? give
a quality product at a low price. It's what the American public
wants."
[back to top]
Wal-Mart, county at odds
Kish Rajan Alamo
[back to top]
Letters To The Editor Silicon
Valley Business Times
Published: Friday, November 14,
2003
As a proud resident of Contra Costa
County, I am deeply concerned about the effort by Wal-Mart to muscle
their way into our county on their terms.
The Contra Costa County Board of
Supervisors recently voted unanimously to welcome Wal-Mart to
operate on county lands, provided they would operate within certain
parameters. The board sought to address several concerns,
particularly the negative impact new mega centers will have on
traffic.
Given our already-stretched
freeways and roads, new mega centers on county lands that do not
have the infrastructure to support new traffic could significantly
worsen the gridlock.
But, rather than respecting our
tradition of locally controlling our own growth, Wal-Mart instead
mobilized their limitless financial resources to force a 2004 ballot
measure to overturn the ordinance. (Editor's note: To re-affirm the
board's original ordinance, voters must vote "yes" on the measure.
So, in other words, a "yes" vote on the measure is a vote against
Wal-Mart. See full story, Biz Ink, Nov. 7.)
We must not yield to outside
interests who are far more concerned with extracting profits from
our community than adding value to it.
Contra Costa County is a special
place to live because it has been managed by local business,
community and elected leaders who care about it. Please reaffirm
that tradition and support the ballot measure in March 2004.
Kish Rajan Alamo
[back to top]
Wal-Mart: Cruising for a Bruising?
By Amy Tsao - BusinessWeek
Online
[back to top]
November 14, 2003
STREET WISE
The day may be coming when the
retailing giant is a magnet for lawsuits and probers. Dubious?
Ponder the Microsoft precedent
In recent weeks, the world's
biggest discounter has shown up as a fatter target on the radars of
those who would shoot it down. In late October, federal officers
raided Wal-Mart (WMT ) and accused it of using cleaning contractors
that it knew hired illegal immigrants. Based on those allegations,
lawyers for some of the immigrants have filed a class action,
contending that Wal-Mart conspired to avoid paying overtime. Weeks
later, independent gas-station owners accused it of predatory
competition by cutting prices so low that smaller operations are
driven out of business.
So far, Wall Street has hardly
batted an eye. Neither dispute affects Wal-Mart "in the overall
scheme of things," Blaylock & Partners analyst Mark Mandel noted a
few days before the discounter released its third-quarter results.
Analysts still expect Wal-Mart's
sales and profits to rise at a double-digit pace year-in and
year-out, as it opens new stores (many of them huge superstores) at
a rate of more than one a day and racks up greater market share in
toys, groceries, apparel, and jewelry. Ever with an eye for new
opportunities, Wal-Mart may even embrace online businesses such as
music. Its stock is up 10% this year, to $55.62 on Nov. 13.
POINTING THE FINGER.
As Wal-Mart's
power grows, some analysts are starting to wonder: What if
allegations and lawsuits against it proliferate? What if its growing
control over suppliers turns them into subjects that survive only at
the discount king's whim?
Outfits like Safeway (SWY ) and
Albertson's (ABS ) in groceries, Toys 'R' Us (TOY ), and lower-end
department stores have started to blame disappointing financial
results on Wal-Mart's competition. What if they were to fall victim
to the giant's steady expansion?
If these complaints continue to
build, might they transform the behemoth of Bentonville, Ark., into
the discount equivalent of that other colossus, the one in Redmond,
Wash.? If it isn't careful, Wal-Mart could take Microsoft's (MSFT )
place as both the target of endless government probes and a symbol
of heavyhanded corporate practices (see BW, 10/6/03, "Is Wal-Mart
Too Powerful?").
"NEGATIVE PUBLICITY."
If that
happens, it would affect investors' thinking about Wal-Mart -- just
as government probes dulled Microsoft's shine. Dominant companies in
major industries often become targets by virtue of their mere
preeminence, says John Zielinski, portfolio manager at Neuberger
Berman Century Fund in Chicago, who adds: "Investors always have to
gauge that risk and how much is reflected in the stock."
Certainly, that issue is on
analysts' minds in the wake of Wal-Mart's third-quarter report,
released Nov. 13. The 13% increase in profits for the period was
below Wall Street's forecast, with the company saying this might be
due to customers concentrating on its lowest-price goods.
"Recent negative publicity is not
likely to help what we view as deteriorating appearances at many
Wal-Mart stores and may gradually impact the [price-earnings]
multiple," wrote Gary Balter, an analyst at UBS, in reaction to the
earnings report. Wal-Mart's stock fell 4% on Nov. 13, even though it
expects to earn $2.03 to $2.05 a share for all of 2003 -- in sync
with the $2.05 analysts expect.
WHOLESALE SUITS.
Whatever the
financial effects might be, it's getting harder for Wal-Mart to
project a positive image, analysts say. "It worked very hard to
develop a corporate culture and persona in the minds of consumers,"
says Zielenski, who fears Wal-Mart will suffer a loss of consumer
goodwill, despite those attractive prices. Adds Zielinski: "The
impact may be small financially, but you shouldn't discount it."
Besides the illegal-immigrants
complaint, Wal-Mart faces dozens of suits over alleged wage
discrimination, gender bias, and antitrust violations. Most analysts
don't anticipate significant increases in the outfit's legal costs,
which are a pittance in comparison with annual sales of $245
billion.
"Paying a judgment isn't much [of a
cost] from a shareholder standpoint," says Peter Cohan, president of
Peter S. Cohan Associates in Marlborough, Mass. Yet he adds: "If
they have to raise wages and can't offset that, they could be forced
to find cost cuts somewhere else" since one of Wal-Mart's biggest
competitive advantages is lower wages.
WHAT IF...
Realistically, Wal-Mart
would have to get a lot bigger and meaner before it could be charged
with violating antitrust laws. Blaylock's Mandel points out that it
probably has only about 6% of the $3 trillion taken in by U.S.
retailers. And while Microsoft had strong corporate enemies who
accused it of antitrust activity -- not to mention a legion of state
attorneys general -- Wal-Mart's main detractors are all "small,
diffuse, and silent," says Donald Luskin, chief investment officer
at research boutique Trend Macrolytics.
Nor does Wal-Mart encounter ill
feeling in Europe, where Microsoft is now fighting regulators who
argue that the Windows operating system was designed to work better
with Microsoft's own network software than that of competitors.
Microsoft's stock -- $25 as of Nov. 13 -- hasn't budged this year,
even as the Nasdaq composite staged its impressive rally. Analysts
speculate that its malaise is probably a combination of tech
spending's slow recovery and continuing legal issues.
However, if regulators were to
reconsider their current definitions of what constitutes marketplace
wrongs by a dominant company, Wal-Mart could end up in the hot seat.
Antitrust actions traditionally have focused on monopoly abuse by a
seller, says Burt Foer, president of the American Anti-Trust
Institute, who argues that Wal-Mart's unprecedented buying power
could prompt lawmakers to think about "how to draw lines between
legitimate use of size by a buyer, and illegitimate use."
CHINA CHALLENGE.
That could mean
"mid- and large-size suppliers that are getting raked over the coals
and are worried there won't be anyone else to sell to eventually"
could coalesce as an opposing force, Foer says -- just as a number
of computer outfits banded together against Microsoft. Wal-Mart
couldn't be reached for comment.
Both Wal-Mart and Microsoft have
contributed on a grand scale to a restructuring of the business
environment: Microsoft's technology has boosted efficiency at
businesses large and small all over the world, while Wal-Mart has
exploited information technology to revolutionize inventory control
and other business processes, notes Luskin. But Microsoft is viewed
as a key U.S. exporter -- a "good guy" role -- whereas Wal-Mart
figures in domestic suppliers' fears that Chinese imports will
challenge them on their own doorsteps, adds Luskin.
Despite the image Wal-Mart
cultivates as a buy-American company, it's a "major catalyst for
bringing in cheap Chinese goods" and, as a byproduct, displacing
American workers, says Luskin. "That makes Wal-Mart more vulnerable"
to image problems, he adds.
WHAT WINS IN THE END.
Of course,
Wal-Mart's ultimate weapon against public outrage is a powerful one:
rock-bottom prices. As much as consumers might fret over the social,
economic, and cultural impacts of Wal-Mart's practices "they still
want the cheapest price," says San Francisco-based Tiburon Research
analyst Rob Wilson, who adds: "That wins out at the end of the day."
For now, analysts and investors are
still focusing on the bright side of the Wal-Mart story. Many of
those who patronize the stores adore it. But that was also true of
Microsoft -- before it started to swing more weight than any rival
could counter.
[back to top]
Fighting mega-center may cost city
mega-bucks
By JACK DOO and TIM MORAN
[back to top]
BEE STAFF WRITERS
November 16, 2003
If Turlock wants to block Wal-Mart
from opening a supercenter, the city should brace itself for a long
and costly fight, said a Contra Costa County supervisor battling
Wal-Mart over a similar ban.
"They should start raising money,"
Supervisor John Gioia of Richmond said. "Probably working with
busi-nesses that think they might be im-pacted."
The Turlock City Council is
considering an ordinance, similar to one Contra Costa County adopted
in June, that would prevent discount stores of more than 100,000
square feet from using more than 5 percent of the space for
groceries and other nontaxable items.
Wal-Mart, which opened a
125,000-square-foot store on Fulkerth Road in Turlock in 1993, has
proposed building a 225,000-square-foot supercenter, which would
feature groceries.
The company's relationship with
city officials already has deteriorated.
Mayor Curt Andre and City
Councilman John Lazar said Wal-Mart's tactics have been
"threatening" and "heavy-handed."
Wal-Mart representatives checked
political contribution records for elected city officials before
meeting with them, Andre and Lazar said.
They also said Wal-Mart officials
threatened to do whatever they could to oppose the ordinance,
including an initiative drive, a lawsuit or simply moving the
supercenter outside the city.
"It alarmed me that Wal-Mart would
take the low road before it is even before the council," Andre said.
The mayor said Wal-Mart community
relations official Peter Kanelos told him the company would use "any
means, legal, political or otherwise" to get the store built.
"I was shocked," Lazar said. "For
people who want to do business in the community, instead of coming
in friendly, it's 'do it my way or be executed.'"
Kanelos said researching the
records of the council members is a normal practice for many
companies.
"It's perfectly legitimate and
logical for anyone who has an issue before the council to look for
potential conflicts of interest," Kanelos said.
As far as being aggressive and
heavy-handed, Kanelos noted that the city officials had met with
grocery store and union representatives before drafting the
ordinance, but not with Wal-Mart.
"The fact that the City Council is
even considering an ordinance against a company already doing
business in their city without input is disappointing," he said.
Kanelos said he didn't intend to
threaten officials when he told them about the possibility of a
lawsuit, an initiative or locating the store outside the city limit.
"I wanted to make sure they had all
the facts. It's important for them to understand our intentions, so
they don't cost the city tax dollars down the road," Kanelos said.
"I apologize if they perceive it as a threat."
Wal-Mart challenged the Contra
Costa ordinance by hiring a Sacra-mento firm to secure 27,000
signatures to qualify for a referendum overturning the ban. The
issue will be on the March ballot.
Amy Hill, community affairs man-
ager for Wal-Mart, said the retail giant previously collected
signatures for referendums overturning similar bans in Calexico and
Inglewood as well as Clark County, Nev.
She said Inglewood and Clark County
repealed their ordinances rather than putting referendums on
ballots, and Calexico voters overwhelmingly supported Wal-Mart's
position.
"We got a 70 percent margin to
overturn," she said. "It demonstrates the public is not supportive
of these ordinances. They don't want local government telling them
where they can shop."
In Contra Cost County, Gioia said
he expects Wal-Mart to pull out all stops. "We won't be surprised if
they decide to spend over $1 million," he said.
The other side plans to fight back
with a direct-mail promotion, Gioia said.
"We're raising money to run a
campaign," he said. "We know they will out-spend us, but we need to
spend enough to get our message out of sound public policy." Lazar suggested the Turlock
ordinance, and Andre brought it to the council.
As for the Wal-Mart tactics, Lazar
commented, "Turlock is growing up. I guess we are not in Kansas
anymore." Kanelos said it is premature to say
whether Wal-Mart would challenge Turlock's ordinance, because it is
only a proposal, but he is watching it closely. "I will be up there. This is
nothing we're going to ignore or take lightly," Kanelos said. "We
will be participating in the process.
Public hearing coming up
WHAT: The Turlock Planning
Commission will hold a public hearing on a proposal to limit large
discount stores with substantial grocery departments.
WHEN: 7 p.m. Thursday.
WHERE: Turlock City Hall, 156 S.
Broadway.
The commission's recommendation
will go to the Turlock City Council, which is scheduled to hold a
hearing Dec. 9 and could make a decision in January.
[back to top]
The Wal-Martization of America
New York Times Editorial
[back to top]
November
15, 2003
The 70,000 grocery workers on strike in Southern California
are the front line in a battle to prevent middle-class service jobs
from turning into poverty-level ones. The supermarkets say they are
forced to lower their labor costs to compete with Wal-Mart, a
nonunion, low-wage employer aggressively moving into the grocery
business. Everyone should be concerned about this fight. It is, at
bottom, about the ability of retail workers to earn wages that keep
their families out of poverty.
Grocery stores in Southern
California are bracing for the arrival, in February, of the first of
40 Wal-Mart grocery supercenters. Wal-Mart's prices are about 14
percent lower than other groceries' because the company is
aggressive about squeezing costs, including labor costs. Its workers
earn a third less than unionized grocery workers, and pay for much
of their health insurance. Wal-Mart uses hardball tactics to ward
off unions. Since 1995, the government has issued at least 60
complaints alleging illegal anti-union activities.
Southern California's supermarket
chains have reacted by demanding a two-year freeze on current
workers' salaries and lower pay for newly hired workers, and they
want employees to pay more for health insurance. The union counters
that if the supermarkets match Wal-Mart, their workers will be
pushed out of the middle class. Those workers are already only a
step — or a second family income — from poverty, with wages of
roughly $18,000 a year. Wal-Mart sales clerks make about $14,000 a
year, below the $15,060 poverty line for a family of three.
Wal-Mart may also be driving down
costs by using undocumented immigrants. Last month, federal agents
raided Wal-Marts in 21 states. Wal-Mart is facing a grand jury
investigation, and a civil racketeering class-action filed by
cleaners who say they were underpaid when working for contractors
hired by Wal-Mart. Wal-Mart insists that it was unaware of its
contractors' practices. But aware or not, it may have helped to
deprive legally employable janitors of jobs and adequate pay.
This Wal-Martization of the work
force, to which other low-cost, low-pay stores also contribute,
threatens to push many Americans into poverty. The first step in
countering it is to enforce the law. The government must act more
vigorously, and more quickly, when Wal-Mart uses illegal tactics to
block union organizing. And Wal-Mart must be made to pay if it
exploits undocumented workers.
Unions understand that the quickest
way to win this war is to organize Wal-Mart workers. And Wal-Mart's
competitors have to strive for Wal-Mart's efficiency without making
workers bear the brunt. Consumers can also play a part. Wal-Mart
likes to wrap itself in American values. It should be reminded that
one of those is paying workers enough to give their families a
decent life.
[back to top]
The trouble with Wal-Mart
By Dan K. Thomasson - Scripps
Howard News Service
[back to top]
Thursday November 13th
It used to be that what was good
for General Motors was good for the nation. At least that's what
people said in the old days before the Japanese invasion when the
industrial behemoth was running roughshod over the rest of the
world's automobile manufacturers.
Now it seems there are those who
would apply that slogan to Wal-Mart, the world's largest retailer.
But is it an accurate assessment of the Arkansas-based giant's value
to the free enterprise system? There are a growing number who would
disagree, citing numerous instances where the Wal-Mart way - and the
way it built its business - isn't quite the American way. In fact,
it frequently appears to be the antithesis of fair competition,
deriving its enormous selling power through an injection of
questionable practices.
Substantiation of those allegations
came recently when it was revealed that Wal-Mart was subcontracting
its daily cleaning chores in many of its stores to companies that
employed illegal immigrants at low wages and without overtime or
benefits and apparently without collecting payroll taxes. Federal
agents raided 60 stores in 20 states rounding up more than 250
illegal aliens and the company has been notified that it is the
target of a grand jury investigation.
There are serious charges that
Wal-Mart executives were aware of the practice, which by all
estimations saved the company millions of dollars over what it would
have had to pay otherwise. Not to have known is almost
incomprehensible for a company that is tightly managed at all
levels. One commentator noted that Wal-Mart is not the kind of place
where they permit janitors to run around in their stores at night
without some company supervision. Some of those janitors now have
filed a class action suit against the company charging that it
violated federal racketeering charges by conspiring with cleaning
contractors to cheat them out of wages.
This is just the latest
questionable event in the spectacular life of the late Sam Walton's
brainchild. There have been charges of predatory practices almost
from the company's humble beginnings, ranging from the sale of goods
produced in foreign sweat shops to using its enormous buying power
to sell near or below wholesale until its competitors are put out of
business to low wages that destroy the prevailing local pay scales.
In smaller communities a rule of thumb has been that five local
businesses will fail during the first year after a Wal-Mart opens as
the under pricing bites off an ever increasing percentage of sales
of everything from groceries to drugs to dry goods and, in some
areas, even haircuts.
In my hometown of 15,000 to 20,200
residents where there was once a wide array of retail stores,
virtually only Wal-Mart and a few grocery outlets survive. For
variety one must drive the 25 miles to downtown Indianapolis. Some
of the town's retail demise can be blamed on the Interstate highway
system that allowed easy access to a large urban area, but not all
by any means. When Wal-Mart arrived the remaining vestiges of local
retail businesses disappeared overnight. Now Wal-Mart can charge
what it wants without fear of competition.
An entire cottage industry has
grown up to coach smaller to midsize communities on how to avoid the
Wal-Mart menace. Mainly it boils down to advising chambers of
commerce to let them in at peril to their own existence, a strategy
that obviously hasn't worked well given the company's incredible
growth.
There is no better example of the
Wal-Mart impact than the current battle being fought by 70,000
unionized grocery workers against three supermarket chains in
Southern California over wages that the companies claim are too high
in the face of Wal-Mart's plan to open 40 grocery-selling super
centers in that part of the state over the next five years.
Picketing workers carry signs that proclaim, "Don't Let Us Become
Another Wal-Mart." The grocery workers now earn from $7.40 an hour
for baggers after 30 months on the job to $17.90 for cashiers.
Wal-Mart grocery workers reportedly earn $9 an hour average.
While GM was undoubtedly good for
the country in many respects and so is Wal-Mart, which remains a
symbol of one man's retail vision of providing ever increasing
numbers with one-stop shopping, there also were downsides that
caused complaints that General Motors, like Standard Oil of another
time, had gotten too big and should be broken up. As it gobbles up
more and more of the nation's retail business, Wal-Mart is going to
face increasing criticism and with that more and more government
attention. It's the American way. Perhaps there is such a thing as
too big.
[back to top]
The Wal-Mart You Don't Know
The giant retailer's low prices
often come with a high cost. Wal-Mart's relentless pressure can
crush the companies it does business with and force them to send
jobs overseas. Are we shopping our way straight to the unemployment
line?
By: Charles Fishman
[back to top]
From: Fast Company Magazine - Issue
77, Page 68
December 2003
A gallon-sized jar of whole pickles
is something to behold. The jar is the size of a small aquarium. The
fat green pickles, floating in swampy juice, look reptilian, their
shapes exaggerated by the glass. It weighs 12 pounds, too big to
carry with one hand. The gallon jar of pickles is a display of
abundance and excess; it is entrancing, and also vaguely unsettling.
This is the product that Wal-Mart fell in love with: Vlasic's gallon
jar of pickles.
Wal-Mart priced it at $2.97--a
year's supply of pickles for less than $3! "They were using it as a
'statement' item," says Pat Hunn, who calls himself the "mad
scientist" of Vlasic's gallon jar. "Wal-Mart was putting it before
consumers, saying, This represents what Wal-Mart's about. You can
buy a stinkin' gallon of pickles for $2.97. And it's the nation's
number-one brand."
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.
Indeed, as Vlasic discovered, the
real story of Wal-Mart, the story that never gets told, is the story
of the pressure the biggest retailer relentlessly applies to its
suppliers in the name of bringing us "every day low prices." It's
the story of what that pressure does to the companies Wal-Mart does
business with, to U.S. manufacturing, and to the economy as a whole.
That story can be found floating in a gallon jar of pickles at
Wal-Mart.
Wal-Mart is not just the world's
largest retailer. It's the world's largest company--bigger than
ExxonMobil, General Motors, and General Electric. The scale can be
hard to absorb. Wal-Mart sold $244.5 billion worth of goods last
year. It sells in three months what
number-two retailer Home Depot
sells in a year. And in its own category of general merchandise and
groceries, Wal-Mart no longer has any real rivals. It does more
business than Target, Sears, Kmart, J.C. Penney, Safeway, and Kroger
combined. "Clearly," says Edward Fox, head of Southern Methodist
University's J.C. Penney Center for Retailing Excellence, "Wal-Mart
is more powerful than any retailer has ever been." It is, in fact,
so big and so furtively powerful as to have become an entirely
different order of corporate being.
Wal-Mart wields its power for just
one purpose: to bring the lowest possible prices to its customers.
At Wal-Mart, that goal is never reached. The retailer has a clear
policy for suppliers: On basic products that don't change, the price
Wal-Mart will pay, and will charge shoppers, must drop year after
year. But what almost no one outside the world of Wal-Mart and its
21,000 suppliers knows is the high cost of those low prices.
Wal-Mart has the power to squeeze profit-killing concessions from
vendors. To survive in the face of its pricing demands, makers of
everything from bras to bicycles to blue jeans have had to lay off
employees and close U.S. plants in favor of outsourcing products
from overseas.
Of course, U.S. companies have been
moving jobs offshore for decades, long before Wal-Mart was a
retailing power. But there is no question that the chain is helping
accelerate the loss of American jobs to low-wage countries such as
China. Wal-Mart, which in the late 1980s and early 1990s trumpeted
its claim to "Buy American," has doubled its imports from China in
the past five years alone, buying some $12 billion in merchandise in
2002. That's nearly 10% of all Chinese exports to the United States.
One way to think of Wal-Mart is as
a vast pipeline that gives non-U.S. companies direct access to the
American market. "One of the things that limits or slows the growth
of imports is the cost of establishing connections and networks,"
says Paul Krugman, the Princeton University economist. "Wal-Mart is
so big and so centralized that it can all at once hook Chinese and
other suppliers into its digital system. So--wham!--you have a large
switch to overseas sourcing in a period quicker than under the old
rules of retailing."
Steve Dobbins has been bearing the
brunt of that switch. He's president and CEO of Carolina Mills, a
75-year-old North Carolina company that supplies thread, yarn, and
textile finishing to apparel makers--half of which supply Wal-Mart.
Carolina Mills grew steadily until 2000. But in the past three
years, as its customers have gone either overseas or out of
business, it has shrunk from 17 factories to 7, and from 2,600
employees to 1,200. Dobbins's customers have begun to face imported
clothing sold so cheaply to Wal-Mart that they could not compete
even if they paid their workers nothing.
"People ask, 'How can it be bad for
things to come into the U.S. cheaply? How can it be bad to have a
bargain at Wal-Mart?' Sure, it's held inflation down, and it's great
to have bargains," says Dobbins. "But you can't buy anything if
you're not employed. We are shopping ourselves out of jobs."
The gallon jar of pickles at
Wal-Mart became a devastating success, giving Vlasic strong sales
and growth numbers--but slashing its profits by millions of dollars.
There is no question that
Wal-Mart's relentless drive to squeeze out costs has benefited
consumers. The giant retailer is at least partly responsible for the
low rate of U.S. inflation, and a McKinsey & Co. study concluded
that about 12% of the economy's productivity gains in the second
half of the 1990s could be traced to Wal-Mart alone.
There is also no question that
doing business with Wal-Mart can give a supplier a fast, heady jolt
of sales and market share. But that fix can come with long-term
consequences for the health of a brand and a business. Vlasic, for
example, wasn't looking to build its brand on a gallon of whole
pickles. Pickle companies make money on "the cut," slicing cucumbers
into spears and hamburger chips. "Cucumbers in the jar, you don't
make a whole lot of money there," says Steve Young, a former vice
president of grocery marketing for pickles at Vlasic, who has since
left the company.
At some point in the late 1990s, a
Wal-Mart buyer saw Vlasic's gallon jar and started talking to Pat
Hunn about it. Hunn, who has also since left Vlasic, was then head
of Vlasic's Wal-Mart sales team, based in Dallas. The gallon
intrigued the buyer. In sales tests, priced somewhere over $3, "the
gallon sold like crazy," says Hunn, "surprising us all." The
Wal-Mart buyer had a brainstorm: What would happen to the gallon if
they offered it nationwide and got it below $3? Hunn was skeptical,
but his job was to look for ways to sell pickles at Wal-Mart. Why
not?
And so Vlasic's gallon jar of
pickles went into every Wal-Mart, some 3,000 stores, at $2.97, a
price so low that Vlasic and Wal-Mart were making only a penny or
two on a jar, if that. It was showcased on big pallets near the
front of stores. It was an abundance of abundance. "It was selling
80 jars a week, on average, in every store," says Young. Doesn't
sound like much, until you do the math: That's 240,000 gallons of
pickles, just in gallon jars, just at Wal-Mart, every week. Whole
fields of cucumbers were heading out the door.
For Vlasic, the gallon jar of
pickles became what might be called a devastating success. "Quickly,
it started cannibalizing our non-Wal-Mart business," says Young. "We
saw consumers who used to buy the spears and the chips in
supermarkets buying the Wal-Mart gallons. They'd eat a quarter of a
jar and throw the thing away when they got moldy. A family can't eat
them fast enough."
The gallon jar reshaped Vlasic's
pickle business: It chewed up the profit margin of the business with
Wal-Mart, and of pickles generally. Procurement had to scramble to
find enough pickles to fill the gallons, but the volume gave Vlasic
strong sales numbers, strong growth numbers, and a powerful place in
the world of pickles at Wal-Mart. Which accounted for 30% of
Vlasic's business. But the company's profits from pickles had
shriveled 25% or more, Young says--millions of dollars.
The gallon was hoisting Vlasic and
hurting it at the same time.
Young remembers begging Wal-Mart
for relief. "They said, 'No way,' " says Young. "We said we'll
increase the price"--even $3.49 would have helped tremendously--"and
they said, 'If you do that, all the other products of yours we buy,
we'll stop buying.' It was a clear threat." Hunn recalls things a
little differently, if just as ominously: "They said, 'We want the
$2.97 gallon of pickles. If you don't do it, we'll see if someone
else might.' I knew our competitors were saying to Wal-Mart, 'We'll
do the $2.97 gallons if you give us your other business.' "
Wal-Mart's business was so indispensable to Vlasic, and the gallon
so central to the Wal-Mart relationship, that decisions about the
future of the gallon were made at the CEO level.
Finally, Wal-Mart let Vlasic up for
air. "The Wal-Mart guy's response was classic," Young recalls. "He
said, 'Well, we've done to pickles what we did to orange juice.
We've killed it. We can back off.' " Vlasic got to take it down to
just over half a gallon of pickles, for $2.79. Not long after that,
in January 2001, Vlasic filed for bankruptcy--although the gallon
jar of pickles, everyone agrees, wasn't a critical factor.
By now, it is accepted wisdom that
Wal-Mart makes the companies it does business with more efficient
and focused, leaner and faster. Wal-Mart itself is known for
continuous improvement in its ability to handle, move, and track
merchandise. It expects the same of its suppliers. But the ability
to operate at peak efficiency only gets you in the door at Wal-Mart.
Then the real demands start. The public image Wal-Mart projects may
be as cheery as its yellow smiley-face mascot, but there is nothing
genial about the process by which Wal-Mart gets its suppliers to
provide tires and contact lenses, guns and underarm deodorant at
every day low prices. Wal-Mart is legendary for forcing its
suppliers to redesign everything from their packaging to their
computer systems. It is also legendary for quite straightforwardly
telling them what it will pay for their goods.
"We are one of Wal-Mart's biggest
suppliers, and they are our biggest customer, by far. We have a
great relationship. That's all I can say. Are we done now?"
John Fitzgerald, a former vice
president of Nabisco, remembers Wal-Mart's reaction to his company's
plan to offer a 25-cent newspaper coupon for a large bag of
Lifesavers in advance of Halloween. Wal-Mart told Nabisco to add up
what it would spend on the promotion--for the newspaper ads, the
coupons, and handling--and then just take that amount off the price
instead. "That isn't necessarily good for the manufacturer,"
Fitzgerald says. "They need things that draw attention."
It also is not unheard of for
Wal-Mart to demand to examine the private financial records of a
supplier, and to insist that its margins are too high and must be
cut. And the smaller the supplier, one academic study shows, the
greater the likelihood that it will be forced into damaging
concessions. Melissa Berryhill, a Wal-Mart spokeswoman, disagrees:
"The fact is Wal-Mart, perhaps like no other retailer, seeks to
establish collaborative and mutually beneficial relationships with
our suppliers."
For many suppliers, though, the
only thing worse than doing business with Wal-Mart may be not doing
business with Wal-Mart. Last year, 7.5 cents of every dollar spent
in any store in the United States (other than auto-parts stores)
went to the retailer. That means a contract with Wal-Mart can be
critical even for the largest consumer-goods companies. Dial Corp.,
for example, does 28% of its business with Wal-Mart. If Dial lost
that one account, it would have to double its sales to its next nine
customers just to stay even. "Wal-Mart is the essential retailer, in
a way no other retailer is," says Gib Carey, a partner at Bain &
Co., who is leading a yearlong study of how to do business with
Wal-Mart. "Our clients cannot grow without finding a way to be
successful with Wal-Mart."
Many companies and their executives
frankly admit that supplying Wal-Mart is like getting into the
company version of basic training with an implacable Army drill
sergeant. The process may be unpleasant. But there can be some
positive results.
"Everyone from the forklift driver
on up to me, the CEO, knew we had to deliver [to Wal-Mart] on time.
Not 10 minutes late. And not 45 minutes early, either," says Robin
Prever, who was CEO of Saratoga Beverage Group from 1992 to 2000,
and made private-label water sold at Wal-Mart. "The message came
through clearly: You have this 30-second delivery window. Either
you're there, or you're out. With a customer like that, it changes
your organization. For the better. It wakes everybody up. And all
our customers benefited. We changed our whole approach to doing
business."
But you won't hear evenhanded
stories like that from Wal-Mart, or from its current suppliers.
Despite being a publicly traded company, Wal-Mart is intensely
private. It declined to talk in detail about its relationships with
its suppliers for this story. More strikingly, dozens of companies
contacted declined to talk about even the basics of their business
with Wal-Mart.
Here, for example, is an executive
at Dial: "We are one of Wal-Mart's biggest suppliers, and they are
our biggest customer by far. We have a great relationship. That's
all I can say. Are we done now?" Goaded a bit, the executive
responds with an almost hysterical edge: "Are you meshuga? Why in
the world would we talk about Wal-Mart? Ask me about anything else,
we'll talk. But not Wal-Mart."
No one wants to end up in what is
known among Wal-Mart vendors as the "penalty box"--punished, or even
excluded from the store shelves, for saying something that makes
Wal-Mart unhappy. (The penalty box is normally reserved for vendors
who don't meet performance benchmarks, not for those who talk to the
press.)
"You won't hear anything negative
from most people," says Paul Kelly, founder of Silvermine Consulting
Group, a company that helps businesses work more effectively with
retailers. "It would be committing suicide. If Wal-Mart takes
something the wrong way, it's like Saddam Hussein. You just don't
want to piss them off."
As a result, this story was
reported in an unusual way: by speaking with dozens of people who
have spent years selling to Wal-Mart, or consulting to companies
that sell to Wal-Mart, but who no longer work for companies that do
business with Wal-Mart. Unless otherwise noted, the companies
involved in the events they described refused even to confirm or
deny the basics of the events.
To a person, all those interviewed
credit Wal-Mart with a fundamental integrity in its dealings that's
unusual in the world of consumer goods, retailing, and groceries.
Wal-Mart does not cheat suppliers, it keeps its word, it pays its
bills briskly. "They are tough people but very honest; they treat
you honestly," says Peter Campanella, who ran the business that sold
Corning kitchenware products, both at Corning and then at World
Kitchen. "It was a joke to do business with most of their
competitors. A fiasco."
But Wal-Mart also clearly does not
hesitate to use its power, magnifying the Darwinian forces already
at work in modern global capitalism.
Caught in the Wal-Mart squeeze,
Huffy didn't just relinquish profits to keep its commitment to the
retailer. It handed those profits to the competition.
What does the squeeze look like at
Wal-Mart? It is usually thoroughly rational, sometimes devastatingly
so.
John Mariotti is a veteran of the
consumer-products world--he spent nine years as president of Huffy
Bicycle Co., a division of Huffy Corp., and is now chairman of World
Kitchen, the company that sells Oxo, Revere, Corning, and Ekco brand
housewares.
He could not be clearer on his
opinion about Wal-Mart: It's a great company, and a great company to
do business with. "Wal-Mart has done more good for America by
several thousand orders of magnitude than they've done bad,"
Mariotti says. "They have raised the bar, and raised the bar for
everybody."
Mariotti describes one episode from
Huffy's relationship with Wal-Mart. It's a tale he tells to
illustrate an admiring point he makes about the retailer. "They
demand you do what you say you are going to do." But it's also a
classic example of the damned-if-you-do, damned-if-you-don't
Wal-Mart squeeze. When Mariotti was at Huffy throughout the 1980s,
the company sold a range of bikes to Wal-Mart, 20 or so models, in a
spread of prices and profitability. It was a leading manufacturer of
bikes in the United States, in places like Ponca City, Oklahoma;
Celina, Ohio; and Farmington, Missouri.
One year, Huffy had committed to
supply Wal-Mart with an entry-level, thin-margin bike--as many as
Wal-Mart needed. Sales of the low-end bike took off. "I woke up May
1"--the heart of the bike production cycle for the summer--"and I
needed 900,000 bikes," he says. "My factories could only run
450,000." As it happened, that same year, Huffy's fancier,
more-profitable bikes were doing well, too, at Wal-Mart and other
places. Huffy found itself in a bind.
With other retailers, perhaps,
Mariotti might have sat down, renegotiated, tried to talk his way
out of the corner. Not with Wal-Mart. "I made the deal up front with
them," he says. "I knew how high was up. I was duty-bound to supply
my customer." So he did something extraordinary. To free up
production in order to make Wal-Mart's cheap bikes, he gave the
designs for four of his higher-end, higher-margin products to rival
manufacturers. "I conceded business to my competitors, because I
just ran out of capacity," he says. Huffy didn't just relinquish
profits to keep Wal-Mart happy--it handed those profits to its
competition. "Wal-Mart didn't tell me what to do," Mariotti says.
"They didn't have to." The retailer, he adds, "is tough as nails.
But they give you a chance to compete. If you can't compete, that's
your problem."
In the years since Mariotti left
Huffy, the bike maker's relationship with Wal-Mart has been vital
(though Huffy Corp. has lost money in three out of the last five
years). It is the number-three seller of bikes in the United States.
And Wal-Mart is the number-one retailer of bikes. But here's one
last statistic about bicycles: Roughly 98% are now imported from
places such as China, Mexico, and Taiwan. Huffy made its last bike
in the United States in 1999.
As Mariotti says, Wal-Mart is tough
as nails. But not every supplier agrees that the toughness is always
accompanied by fairness. The Lovable Company was founded in 1926 by
the grandfather of Frank Garson II, who was Lovable's last
president. It did business with Wal-Mart, Garson says, from the
earliest days of founder Sam Walton's first store in Bentonville,
Arkansas. Lovable made bras and lingerie, supplying retailers that
also included Sears and Victoria's Secret. At one point, it was the
sixth-largest maker of intimate apparel in the United States, with
700 employees in this country and another 2,000 at eight factories
in Central America.
Eventually Wal-Mart became
Lovable's biggest customer. "Wal-Mart has a big pencil," says
Garson. "They have such awesome purchasing power that they write
their own ticket. If they don't like your prices, they'll go
vertical and do it themselves--or they'll find someone that will
meet their terms."
In the summer of 1995, Garson
asserts, Wal-Mart did just that. "They had awarded us a contract,
and in their wisdom, they changed the terms so dramatically that
they really reneged." Garson, still worried about litigation, won't
provide details. "But when you lose a customer that size, they are
irreplaceable."
Lovable was already feeling intense
cost pressure. Less than three years after Wal-Mart pulled its
business, in its 72nd year, Lovable closed. "They leave a lot to be
desired in the way they treat people," says Garson. "Their actions
to pulverize people are unnecessary. Wal-Mart chewed us up and spit
us out."
Believe it or not, American
business has been through this before. The Great Atlantic & Pacific
Tea Co., the grocery-store chain, stood astride the U.S. market in
the 1920s and 1930s with a dominance that has likely never been
duplicated. At its peak, A&P had five times the number of stores
Wal-Mart has now (although much smaller ones), and at one point, it
owned 80% of the supermarket business. Some of the
antipredatory-pricing laws in use today were inspired by A&P's
attempts to muscle its suppliers.
There is very little academic and
statistical study of Wal-Mart's impact on the health of its
suppliers and virtually nothing in the last decade, when Wal-Mart's
size has increased by a factor of five. This while the retail
industry has become much more concentrated. In large part, that's
because it's nearly impossible to get meaningful data that would
allow researchers to track the influence of Wal-Mart's business on
companies over time. You'd need cooperation from the vendor
companies or Wal-Mart or both--and neither Wal-Mart nor its
suppliers are interested in sharing such intimate detail.
Bain & Co., the global management
consulting firm, is in the midst of a project that asks, How does a
company have a healthy relationship with Wal-Mart? How do you avoid
being sucked into the vortex? How do you maintain some standing,
some leverage of your own?
This July, in a mating that had the
relieved air of lovers who had too long resisted embracing, Levi
Strauss rolled blue jeans into every Wal-Mart in the United States.
Bain's first insights are obvious,
if not easy. "Year after year," Carey, a partner at Bain & Co.,
says, "for any product that is the same as what you sold them last
year, Wal-Mart will say, 'Here's the price you gave me last year.
Here's what I can get a competitor's product for. Here's what I can
get a private-label version for. I want to see a better value that I
can bring to my shopper this year. Or else I'm going to use that
shelf space differently.' "
Carey has a friend in the umbrella
business who learned that. One year, because of costs, he went to
Wal-Mart and asked for a 5% price increase. "Wal-Mart said, 'We were
expecting a 5% decrease. We're off by 10%. Go back and sharpen your
pencil.' " The umbrella man scrimped and came back with a 2%
increase. "They said, 'We'll go with a Chinese manufacturer'--and he
was out entirely."
The Wal-Mart squeeze means vendors
have to be as relentless and as microscopic as Wal-Mart is at
managing their own costs. They need, in fact, to turn themselves
into shadow versions of Wal-Mart itself. "Wal-Mart won't necessarily
say you have to reconfigure your distribution system," says Carey.
"But companies recognize they are not going to maintain margins with
growth in their Wal-Mart business without doing it."
The way to avoid being trapped in a
spiral of growing business and shrinking profits, says Carey, is to
innovate. "You need to bring Wal-Mart new products--products
consumers need. Because with those, Wal-Mart doesn't have benchmarks
to drive you down in price. They don't have historical data, you
don't have competitors, they haven't bid the products out to
private-label makers. That's how you can have higher prices and
higher margins."
Reasonable advice, but not
universally useful. There has been an explosion of "innovation" in
toothbrushes and toothpastes in the past five years, for instance;
but a pickle is a pickle is a pickle.
Bain's other critical discovery is
that consumers are often more loyal to product companies than to
Wal-Mart. With strongly branded items people develop a preference
for--things like toothpaste or laundry detergent--Wal-Mart rarely
forces shoppers to switch to a second choice. It would simply punish
itself by seeing sales fall, and it won't put up with that for long.
But as Wal-Mart has grown in market
reach and clout, even manufacturers known for nurturing premium
brands may find themselves overpowered. This July, in a mating that
had the relieved air of lovers who had too long resisted embracing,
Levi Strauss rolled blue jeans into every Wal-Mart doorway in the
United States: 2,864 stores. Wal-Mart, seeking to expand its
clothing business with more fashionable brands, promoted the clothes
on its in-store TV network and with banners slipped over the
security-tag detectors at exit doors.
Levi's launch into Wal-Mart came
the same summer the clothes maker celebrated its 150th birthday. For
a century and a half, one of the most recognizable names in American
commerce had survived without Wal-Mart. But in October 2002, when
Levi Strauss and Wal-Mart announced their engagement, Levi was
shrinking rapidly. The pressure on Levi goes back 25 years--well
before Wal-Mart was an influence. Between 1981 and 1990, Levi closed
58 U.S. manufacturing plants, sending 25% of its sewing overseas.
Sales for Levi peaked in 1996 at
$7.1 billion. By last year, they had spiraled down six years in a
row, to $4.1 billion; through the first six months of 2003, sales
dropped another 3%. This one account--selling jeans to
Wal-Mart--could almost instantly revive Levi.
Last year, Wal-Mart sold more
clothing than any other retailer in the country. It also sold more
pairs of jeans than any other store. Wal-Mart's own inexpensive
house brand of jeans, Faded Glory, is estimated to do $3 billion in
sales a year, a house brand nearly the size of Levi Strauss. Perhaps
most revealing in terms of Levi's strategic blunders: In 2002, half
the jeans sold in the United States cost less than $20 a pair. That
same year, Levi didn't offer jeans for less than $30.
For much of the last decade, Levi
couldn't have qualified to sell to Wal-Mart. Its computer systems
were antiquated, and it was notorious for delivering clothes late to
retailers. Levi admitted its on-time delivery rate was 65%. When it
announced the deal with Wal-Mart last year, one fashion-industry
analyst bluntly predicted Levi would simply fail to deliver the
jeans.
But Levi Strauss has taken to the
Wal-Mart Way with the intensity of a near-death religious
conversion--and Levi's executives were happy to talk about their
experience getting ready to sell at Wal-Mart. One hundred people at
Levi's headquarters are devoted to the new business; another 12 have
set up in an office in Bentonville, near Wal-Mart's headquarters,
where the company has hired a respected veteran Wal-Mart sales
account manager.
Getting ready for Wal-Mart has been
like putting Levi on the Atkins diet. It has helped
everything--customer focus, inventory management, speed to market.
It has even helped other retailers that buy Levis, because Wal-Mart
has forced the company to replenish stores within two days instead
of Levi's previous five-day cycle.
And so, Wal-Mart might rescue Levi
Strauss. Except for one thing.
Levi didn't actually have any
clothes it could sell at Wal-Mart. Everything was too expensive. It
had to develop a fresh line for mass retailers: the Levi Strauss
Signature brand, featuring Levi Strauss's name on the back of the
jeans.
Two months after the launch, Levi
basked in the honeymoon glow. Overall sales, after falling for the
first six months of 2003, rose 6% in the third quarter; profits in
the summer quarter nearly doubled. All, Levi's CEO said, because of
Signature.
"They are all very rational people.
And they had a good point. Everyone was willing to pay more for a
Master Lock. But how much more can they justify?"
But the low-end business isn't a
business Levi is known for, or one it had been particularly
interested in. It's also a business in which Levi will find itself
competing with lean, experienced players such as VF and Faded Glory.
Levi's makeover might so improve its performance with its
non-Wal-Mart suppliers that its established business will thrive,
too. It is just as likely that any gains will be offset by the
competitive pressures already dissolving Levi's premium brands, and
by the cannibalization of its own sales. "It's hard to see how this
relationship will boost Levi's higher-end business," says Paul
Farris, a professor at the University of Virginia's Darden Graduate
School of Business Administration. "It's easy to see how this will
hurt the higher-end business."
If Levi clothing is a runaway hit
at Wal-Mart, that may indeed rescue Levi as a business. But what
will have been rescued? The Signature line--it includes clothing for
girls, boys, men, and women--is an odd departure for a company whose
brand has long been an American icon. Some of the jeans have the
look, the fingertip feel, of pricier Levis. But much of the clothing
has the look and feel it must have, given its price (around $23 for
adult pants): cheap. Cheap and disappointing to find labeled with
Levi Strauss's name. And just five days before the cheery profit
news, Levi had another announcement: It is closing its last two U.S.
factories, both in San Antonio, and laying off more than 2,500
workers, or 21% of its workforce. A company that 22 years ago had 60
clothing plants in the United States--and that was known as one of
the most socially reponsible corporations on the planet--will, by
2004, not make any clothes at all. It will just import them.
In the end, of course, it is we as
shoppers who have the power, and who have given that power to
Wal-Mart. Part of Wal-Mart's dominance, part of its insight, and
part of its arrogance, is that it presumes to speak for American
shoppers.
If Wal-Mart doesn't like the
pricing on something, says Andrew Whitman, who helped service
Wal-Mart for years when he worked at General Foods and Kraft, they
simply say, "At that price we no longer think it's a good value to
our shopper. Therefore, we don't think we should carry it."
Wal-Mart has also lulled shoppers
into ignoring the difference between the price of something and the
cost. Its unending focus on price underscores something that
Americans are only starting to realize about globalization:
Ever-cheaper prices have consequences. Says Steve Dobbins, president
of thread maker Carolina Mills: "We want clean air, clear water,
good living conditions, the best health care in the world--yet we
aren't willing to pay for anything manufactured under those
restrictions."
Randall Larrimore, a former CEO of
MasterBrand Industries, the parent company of Master Lock,
understands that contradiction too well. For years, he says, as
manufacturing costs in the United States rose, Master Lock was able
to pass them along. But at some point in the 1990s, Asian
manufacturers started producing locks for much less. "When the
difference is $1, retailers like Wal-Mart would prefer to have the
brand-name padlock or faucet or hammer," Larrimore says. "But as the
spread becomes greater, when our padlock was $9, and the import was
$6, then they can offer the consumer a real discount by carrying two
lines. Ultimately, they may only carry one line."
In January 1997, Master Lock
announced that, after 75 years making locks in Milwaukee, it would
begin importing more products from Asia. Not too long after, Master
Lock opened a factory of its own in Nogales, Mexico. Today, it makes
just 10% to 15% of its locks in Milwaukee--its 300 employees there
mostly make parts that are sent to Nogales, where there are now 800
factory workers.
Larrimore did the first
manufacturing layoffs at Master Lock. He negotiated with Master
Lock's unions himself. He went to Bentonville. "I loved dealing with
Wal-Mart, with Home Depot," he says. "They are all very rational
people. There wasn't a whole lot of room for negotiation. And they
had a good point. Everyone was willing to pay more for a Master
Lock. But how much more can they justify? If they can buy a lock
that has arguably similar qual-ity, at a cheaper price, well, they
can get their consumers a deal."
It's Wal-Mart in the role of Adam
Smith's invisible hand. And the Milwaukee employees of Master Lock
who shopped at Wal-Mart to save money helped that hand shove their
own jobs right to Nogales. Not consciously, not directly, but
inevitably. "Do we as consumers appreciate what we're doing?"
Larrimore asks. "I don't think so. But even if we do, I think we
say, Here's a Master Lock for $9, here's another lock for $6--let
the other guy pay $9."
[back to top]
Judge certifies 100,000-strong
class for Wal-Mart hours case
By Jahna Berry - The Recorder
[back to top]
November 11, 2003
As Wal-Mart braces for a key ruling
in a massive sex-discrimination suit in federal court, an Alameda
County judge has certified a wage-and-hour class action on behalf of
more than 100,000 California Wal-Mart employees.
The East Bay suit, the largest
wage-and-hour case ever to be certified, could force the nation's
No. 1 retailer to shell out millions in back pay, one plaintiffs'
attorney says.
On Thursday, Judge Ronald Sabraw
cleared the way for plaintiffs to litigate Savaglio v. Wal-Mart,
C835687, a suit alleging that Wal-Mart routinely asked workers to
toil "off the clock" but didn't pay them for it. The work included
times when workers were told to shorten, skip or interrupt lunch and
other breaks.
"The court finds that plaintiffs
have presented substantial evidence that Wal-Mart had uniform
policies of encouraging employees to assist customers at all times
... and discouraging overtime work," Sabraw wrote.
Wal-Mart's attorney, Teresa Beaudet
of the Los Angeles office of Mayer, Brown, Rowe & Maw, referred
press calls to Wal-Mart spokeswoman Sarah Clark. Clark could not be
reached for comment Monday afternoon.
Savaglio is one of several similar
suits pending in other states, said lead plaintiff attorney
Frederick Furth of The Furth Firm in San Francisco.
Wal-Mart's practices are "hard on
[workers] physically and emotionally," Furth said, noting that
employees had to help any customer within 10 feet, whether they were
working or not. "For a lot of them, this was the only job available
to them."
The suit extends to past and
present hourly California Wal-Mart employees who've worked with the
retailer since 1997.
Although the East Bay case is the
largest certified class action against Wal-Mart so far, Dukes v.
Wal-Mart, 01-2252, may soon dwarf it. That case, which is pending
before U.S. District Judge Martin Jenkins, alleges that Wal-Mart
pays women less and promotes them less often than men. If the class,
which includes 1.6 million past and present female employees, is
certified, it would be the largest employment discrimination class
in the nation's history.
Reporter Jahna Berry's e-mail
address is mailto:jberry@therecorder.com
[back to top]
P&G, Wal-Mart store did secret test
of RFID
Howard Wolinsky - Chicago Sun-Times
[back to top]
November 9, 2003
Shoppers in a suburban Tulsa,
Okla., Wal-Mart were unwitting guinea pigs earlier this year in a
secret study that two of America's largest corporations never
expected you'd know about.
In the study, uncovered by the
Chicago Sun-Times, shelves in a Wal-Mart in Broken Arrow, Okla.,
were equipped with hidden electronics to track the Max Factor
Lipfinity lipstick containers stacked on them. The shelves and
Webcam images were viewed 750 miles away by Procter & Gamble
researchers in Cincinnati who could tell when lipsticks were removed
from the shelves and could even watch consumers in action.
The study involved a new
technology, known as Radio Frequency Identification (RFID), that
enables retailers to use radio signals to electronically track
products in warehouses and on store shelves, a technology critics
fear ultimately could be used to track people once they leave the
store.
Manufacturers and retailers are
looking at ultimately putting the tiny chips into everything from
soda cans and cereal boxes to shoes, clothing and car tires.
This worries privacy-rights
advocates who envision tags in shoes and other personal items being
linked to credit-card information so that retailers and government
agencies could spy on the public.
Experts on RFID said the four-month
study in Broken Arrow, Okla., was the first of its kind in the
United States. Up to now, industry leaders have denied such testing
had been conducted in this country.
The Sun-Times learned of the trial
from a disgruntled Procter & Gamble executive and also from the firm
that designed the "smart shelf" system. Researchers concealed
"readers" in contact paper placed under the shelves and embedded
RFID antenna chips in Lipfinity packaging.
Kevin Ashton, executive director of
the Auto-ID Center at the Massachusetts Institute of Technology,
downplayed the trial. "I think that the idea that someone's privacy
is at stake because there are a few RFID tags in a few lipsticks in
one store is silly," Ashton said.
The Auto-ID Center was founded in
1999 to develop RFID technology.
But Katherine Albrecht, founder of
CASPIAN, a privacy rights group, said, "On the surface, the Broken
Arrow trial may seem harmless. But the truth is that the businesses
involved pushed forward with this technology in secret, knowing full
well that consumers are overwhelmingly opposed to it. This is why we
have called for mandatory labeling of products containing RFID
chips."
Procter & Gamble spokeswoman
Jeannie Tharrington reluctantly confirmed the Broken Arrow test.
She said there was a sign at the
Lipfinity display that "alerted customers that closed-circuit
televisions and electronic merchandise security systems are in place
in the store."
She said there were no specific
warnings about RFID tags in the lipstick packages.
Tharrington said the tags had a
short read range -- about a half inch. That meant that once the
packages left the shelves, researchers could not track them or the
people carrying them.
Albrecht said: "Customers do not go
into a Wal-Mart expecting to be used as research subjects. And they
certainly don't expect these companies to slip tiny tracking devices
into the products they buy."
Tom Williams, spokesman for
Wal-Mart, initially denied that the study had been done, only to
call back the next day to say he found that indeed the test had been
conducted from late March until mid- July.
The Chicago Sun-Times learned that
an Oklahoma Wal-Mart and Procter & Gamble did a study earlier this
year of Radio Frequency Identification. Shelves in a display similar
to this (minus the computers) were equipped with hidden electronics
to track packages of Lipfinity lipstick.
[back to top]
Judge certifies Wal-Mart suit class
action
BY JULIE FORSTER - St. Paul Pioneer
Press
[back to top]
6 November 2003
More than 64,000 former and current
employees of Wal-Mart and Sam's Club stores in Minnesota will be
eligible to join a lawsuit against the giant retailer that claims
employees were forced to work off the clock and without breaks.
Thomas R. Lacy, a Dakota County
district court judge, this week gave class-action status to a
wage-and-hour case against the Bentonville, Ark., company. The case
could be worth upwards of $200 million based on the number of
potential claimants.
Across the nation, there are 37
class-action lawsuits against Wal-Mart with similar types of claims.
Minnesota's is only the second to be certified. The other such case,
in Indiana, is on appeal. Wal-Mart said it is "looking at options"
for an appeal in the Minnesota case.
The case was originally filed in
September 2001 by four former hourly employees who maintain that
they did not receive rest and meal breaks to which they were
entitled under Wal-Mart policy and Minnesota law. Each of the four
women also claims that she worked off the clock without
compensation, a violation of Wal-Mart policy and state wage-and hour
laws. Wal-Mart denies these claims.
The majority of cases filed as
class actions are never certified. And as is often the case, it
would be unlikely that the plaintiffs would have the wherewithal to
proceed individually.
In this case, the judge was
convinced that tens of thousands of potential class members have
common circumstances and similar claimed injuries and that the
merits of the case should be decided on a class-wide basis.
"It's not easy to do. That's why it
is somewhat extraordinary when a judge allows a class action,
particularly against such a power like Wal-Mart," said Joe Daly, a
law professor at Hamline University who is also a federal mediator
in labor disputes.
"The unusual part is that they are
going against a company that is very large," he said. "They are
going against a company that has projected itself in advertising as
family-friendly and old-people-friendly. Now Wal-Mart is going to
have to deal with thousands and thousands of employees who may not
have even thought about this and are now realizing that they very
well may have been short-changed."
Wal-Mart has 58 stores in
Minnesota, including its Sam's Club, supercenter and discount
stores. Altogether, these stores employ 15,749 hourly workers and
have employed 64,642 hourly workers since 1998. The plaintiffs
— Nancy Braun, Debbie Simonson, Cindy Severson and Pamela
Reinert — are all former employees who worked at various stores
in Minnesota during or after 1997.
A key piece of evidence in the case
is a time record audit conducted by Wal-Mart in 2000. Wal-Mart
disputes the accuracy of these records but, according to the court
order, Wal-Mart's own internal auditors concluded — based on
data from those records — that hourly employees in a sample of
127 stores, including six Minnesota stores, were denied more than
76,000 rest and meal breaks for a one-week period during June 2000.
The audit's own author concluded that "Wal-Mart may face several
adverse consequences as a result of staffing and scheduling not
being prepared appropriately," court records said.
The central issue in the case is
whether Wal-Mart's conduct, as reflected in the time records,
resulted in employees being denied earned rest breaks, meal periods
and compensation for time worked.
The time records show that in some
cases payroll managers edited time cards, shaving off time or
manually inserting a 30-minute unpaid meal period into hourly
workers' previous day's time entries. Wal-Mart admits the manual
insertion in only one case and had no explanation for other
instances of edited time records, court records said. "While the
court is not making a determination of the merits, for class
certification purposes, the evidence submitted by plaintiffs, based
on Wal-Mart's time records, tends to show that these practices were
widespread and not limited to the four named plaintiffs," Judge Lacy
wrote.
The attorneys for the former
employees maintain that store managers are under enormous pressure
to keep labor costs to a minimum and that the company stacks the
deck so that managers cannot meet their budgets without resorting to
these types of practices. "They are constantly pressured to decrease
payroll, both the number of employees and the total payroll expense
as a percentage of sales," said Jonathan Parritz, the lead
plaintiff's attorney who is arguing the case.
A Wal-Mart spokeswoman said the
company's policy is to pay hourly workers for every minute that they
work. "Certifying this as a class action does not mean that the
company has done anything wrong or improper," said Sarah Clark, a
Wal-Mart spokeswoman. "There has been no ruling on the merits of the
plaintiff's claims."
The courts have denied
certification in eight states, including a decision filed last week
in Georgia.
[back to top]
Wal-Mart influence across U.S.
grows
By Greg Schneider and Dina
ElBoghdady
[back to top]
Washington Post
November 6, 2003
Wal-Mart, known for selling goods
at rock-bottom prices, has forced other retailers to follow suit or
fall behind.
A Wal-Mart and Sam's Club will open
next year in Honolulu. For retailers, competing with Wal-Mart means
not just holding down wages, but curbing healthcare costs. Wal-Mart
workers typically earn $7-$8 an hour.
MORGANTOWN, W.Va. As a young man,
Roy Bukrim found a job that seemed better than working in dangerous
coal mines like his relatives: He hired on at the Kroger
supermarket, where 27 years later he's head night stocker and
supports a wife, two kids and a mortgage.
But Bukrim, 48, figures he wouldn't
have that career option today. Young people who hire on now get
minimum wage and no health benefits, then leave after a few months.
Bukrim said the future that he saw in grocery work no longer exists.
To Bukrim and other workers as well
as Kroger Co. executives the juggernaut driving that change is the
store's most-feared competitor, Wal-Mart Stores Inc.
"All we've heard is Wal-Mart this
and Wal-Mart that," said Kroger cashier Victoria Marano. "They want
to be like Wal-Mart so they can compete."
Wal-Mart, the world's biggest
retailer and the nation's biggest private employer, has become so
powerful that its practices reverberate throughout the U.S. economy.
About as many people work for Wal-Mart 1.3 million as serve active
duty in the U.S. military. Its most recent annual sales $245 billion
are greater than the gross domestic product of Switzerland. It's no
wonder the company has more than 3,000 stores in the United States;
on Oct. 29 Wal-Mart opened 39 stores, and it once opened 47 in a
day.
Next year, the company will open a
317,000-square-foot Wal-Mart/Sam's Club center on a 10.5-acre site
in Honolulu known as the "Ke'eaumoku superblock."
Because it wields enormous buying
power, Wal-Mart influences the makers of virtually all household
products, dictating everything from pricing to packaging. What's
more, Wal-Mart's mania for selling goods at rock-bottom prices has
trained consumers to expect deep discounts everywhere they shop,
forcing competing retailers to follow suit or fall behind.
Part of the reason the chain is
able to offer a microwave oven for under $30 or a 24-can package of
Sam's Choice cola for $3.64 or a gas-powered lawn mower for under
$150, for instance, is that it contracts with outside janitorial
services some of which have questionable hiring practices and relies
heavily on lower-paid part-time workers, say unions and competitors.
Wal-Mart's vast, nonunionized
workforce earns a typical wage of about $7 to $8 an hour. Unionized
workers at Kroger, by contrast, said they were making between $11
and $13 an hour, with full health benefits. About 62 percent of
Wal-Mart workers are eligible for benefits, but less than half of
the workforce participates. Critics say the low participation is
because Wal-Mart requires steep employee contributions.
As other retailers follow
Wal-Mart's lead, workers without technical training are feeling a
tightening squeeze. And untrained people entering today's workforce
the way Bukrim did three decades ago have dwindling odds of reaching
the middle class.
"These are jobs that have
historically yielded a middle-class lifestyle," said Jared
Bernstein, an economist with the Economic Policy Institute. "But
with a much more lean and mean approach to services, many of those
jobs are going by the wayside."
Nowhere is that shift more evident
than at supermarkets, such as Kroger, which have seen Wal-Mart
rocket to the top of their industry in only 10 years. Bukrim and
70,000 other unionized workers at the Kroger, Safeway and Albertsons
chains in several states including West Virginia, California and
Kentucky are now on strike or locked out in a conflict over wage and
benefits changes their employers say are necessary to compete with
Wal-Mart.
Some economists argue that the
Wal-Martization of the American workforce is simply the free-market
system functioning as it should. Gary Stibel, founder and principal
of the New England Consulting Group, said Wal-Mart has saved
consumers more than $20 billion through its discount pricing.
Figuring in Wal-Mart's pressure on other retailers to lower prices,
savings top $100 billion, he said.
"In this day and age, the United
States needs more companies like Wal-Mart to create jobs, even if
not at the highest pay," Stibel said.
Wal-Mart morphed from a single
store in Rogers, Ark., in 1962 into a retail powerhouse by mastering
the art of low pricing in a way that has transformed its
competitors, its suppliers and the industries it now dominates
including groceries, toys and apparel.
Founder Sam Walton pioneered the
"supercenter" retail phenomenon. His use of technology such as bar
code price scanners and his reinvention of the supply chain, with
stores reordering stock only as needed instead of keeping mountains
of goods in warehouses, changed the way of business in America.
"Wal-Mart creates its own weather,"
said John Challenger, chief executive of Challenger, Gray &
Christmas Inc., a Chicago outplacement firm that tracks retail jobs.
"It sets the standards in many ways for retailers throughout the
country."
Kmart Corp., which dwarfed Wal-Mart
only 15 years ago, filed for bankruptcy protection in 2002 and
eliminated 57,000 positions in part because it tried to compete with
Wal-Mart on prices and failed. FAO Inc., the iconic toy seller,
filed for protection from its creditors in part because it did not
try to compete with Wal-Mart on prices. Both retailers have since
emerged from bankruptcy proceedings. And since Wal-Mart began
aggressively expanding into groceries in the past decade, some
national supermarket chains have gone bankrupt.
It's within the food sector that
the nonunionized retailer is most affecting labor relations in this
country, said Ira Kalish, a global director at Deloitte Research.
For supermarkets, which operate on
razor-thin profit margins, labor is perhaps the highest cost of
doing business, said Michael J. Silverstein, a senior vice president
at Boston Consulting Group.
"The less you pay (for labor), the
lower your prices can be," Silverstein said. "The grocery store is a
war zone, and the weak are going down fast and with them go a lot of
jobs."
Wal-Mart's supercenters have labor
costs 20 percent to 30 percent lower than those of unionized
supermarkets, according to a study from consulting firm Retail
Forward. So groceries at Wal-Mart cost about 15 percent less than
the competition, the study said.
Retail Forward concluded that for
every Wal-Mart Supercenter that opens in the next five years, two
supermarkets will close their doors. That means the supermarket
industry could lose 2,000 more stores over the next five years, or
400 a year.
Wal-Mart is applying the same heavy
pressure on grocery suppliers that it exerts on makers of other
consumer goods, leaving them beholden to the retailing giant for a
significant part of their revenue. Wal-Mart made up 30 percent or
more of U.S. sales for Clorox Co., Gillette Co., Mattel Inc. and
Procter & Gamble Co. in fiscal 2002, according to Fitch Ratings.
For retailers, competing with
Wal-Mart means not just holding down wages, but curbing healthcare
costs.
A report by the AFL-CIO said the
retailer insures only about 45 percent of its work force. Wal-Mart
workers must pay about one-third of the cost of their healthcare
premiums, while employees at other large companies typically pay 16
percent to 25 percent, the report said.
The result is that many Wal-Mart
workers transfer the healthcare burden either to their spouse's
employer or to government agencies, the report said.
Wal-Mart defends its practices,
arguing that its employees have generous access to insurance and
that worker contributions to health care $57 per two-week pay period
for a family plan are in line with the rest of the industry.
As for wages, Wal-Mart's
entry-level jobs "are not designed for someone who is the sole
support for a family" but for those looking to advance, said Mona
Williams, Wal-Mart's chief spokeswoman. About two-thirds of
Wal-Mart's managers were once hourly workers for the chain.
[back to top]
Stores Follow Wal-Mart's Lead in
Labor; Competitors Struggle to Match Savings From Non-Union
Workforce
Greg Schneider and Dina ElBoghdady
- Washington Post Staff Writers
November 6, 2003
[back to top]
As a young man, Roy Bukrim found a
job that seemed better than working in dangerous coal mines like his
relatives: He hired on at the Kroger supermarket, where 27 years
later he's head night stocker and supports a wife, two kids and a
mortgage.
But Bukrim, 48, figures he wouldn't
have that career option today. Young people who take a job there now
get minimum wage and no health benefits, then leave after a few
months. Bukrim said the future that he saw in grocery work no longer
exists. "We've been the generation where that's all changed."
To Bukrim and other workers -- as
well as Kroger Co. executives -- the juggernaut driving that change
is the store's most-feared competitor, Wal-Mart Stores Inc.
"All we've heard is Wal-Mart this
and Wal-Mart that," said Kroger cashier Victoria Marano. "They want
to be like Wal-Mart so they can compete."
Wal-Mart, the world's biggest
retailer and the nation's biggest private employer, has become so
powerful that its practices reverberate throughout the U.S. economy.
About as many people work for Wal-Mart -- 1.3 million -- as are on
active duty in the U.S. military. Its most recent annual sales --
$245 billion -- are greater than the gross domestic product of
Switzerland. It's no wonder the company has more than 3,000 stores
in the United States; on Oct. 29 alone Wal-Mart opened 39 stores,
and it once opened 47 in a day.
Because it wields enormous buying
power, Wal-Mart influences the makers of virtually all household
products, dictating everything from pricing to packaging. What's
more, Wal-Mart's mania for selling goods at rock-bottom prices has
trained consumers to expect deep discounts everywhere they shop,
forcing competing retailers to follow suit or fall behind.
The Oct. 23 arrest of 250 illegal
aliens working for outside cleaning crews at 61 Wal-Mart stores
nationwide underscores another aspect of Wal-Mart's low-price
formula: a fervent effort to hold down labor costs. This week the
retailer said it has received a "target letter" from a federal grand
jury in Pennsylvania, signifying that Wal-Mart itself is under
investigation for its role in using illegal workers.
Part of the reason the chain is
able to offer a microwave oven for under $30 or a 24-can package of
Sam's Choice cola for $3.64 or a gas-powered lawn mower for under
$150, for instance, is because it contracts with outside janitorial
services -- some of which have questionable hiring practices -- and
relies heavily on lower-paid part-time workers, say unions and
competitors.
Wal-Mart's vast, non-unionized work
force earns a typical wage of about $7 to $8 an hour. Unionized
workers at Kroger, by contrast, said they were making between $11
and $13 an hour, with full health benefits. About 62 percent of
Wal-Mart workers are eligible for benefits, but less than half of
the workforce participates. Critics say the low participation is
because Wal-Mart requires steep employee contributions.
As other retailers follow
Wal-Mart's lead, workers without technical training are feeling a
tightening squeeze. Low-skilled manufacturing jobs are vanishing at
historic rates -- West Virginia's coalfield employment, for
instance, plummeted from 59,700 jobs in 1980 to 15,700 in 2000.
Untrained people entering today's workforce the way Bukrim did three
decades ago have dwindling odds of reaching the middle class.
"These are jobs that have
historically yielded a middle-class lifestyle. But with a much more
lean and mean approach to services, many of those jobs are going by
the wayside," said Jared Bernstein, an economist with the Economic
Policy Institute.
Nowhere is that shift more evident
than at supermarkets, such as Kroger, which have seen Wal-Mart
rocket to the top of their industry in only 10 years. Bukrim and
70,000 other unionized workers at the Kroger, Safeway and Albertsons
chains in several states -- including West Virginia, California and
Kentucky -- are now on strike or locked out in a conflict over wage
and benefits changes their employers say are necessary to compete
with Wal-Mart.
Some economists argue that the
Wal-Martization of the American workforce is simply the free-market
system functioning as it should. Gary Stibel, founder and principal
of the New England Consulting Group, said Wal-Mart has saved
consumers more than $20 billion through its discount pricing.
Figuring in Wal-Mart's pressure on other retailers to lower prices,
savings top $100 billion, he said.
"In this day and age, the United
States needs more companies like Wal-Mart to create jobs, even if
not at the highest pay," Stibel said. "The company that makes its
mark by taking the cost of manufacturing products and services up
will lose, and the country that promotes that will lose."
Wal-Mart morphed from a single
store in Rogers, Ark., in 1962 into a retail powerhouse by mastering
the art of low pricing in a way that has transformed its
competitors, its suppliers and the industries it now dominates --
including groceries, toys and apparel.
Founder Sam Walton pioneered the
"supercenter" retail phenomenon. His use of technology such as bar
code price scanners and his reinvention of the supply chain, with
stores reordering stock only as needed instead of keeping mountains
of goods in warehouses, changed the way businesses interact with one
another and their customers.
Walton's method of expanding his
chain was unique, too. The company emerged from what one analyst
called "one of the most backward areas of America" and spread
through the rural South by hiring people who were accustomed to farm
work. Wal-Mart inspired fervent loyalty from customers by putting
its stores in regions other retailers had ignored.
But it also drew condemnation for
squashing smaller businesses in its path. Small-town business
districts tended to empty out when Wal-Mart hit. Some areas
responded by drafting anti-Wal-Mart zoning ordinances that keep out
retailers of a certain size.
Today, "Wal-Mart creates its own
weather," said John A. Challenger, chief executive of Challenger,
Gray & Christmas Inc., a Chicago outplacement firm that tracks
retail jobs. "It sets the standards in many ways for retailers
throughout the country, which benchmark against them."
Kmart Corp., which dwarfed Wal-Mart
only 15 years ago, filed for bankruptcy protection in 2002 and
eliminated 57,000 positions in part because it tried to compete with
Wal-Mart on prices and failed. FAO Inc., the iconic toy seller,
filed for protection from its creditors in part because it did not
try to compete with Wal-Mart on prices. Both retailers have since
emerged from bankruptcy proceedings. And since Wal-Mart began
aggressively expanding into groceries in the past decade, some
national supermarket chains have gone bankrupt.
Wal-Mart's pressure to hold down
labor costs also helps fuel the national market for undocumented
workers, immigrant advocates say, as employers take advantage of
laborers who are too fearful of being deported to object to
substandard wages and conditions. Rather than hire illegal
immigrants themselves, big chains typically turn a task such as
janitorial services over to a low-bidding national contractor, which
in turn farms the work out to smaller subcontractors. The
subcontractors range from established firms that rigorously check
workers' immigration status to one-man, fly-by-night operations that
knowingly employ illegal workers, labor experts say.
Undocumented workers learn of the
companies through word of mouth, foreign-language newspaper
advertisements and Web sites. It was a Russian hostel owner in
Brooklyn, for example, who directed 24-year-old Russian immigrant
Misha Firer to a small company that cleaned a Wal-Mart in
Pennsylvania. For two months, the undocumented worker lived in a
trailer park and buffed the store's floors from midnight to 8 a.m.
for $6 an hour -- $1 of which was seized by his boss, Firer said.
Even though Wal-Mart's roots are
outside of food retailing, it's within the food sector that the
non-unionized retailer is most affecting labor relations in this
country, said Ira Kalish, a global director at Deloitte Research.
"The impact in terms of wage
pressures is really in the supermarket industry because that's the
one part of retailing that's heavily unionized," Kalish said. "Most
others are not. For [a fashion retailer such as] the Gap, for
instance, the issue is not so much labor costs as supply-chain
efficiency, sourcing and rent."
But for supermarkets, which operate
on razor-thin profit margins, labor is perhaps the highest cost of
doing business, said Michael J. Silverstein, a senior vice president
at Boston Consulting Group.
"The less you pay [for labor], the
lower your prices can be," Silverstein said. "The grocery store is a
war zone, and the weak are going down fast -- and with them go a lot
of jobs."
Wal-Mart's supercenters have labor
costs roughly 20 to 30 percent lower than those of unionized
supermarkets, according to a study from consulting firm Retail
Forward. As a result, groceries at Wal-Mart cost about 15 percent
less than the competition, the study said.
Retail Forward concluded that for
every Wal-Mart Supercenter that opens in the next five years, two
supermarkets will close their doors. That means the supermarket
industry could lose 2,000 more stores over the next five years, or
400 a year.
"It's unlikely that any other U.S.
food retailer will catch up to Wal-Mart, even through a
mega-merger," the report said. By 2007, the chain should capture 35
percent of supermarket industry sales and double the number of its
supercenters to 2,250.
Wal-Mart is applying the same heavy
pressure on grocery suppliers that it exerts on makers of other
consumer goods, leaving them beholden to the retailing giant for a
significant part of their revenue. Wal-Mart made up 30 percent or
more of U.S. sales for Clorox Co., Gillette Co., Mattel Inc., and
Procter & Gamble Co. in fiscal 2002, according to Fitch Ratings.
For retailers, competing with
Wal-Mart means not just holding down wages, but curbing health care
costs, which are becoming an increasing burden on employers
nationwide.
A report by the AFL-CIO, which has
tried and failed to organize Wal-Mart workers, said the retailer
insures only about 45 percent of its workforce. Wal-Mart workers
must pay about one-third of the cost of their health care premiums,
while employees at other large companies typically pay 16 to 25
percent, the report said.
The result is that many Wal-Mart
workers transfer the health care burden either to their spouse's
employer or to government agencies, the report said.
Some employees at Minneapolis-based
Target Corp., a non-union company once known for its generous
employee benefits, say they believe price competition with Wal-Mart
caused their employer to cut benefits as well.
In April, Target rolled out a new
health care plan for 2004 that offered generous benefits, but only
for employees who averaged more than 32 hours of work each week.
Some Target employees say the company then hired more workers and
reduced existing workers' schedules so they no longer qualified for
the plan.
Wal-Mart workers have complained of
similar strategies designed to keep them from qualifying for health
coverage.
Lawsuits representing thousands of
current or former Wal-Mart employees and focusing on wage and
overtime pay as well as sex discrimination are on file around the
country, along with dozens of complaints to federal labor
regulators.
Wal-Mart defends its practices,
arguing that its employees have generous access to insurance and
that worker contributions to health care -- $57 per two-week pay
period for a family plan -- are in line with the rest of the
industry. The company does not quibble with AFL-CIO's wage numbers
or health coverage statistics, "but they're only telling half the
story," said Mona Williams, Wal-Mart's chief spokeswoman.
Forty percent of the employees who
Wal-Mart insures had no medical benefits prior to joining the
company, she said. "These are people who would have fallen through
the cracks or been on public health rolls," she said, adding that
some 62 percent of Wal-Mart's workers are eligible for benefits.
As for wages, Wal-Mart's
entry-level jobs "are not designed for someone who is the sole
support for a family" but for those looking to advance, she said.
About two-thirds of Wal-Mart's managers were once hourly workers for
the chain. Employee turnover is 50 percent, better than the 70
percent industry average, Williams said.
Maybe that's why union attempts to
organize Wal-Mart employees have failed, Williams said.
"What we need to ask our
competitors is: Can they be more efficient? Can they live more
frugally?" she said. "Is paying people $15 to $17 [to stock shelves]
realistic?"
Some analysts agree, saying
Wal-Mart's strategies and success would not be possible without
willing workers and the backing of penny-pinching consumers.
"You can't stay non-union unless
you're giving people something. On balance it has to work out for
employees," said Bernard Sosnick, an analyst at Oppenheimer & Co.
Kroger employees on a picket line
this week in Morgantown, many of whom said they were making between
$11 and $13 an hour, said they would never work at Wal-Mart. But
most said they shop there. In the parking lot of the nearest
Wal-Mart Supercenter, on a hilly cow pasture 19 miles south of
Morgantown, Vivian Mullins and her daughter, Jennifer, wheeled out a
cartload of groceries and said they have sympathy for Kroger
workers. But they love their Wal-Mart.
"I applied to work there just the
other day," said Jennifer Mullins, 18, currently working in a
restaurant. "A lot of my friends I went to school with work there.
They think it's great."
Staff writers Kirstin Downey and
Michael Barbaro contributed to this report.
[back to top]
Supervisor defends big box limit
By
Peter Felsenfeld - CONTRA COSTA TIMES
[back to top]
October 28, 2003
WALNUT CREEK - Anti-tax advocates
gave Contra Costa Supervisor John Gioia of Richmond a chilly
reception Monday as he outlined a controversial measure to limit
large retailers.
Foreshadowing what promises to be a
bitter political fight this winter, members of the Contra Costa
Taxpayers Association said supervisors have placed a sloppily worded
referendum on the March 2 ballot to please their union supporters.
"I doubt the supervisors voted for
this after a careful, objective analysis," said Henry Alker,
president of the Black Diamond Coal Mining Company. "I suspect they
are facing very strong pressure from the unions to protect union
jobs."
Gioia defended the measure as an
important planning tool and a vehicle to protect Contra Costa tax
dollars. Supervisors approved it in June, but Wal-Mart soon
collected enough signatures to force the board to rescind the
ordinance or place it before voters.
The measure would prohibit
so-called "big box" stores larger than 90,000 square feet from
dedicating more than 5 percent of shelf space to nontaxable items
such as groceries. It would only apply to retailers in the county's
unincorporated areas. Martinez and Oakland have similar ordinances.
A coalition of labor and community
groups says Contra Costa's ordinance helps protect small
neighborhood merchants from the jaws of giant supercenters.
Though Wal-Mart is not mentioned in
the measure, the retail chain contends it is the target. The store's
workers are not unionized.
Gioia, addressing the taxpayer
group at the Renaissance ClubSport Hotel, veered away from labor
arguments, stressing instead the measure's land-use impacts.
The grocery section of Wal-Mart
"does not generate substantial sales tax revenue, but studies show
it does add car trips," Gioia said. "Why should taxpayers be stuck
paying for road improvements and maintenance for trips these stores
generate?"
Wal-Mart's arguments resonated with
the county's top tax group. Stores like Wal-Mart make Contra Costa a
more affordable place to live by offering discounted items, said
association president Larry Lippow.
"Supervisors are placing
restrictions on this enterprise when they should be encouraging it,"
he said.
Afterward, Gioia acknowledged that
unions support the law. However, he said its impacts would benefit
all Contra Costa residents.
"I agree with many of labor's
issues on this, I don't deny it," Gioia said. "But they didn't
pressure me."
[back to top]
Standing against bias
Stacy A. Teicher Staff writer of The Christian Science Monitor
[back to top]
October 27,
2003
Guess the era:
* A previously coed troupe that
entertains fans at sporting events runs job ads seeking "males with
athletic ability and talent."
* A female employee at a
home-improvement store is assigned to a cash register, despite
previous experience in a lumberyard that would qualify her for a
sales-floor job (the springboard for promotions).
* A woman asks her boss why men in
similar jobs earn more money. His reply: They have families to
support.
If you said the 1960s or '70s, try
again. All three incidents took place in the past 10 years. The
first two resulted in payments to the affected women and agreements
by the companies to try to eliminate discriminatory practices. The
third stems from a lawsuit against Wal-Mart now working its way
through the courts.
More than 100 women have submitted
statements to the US District Court in San Francisco, charging
discrimination in the form of unequal pay and barriers to promotion.
If their request to classify this as a class-action suit is granted,
the class would include 1.6 million women who have worked at
Wal-Mart since 1998.
That would make it the largest
employment class-action suit in United States history - one that
would have "seismic impact," says Adam Forman, an attorney with
Testa, Hurwitz, & Thibeault in Boston, which is not involved in the
case.
The potential for a full battle in
court ora gargantuan settlement has lawyers and employers alike
watching from the edges of their seats. And the case could bring sex
discrimination to the public's attention in a way not seen since
Anita Hill's accusations against Clarence Thomas in 1991 forced a
national conversation on sexual harassment.
However the case is resolved, it
raises the specter of gender stereotypes that many assume had
disappeared long ago.
"We don't hear very much anymore of
people willing to say women should be home with their children, or a
man should make more because he's supporting [a family] ... but the
notion of women not being interested [in certain jobs] is still
quite pervasive," says Joyce K. Fletcher, a professor at Boston's
Simmons School of Management and its Center for Gender in
Organizations.
Those more subtle stereotypes "are
so embedded in the culture that it just seems like common sense, it
doesn't seem like bias," she says.
No one denies women's overall
advancement in the past few decades. In 1966, women constituted 31
percent of employees but only 9.3 percent of officials and managers
at companies with more than 100 workers, according to the Equal
Employment Opportunity Commission (EEOC). By 2002, women accounted
for 48 percent of employees and 36.4 percent of officials and
managers.
But sex discrimination remains the
second most common type of complaint to the EEOC (after race) - with
about 25,000 filed each year, the vast majority from women.
One reason sex discrimination
persists is that class-action lawsuits often end in monetary
settlements, without much monitoring of the improvements a company
is supposed to make afterward, says Michael Selmi, a law professor
at George Washington University and author of a recent Texas Law
Review article on key discrimination suits.
But firms can make significant
changes if their leaders see value in eliminating exclusionary
practices that are bad for business, he says. "There have to be
rewards for diversifying the workforce, for having more women in
management.... There has to be a commitment that it's the right
thing to do."
Fair shake' sought
To the women suing Wal-Mart,
promotions there have been anything but fair. Christine Kwapnoski
had been working at Sam's Club (owned by Wal-Mart) for 15 years when
she became one of the named plaintiffs in June 2001. "There have
been a ton of guys promoted over me, time and time again," she says
in a phone interview from her home in Concord, Calif. When she asked
her manager why men with significantly less experience were earning
higher pay and promotions, she says he told her that the men had
families to support. It's a story echoed by other plaintiffs, and it
especially stung Ms. Kwapnoski, who pays child support for a
14-year-old and a 10-year-old.
Within weeks of the lawsuit being
filed, Wal-Mart promoted Kwapnoski, and this year she entered the
management training program. But she hopes the lawsuit will help
other women, too. "I don't want them to just promote women out of
fear," she says. "We just want a fair shake. I've seen a lot of
women managers who were really good who got run out of town ... and
that's what I'd like to stop."
Women made up about 65 percent of
the hourly staff at Wal-Mart, but only 33 percent of salaried
management - and at each rung up the ladder, women's representation
drops, according to a report submitted by the women's attorneys.
Wal-Mart offers a different
analysis. "Wal-Mart does not tolerate discrimination against women
or anyone else," says Sarah Clark, a company spokesman, in an
e-mailed statement. "When you look at Wal-Mart's growth and the fact
that we promote women at the same rate they apply for jobs - or
better - you can see that Wal-Mart provides more opportunities for
women than any other employer in the country."
Ms. Clark would not comment
specifically on the lawsuit. But in court, Wal-Mart presented data
to show that any alleged problems were related to individual stores
and did not represent a companywide pattern.
Traditional roles
Some argue that the label
"discrimination" can be slapped onto situations too quickly.
"Sometimes women make less [money] not because of discrimination,
but because they've taken time off to be with their kids.... Or a
woman might decide she needs flex time and that might keep her out
of a management position," says Charlotte Hays, senior editor at the
Independent Women's Forum in Washington, D.C.
If companies want to retain more
women and see them advance to top jobs, Ms. Fletcher says, they may
need to examine how those jobs are defined. "Is it because it's the
best way for getting that work done, or is it defined in the way
that men have always done it, because of their particular life
situation in our society?"
In 1973, Sears was charged with not
hiring women and men on an equal basis for sales-commission jobs,
which yielded higher pay. Sears argued that most women weren't
interested in such jobs. With only statistics to go on and no
"smoking gun" testimony from women, the case was finally resolved in
favor of Sears in 1988.
A few years later, anecdotes did
accompany statistics in a class-action suit against Home Depot's
western division. About 70 percent of the sales-floor jobs were held
by men, while 70 percent of cashiers were women - including the one
who had worked in a lumberyard. While not admitting discrimination,
Home Depot settled that and several smaller claims for $104 million
in 1997. It also made some changes. Instead of managers steering
people informally into jobs, openings are now posted companywide.
Company leaders should know by now
to examine their policies and make sure there isn't room for
decisions based on stereotypes, says Nancy Dowd, a law professor at
the University of Florida in Gainesville. "Anytime there's a
word-of-mouth, informal way that promotions occur, that's a huge red
flag you've got to deal with.... It might be OK ... but you have to
make sure the mentoring and opportunity structures are truly open
and nondiscriminatory."
[Editor's note: The original
version of this story included a chart of top five
sex-discrimination class-action settlements.]
[back to top]
Cleaner at Wal-Mart Tells of Few
Breaks and Low Pay
By STEVEN GREENHOUSE - The New York Times
[back to top]
25 October 2003
Every night for months, Victor
Zavala Jr., who was arrested on Thursday in a 21-state immigration
raid, said he showed up at the Wal-Mart store in New Jersey to clean
floors.
As the store's regular employees
left at 11 p.m., Mr. Zavala said, they often asked him whether he
ever got a night off.
Mr. Zavala, identified by federal
agents as an illegal immigrant from Mexico, told the Wal-Mart
workers that he and four others employed by a cleaning contractor
worked at the Wal-Mart in Old Bridge every night of the year, except
Christmas and New Year's Eve.
Now Mr. Zavala feels cheated,
saying he worked as hard as he could pursuing the American dream,
only to face an immigration hearing that could lead to deportation
for himself, his wife, Eunice, and their three children, 10, 7 and 5
years old. He was one of 250 janitors employed by Wal-Mart
contractors who were arrested at 60 Wal-Mart stores before dawn on
Thursday.
''My family's not happy about
this,'' said Mr. Zavala, who said he paid a ''coyote'' $2,000 to
smuggle him into the United States three years ago. ''My children do
not want to leave and go back to Mexico.''
A federal law enforcement official
who spoke on condition of anonymity said yesterday that several
current and former cleaning contractors for Wal-Mart, the nation's
biggest retailer, were cooperating with the government in its
investigation. On Thursday, federal officials acknowledged that they
had wiretaps and recordings of conversations and meetings among
Wal-Mart executives and contractors.
Federal officials said that as part
of the Thursday raid, they searched the office of a middle-level
manager at Wal-Mart's headquarters in Bentonville, Ark. The
officials said the government believed that Wal-Mart executives knew
the cleaning contractors were using illegal immigrants.
Federal officials noted that 102
illegal immigrants working for Wal-Mart cleaning contractors had
been arrested in 1998 and 2001 and that 13 Wal-Mart cleaning
contractors had pleaded guilty after those arrests. Those pleas
remain under court seal.
Wal-Mart said yesterday that it had
begun an internal investigation and would dismiss anyone in its work
force who did not have proper immigration papers. Wal-Mart also told
its officials to preserve any documents that might be relevant to
the federal inquiry, which is being conducted by the Department of
Homeland Security's division of Immigration and Customs Enforcement.
Wal-Mart officials said that the
raid surprised them, and that they had no idea the company's
cleaning contractors used illegal immigrants.
They acknowledged yesterday that 10
immigrants arrested on Thursday in Arizona and Kentucky were
employed directly by Wal-Mart. Company officials said they had
brought these workers in-house after certain stores phased out the
use of the contractors for whom the immigrants had worked.
Wal-Mart officials also said the
company required its contractors to hire legal workers only.
''We have seen no evidence thus far
that anyone in Wal-Mart is involved in any scheme involving illegal
workers,'' Tom Williams, a company spokesman, said.
Government officials and Walmart
executives declined yesterday to name the cleaning contractors whose
employees were arrested.
''These arrests are part of the
Immigration and Customs Enforcement mission and part of our
continuing commitment to investigate companies that are hiring
individuals who are not authorized to work in the United States,''
said Garrison Courtney, a spokesman for the immigration agency.
Federal officials said yesterday
that the leading nation of origin for the janitors caught in
Thursday's raids was Mexico, with 90. The Czech Republic was second
with 35, followed by Mongolia with 22, Brazil with 20. Uzbekistan,
Poland, Russia, Georgia and Lithuania each had about a dozen.
Mr. Zavala, the janitor in Old
Bridge, N.J., said he got his job shortly after arriving in the
United States, when a neighbor asked whether he wanted work cleaning
buildings. Mr. Zavala, 28, said he did not know the name of his
boss.
Mr. Zavala said he believed that
the Wal-Mart managers knew the janitors were illegal immigrants.
''Deep in their minds, of course
the store managers knew it,'' he said. ''The other guys from the
crew didn't speak one word of English. Of course they knew it, but
if you asked them, they'll say 'we thought they were citizens or
residents.' ''
Mr. Zavala said the contractor that
he and Eunice, his wife, worked for paid them $400 a week each for
working 56 hours. That would come to $6.25 an hour if time and a
half overtime is included for all hours worked in excess of 40.
''We don't know nothing about days
off,'' said Mr. Zavala, whose hometown is Mexico City. ''We don't
know nothing about nights off, we don't know health insurance, we
don't know life insurance, and we don't know anything about 401(k)
plans.''
He said that when he was arrested
and taken to a detention center in Newark, immigration officials
mocked him for taking a job that paid so little in a state where
rents and living expenses are so high. He said that in his 16 months
as a cleaner at Wal-Mart, he was given only two nights off.
He said he did not think that the
contractor withheld taxes from his pay, raising questions about
whether the contractor was making the required contributions for
Social Security and unemployment insurance.
Misha Firer, an illegal immigrant
from Russia, said he worked for three months last year as a cleaner
at Wal-Marts in Ephrata, Pa., and Glens Falls, N.Y., working 90
consecutive days without having a day off.
Mr. Firer said that he earned $6 an
hour, working the midnight-to-8 a.m. shift, washing, waxing and
buffing floors. He said the chemicals were so strong that some
workers had nose bleeds, sore eyes and skin irritations.
''Nobody wanted to take the job,''
he said. ''It was a night job and it paid very little.''
[back to top]
Wal-Mart Raids by U.S. Aimed at
Illegal Immigrants
By STEVEN GREENHOUSE
[back to top]
Published: October 24, 2003
Federal agents raided 60 Wal-Mart
stores across the nation yesterday and said they arrested more than
250 illegal immigrants who worked as janitors for outside
contractors used by Wal-Mart, the world's largest retailer.
As part of the 21-state raid, the
largest immigration crackdown in years, federal agents also searched
the office of an executive at Wal-Mart's headquarters in
Bentonville, Ark., and removed boxes of documents, company and
government officials said.
One federal official, who spoke on
condition of anonymity, said that a grand jury was investigating the
matter and that the government believed that Wal-Mart officials knew
about the widespread use of illegal immigrants. The official said
the government had used wiretaps in the investigation and had
recordings of conversations among Wal-mart executives and
contractors.
Wal-Mart officials were quick to
acknowledge the raids and said that the arrested workers were
employed by contractors and that Wal-Mart required those contractors
to employ only legal workers.
Tom Williams, a Wal-Mart spokesman,
said the raid and the allegations that illegal immigrants were used
in its stores came as a surprise.
"We've seen no evidence from the
Immigration Service that anyone in Wal-Mart was involved in any
scheme involving illegal workers," Mr. Williams said.
He said he believed that the
manager whose office was raided worked in Wal-Mart's building
services division.
The workers who were arrested were
finishing the night shift before dawn, said Garrison Courtney, a
spokesman for the division of Immigration and Customs Enforcement.
Most are from Eastern Europe or Latin America.
Mr. Courtney said federal officials
had originally sought to arrest 300 of the janitorial workers when
the raids began around 4 a.m. yesterday, but were able to arrest
slightly more than 250. The employees now face deportation.
Immigration experts said the
arrests of so many illegal immigrants at Wal-Marts across the
country demonstrated that these workers have come to play a
significant role in the American economy. They often take the
low-end, low-paying jobs shunned by not just American workers, but
also legal immigrants.
Yesterday's arrests came after a
five-year period that saw federal immigration authorities greatly
scale back the number of company raids. Particularly since the Sept.
11 terrorist attacks in New York and Washington, federal officials
have focused their immigration arrests on facilities, like airports,
that might be terrorist targets.
"This is the biggest raid in a few
years," Mr. Courtney said. "This is the result of almost a four-year
investigation. We're a law enforcement agency, and we're going to
enforce the laws."
Federal law enforcement officials
said the investigation grew out of earlier raids in 1998 and 2001
when about 100 illegal immigrants were arrested working at Wal-Mart
stores in New York, Pennsylvania, Ohio and Missouri. These officials
said that after those arrests, 13 Wal-Mart cleaning contractors
pleaded guilty to knowingly employing illegal immigrants.
Mona Williams, Wal-Mart's vice
president for communications, said: "These federal officials are
referring to third-party suppliers that we entrusted to hire legal
workers. For them to say that it strains credibility that we're
surprised about what happened today, those other actions happened
years ago."
Mr. Courtney said that if federal
officials found substantial evidence that the cleaning contractors
or Wal-Mart officials knowingly employed illegal immigrants, they
could face criminal charges, including fines up to $10,000 per
illegal worker. He said he did not know the name of Wal-Mart's
cleaning contractors or of the Wal-Mart executive whose office was
searched.
In a statement, Immigration and
Customs Enforcement said, "The investigation is ongoing," and said
the arrests were part of "ongoing efforts to ensure that U.S.
companies do not employ individuals who are unauthorized to work in
the United States."
Wal-Mart officials said the company
used about 100 contractors to clean about 1,000 of its American
stores. They said they did not know whether one contractor or many
employed the arrested workers.
Wal-Mart is not the first company
to face immigration issues. A three-year-old lawsuit against several
California supermarkets asserts that the supermarkets and their
cleaning subcontractors violated minimum wage and overtime laws in
using illegal immigrants to clean their floors.
The Mexican American Legal Defense
and Education Fund, which filed that lawsuit, asserted that some
workers were paid less than the $5.15-an-hour minimum wage and that
many were never paid overtime even after working 55-hour weeks.
The cleaning contractors involved
in that case often asserted that those workers were independent
contractors and not employees and thus were not covered by minimum
wage or overtime laws.
Mr. Courtney said he did not know
whether Wal-Mart's cleaning contractors had violated wage laws. He
said the Department of Labor had not participated in the
investigation.
Wal-Mart has 1.4 million employees
worldwide and had $245 billion in revenues last year. Each week 138
million shoppers visit Wal-Mart's 4,750 stores.
In recent years, Wal-Mart has
frequently been accused of skirting various federal employment laws.
Class-action suits have been filed
in more than 30 states charging Wal-Mart supervisors with pressuring
employees to work off the clock. In California, lawyers have filed a
lawsuit accusing Wal-Mart of discriminating against female employees
in its promotions. The lawyers have asked a federal judge in San
Francisco to allow the lawsuit to proceed as a class action,
potentially creating a class of 1.6 million current and former
Wal-Mart employees.
Wal-Mart denies pressuring
employees to work off the clock and asserts that it has an
aggressive program to hire and promote women.
The raids yesterday were carried
out in Alabama, Arkansas, Arizona, Connecticut, Delaware, Kentucky,
Massachusetts, Maryland, Michigan, North Carolina, New Hampshire,
New Jersey, New York, Ohio, Oklahoma, Pennsylvania, South Carolina,
Tennessee, Texas, Virginia and West Virginia.
Immigration officials said their
investigation focused on forms, known as I-9's, that employers are
required to use to determine the eligibility of their workers.
Ms. Williams said the company was
assessing the situation.
"We first learned about the raids
when store managers at affected stores began calling us," she said.
[back to top]
Wal-Mart Knew of Illegal Workers
The Associated Press LITTLE ROCK, Ark.
[back to top]
Oct. 24, 2003
Wal-Mart had direct knowledge of
immigration violations involving its cleaning contractors at stores
across the country, federal law enforcement sources said. Federal
agents raided Wal Mart's headquarters and 60 of its stores across
the nation Thursday, arresting more than 300 illegal workers in an
immigration crackdown at the world's biggest retailer.
The workers were members of
cleaning crews hired by outside contractors, but federal law
enforcement officials who spoke to The Associated Press on the
condition of anonymity said Wal-Mart knew of the violations. They
cited recordings of meetings and conversations among Wal-Mart
executives, managers and contractors.
"We have seen no evidence of this
from the INS, and, if that turns out to be true, we will cooperate
fully with law enforcement officials," Wal-Mart spokeswoman Mona
Williams said.
The workers were arrested as they
finished their night shifts at Wal-Mart stores in 21 states. Agents
also hauled away several boxes of documents from an executive's
office at Wal-Mart headquarters in Bentonville.
An employer can face civil and
criminal penalties for knowingly hiring illegal immigrants or
failing to comply with certain employee recordkeeping regulations.
Wal-Mart Stores had sales last year
of $244.5 billion. The company has about 1.1 million employees in
the United States, and it uses more than 100 third-party contractors
to clean more than 700 stores nationwide, Williams said.
"We require each of these
contractors to use only legal workers," she said.
The law enforcement sources said
the investigation grew out of earlier probes of Wal-Mart cleaning
crew contractors in 1998 and 2001.
All the arrested workers were in
the country illegally, said Garrison Courtney, a spokesman with
Immigration and Customs Enforcement. They were detained at local
immigration offices. Those who had no criminal record were released
with instructions to appear before immigration judges.
Wal-Mart is not the first big
company to be targeted in an immigration investigation. Six managers
at Tyson Foods, based one town away from Wal-Mart in Springdale,
were charged in an immigrant-smuggling case in 2001.
One defendant shot himself to death
a few months after being charged, and two managers entered guilty
pleas early in the case. A jury acquitted the poultry company and
three other managers.
Ulysses A. Yannas, an analyst with
the investment firm Buckman, Buckman and Reid, said it is too much
to expect Wal-Mart to keep track of all of its vendors' workers. But
he said the investigation could present a problem for the company.
"It is a question of what else it
might bring out. These are long, drawn-out processes," Yannas said.
Top Wal-Mart officials learned of
Thursday's sweep when store managers began calling headquarters for
guidance in dealing with the raids.
Courtney said agents searched the
office of one of Wal-Mart's executives. Williams, the spokeswoman,
said they spent several hours in the office of a "mid-level manager"
at Wal-Mart's headquarters and carried away several boxes of
paperwork.
She said she did not know if any
other Wal-Mart administrative offices were searched.
The arrests were made at stores in
Alabama, Arkansas, Arizona, Connecticut, Delaware, Kentucky,
Massachusetts, Maryland, Michigan, North Carolina, New Hampshire,
New Jersey, New York, Ohio, Oklahoma, Pennsylvania, South Carolina,
Tennessee, Texas, Virginia and West Virginia.
Suzanne Gamboa in Washington, D.C.,
contributed to this story.
[back to top]
Wal-Mart's everyday high costs
By Froma Harrop -
Providence
Journal
[back to top]
October 22, 2003
AMERICA WORSHIPS at the altar of
Everyday Low Prices. That's how Wal-Mart can get away with ravaging
American wages, benefits and the jobs themselves. That's how
Wal-Mart can go on hollowing out America's downtowns and with
taxpayer subsidies, to boot.
Wal-Mart is not the only big-box
discounter turning the American countryside into a crudscape and its
working people into paupers. But the monster leads the pack in terms
of size and its holy crusade to cut costs. With $245 billion in
revenues last year, Wal-Mart is the world's largest company. Sales
at the Bentonville, Ark.-based giant are bigger than the combined
total of Home Depot, Target, Sears and Kroger.
Business Week described the
everyday low prices slogan as the core value of a cult masquerading
as a company. All those yellow smiley faces and front-door greeters
are part of a bigger strategy: to get rich off America's workers
while undercutting them at every turn. What am I talking about? Here
are the particulars:
* Wal-Mart likes to call its sales
clerks associates, but serfs would be more like it. The company paid
its salespeople an average $8.23 an hour in 2001. At that wage, a
full-time worker made only $13,861 a year. The poverty level for a
family of three was $14,630. Only 38 percent of Wal-Mart's workers
have health coverage. It should surprise no one that nearly half of
Wal-Mart's employees quit every year. (Before the recession, the
annual turnover rate was 70 percent.)
* Wal-Mart is destroying factory
jobs in America. Example: Levi Strauss was one of the last apparel
makers to actually produce stuff in the United States. But the
made-in-America label means zip to Wal- Mart, which scours the
globe's sweatshops for the sweetest prices. Demands for the cheapest
jeans have forced Levi Strauss to shut down about a dozen U.S.
plants. A factory in San Antonio is about to become the latest
casualty.
Wal-Mart lobbies furiously in
Washington for free-trade deals that guarantee a flood of goods made
by pennies-an-hour labor ($12 billion worth from China alone last
year). Small wonder America's manufacturers call Wal-Mart the Beast
from Bentonville.
* To Wal-Mart, unions are the devil
and must be destroyed. Three years ago, meat cutters in
Jacksonville, Texas, tried to establish the first Wal-Mart union.
Eleven days after they joined the United Food and Commercial
Workers, Wal-Mart closed all the meat-cutting departments at its
stores and started buying pre-cut meat.
Wal-Mart is now on a rampage to
devour the nation's supermarkets, and so threatens workers
everywhere. Its Supercenter stores, which sell groceries, have
already sent more than 20 national supermarket chains into
bankruptcy. Wal-Mart has plans for 1,000 new Supercenters.
Terrified of a Wal-Mart invasion,
California's three biggest supermarket chains have tried to lower
their own costs by demanding concessions from their unionized
employees. The result is a strike by 70,000 workers at supermarkets
in southern California.
* Wal-Mart is paving over America
and destroying our communities. Its ugly boxes, plopped down on the
edge of town, vacuum up business from local shopkeepers. (So much
for any notion of customer loyalty.)
A group named Sprawl-Busters was
formed 10 years ago to block Wal- Mart from forcing itself onto
Greenfield, Mass. Every day, five or six towns from across the
country contact Sprawl-Busters for advice on stopping a Wal-Mart,
according to the group's founder, Al Norman. It's not even about
shopping, Norman says. It's about how we relate to the places we
live in. These towns are being changed economically, physically and
socially.
* Wal-Marts hurt surrounding
communities. Iowa State University economist Kenneth Stone has
studied the impact of Wal-Mart on rural Iowa. He found that some
business districts benefited from a Wal- Mart but other towns within
20 miles suffered badly, with retail sales plummeting 25 percent
after five years. Having lost their local merchants, the people
living in surrounding areas find themselves driving long distances
to the Wal-Mart.
The line of groups calling for a
boycott of Wal-Mart and its Sam's Club subsidiary grows by the week.
As a former Wal-Mart customer, your author appreciates the lure of a
good price. But there are competing values. When we understand the
real cost of these everyday low prices, they don't seem much of a
bargain at all.
Froma Harrop is a Journal editorial
writer and syndicated columnist. She may be reached by e-mail at: fharrop@projo.com.
[back to top]
Oakland City Council approves ban
on 'big-box' grocery stores
By Terence Chea - ASSOCIATED
PRESS
[back to top]
October 22, 2003
SAN FRANCISCO Oakland has become
the latest California community to ban Wal-Mart "Supercenters" that
sell discount groceries alongside other bargain goods.
The Oakland City Council voted 7 to
1 Tuesday night to approve a measure to limit the size of "big-box"
grocery stores allowed in the city. The ordinance bars discount
retail stores with full-service supermarkets that exceed 100,000
square feet, or about 2.5 acres.
The measure targets Wal-Mart
Supercenters gigantic shopping centers that average 187,000 square
feet, about twice the size of the typical Wal-Mart store. Since
introducing the concept in 1998, Wal-Mart Stores Inc. has opened
1,258 Supercenters in 43 states, but none in California.
Starting next year, Wal-Mart plans
to open 40 Supercenters in California over the next four years, but
the Bentonville, Ark.-based retailer is running into resistance from
communities worried about their impact on traffic, open space, jobs
and local business.
"Supercenters are going into
communities and doing damage to local economies," said Council
President Ignacio De La Fuente, who sponsored the Oakland measure
with Councilmember Jane Brunner.
"They say they bring jobs and sales
tax, but they put local stores out of business," De La Fuente said
Tuesday night. "The reality is they drain the life out of our
neighborhood commercial areas."
Opponents say Wal-Mart doesn't
provides adequate health insurance coverage for its employees,
straining local health care services. Labor leaders worry that
nonunion Supercenters will pressure traditional supermarkets to
lower wages or fire well-paid workers to stay competitive.
Wal-Mart spokeswoman Amy Hill
insisted that Wal-Mart helps communities by offering lower grocery
prices. She also said that the company offers all employees
competitive wages and benefits.
While Wal-Mart found the ban
disappointing, Hill said the decision "is not curbing our plans for
the state."
"In some respects I think it's
unfortunate that the city council or board of supervisors is trying
to protect some special interest groups, to the detriment of
consumers," Hill said.
Contra Costa County, with nearly
one million people east of San Francisco, has passed a similar ban
on Supercenters, but Wal-Mart hopes to overturn the measure with a
referendum in March. Officials in California's largest city, Los
Angeles, are discussing a measure that would block or discourage
big-box grocery stores.
The Oakland ordinance does not
affect smaller big-box grocery stores, such as Costco and Sam's
Club, or large retail stores that don't sell groceries.
Council members said the measure is
narrowly focused, and that the city isn't trying to turn away other
big-box retailers. The council will vote again on Nov. 4 to confirm
passage of the Oakland ordinance.
"It's the largest California city
where an ordinance like this has passed," said Daniel Beagle,
spokesman for the United Food and Commercial Workers Local 870,
which represents grocery store employees in Alameda County. "It's
sending a message to Wal-Mart that Oakland doesn't want that kind of
predatory competition."
Up Against The Wal-Mart Jonathan
Tasini is the national director of American Rights At Work.
What country has $245 billion in
revenues, a population of 1.4 million, is one of the worst abusers
of workers' rights and is committed to ruining the economy of the
United States? Don't think too hard because this is a trick
question—I'm not really describing a country but the economic power
and behavior of Wal-Mart.
What made me think of Wal-Mart was
the strike by 70,000 grocery clerks in Southern California, now in
its second week. From San Luis Obispo in central California all the
way down to San Diego, the three largest California supermarket
chains—Ralphs, Vons and Albertson—locked out the clerks for
demanding wage freezes, cuts in health care and a lower starting pay
for new hires. The supermarket chains cite Wal-Mart's five-year plan
to open 40 super-centers in California as the main reason they are
seeking to effectively drive yet another group of workers out of the
middle-class. I don't entirely buy the supermarkets' line—companies
are forever citing some economic external threat to justify
battering workers, while leaving corporate perks quite generous,
thank you.
But, there is a point here—Wal-Mart
is a blight on the country. As an employer, it is virulently
anti-union, relishes high-turnover as a tactic to keep workers from
exercising their democratic rights on the job and it employs more
than 70 people full-time to break union organizing efforts. The
National Labor Relations Board—no friend of workers—filed more than
40 complaints against Wal-Mart from 1998 to 2002, charging the
company with illegally firing workers, intimidating union supporters
and threatening workers that they would lose bonuses if they
unionized.
It faces the largest sex
discrimination case in history with perhaps 700,000 plaintiffs who
could be owed billions of dollars. According to a recent article by
Steven Greenhouse of The New York Times, Wal-Mart imported $12
billion of goods from China, accounting for a staggering one-tenth
of American imports from that country. You can see the evidence in
small ways—the company's health plan will not cover child
vaccinations.
It's a company that takes a chunk
out of people, not once but twice in a vicious economic cycle.
Workers shop at Wal-Mart for obvious reasons—low prices. Those low
prices encourage the trade of goods from countries where workers
labor in slave-like conditions (i.e., Wal-Mart keeps buying up more
cheap goods). But the low prices also drag down wages in the United
States because, as the Southern California grocery strike shows,
companies jump onto the bandwagon and demand that workers agree to
wage and benefit cuts for real or fictitious competitive pressures.
So, yes, some of our shopping
habits end up cutting our own economic throats. But, we should not
blame people who shop at Wal-Mart anymore than we should blame
workers who work for a company that pollutes the environment.
Workers flock to Wal-Mart because they are squeezed every day to
stretch a meager paycheck.
But, the point of this rant is not
just to flail away at Wal-Mart. It is to say it doesn't have to be
that way. As David Morris, a creative thinker on the economy and
society (and vice-president of the Institute for Local Self
Reliance), points out, people wear different hats in society: wage
earners, consumers, citizens and taxpayers. "The hat we need to wear
when it comes to Wal-Mart is our citizen hat," he says. "Wal-Mart is
as anti-union as any nation around the world but we allow Wal-Mart
to set-up around the country and force other employers to cut wages.
We should establish rules that do not allow Wal-Mart to compete like
that."
Whoa. Rules against union-busting?
Rules against firing workers, suppressing wages and widespread
discrimination, all passed into law for the common good? Indeed, we
have, as a nation, passed trade laws that set some labor standards
by which other nations must abide in order to trade with the United
States (that those labor standards are often not enforced and are
inadequate is another story). Why should the same standards of
respect for the right to organize unions that we demand of China not
hold true for corporations doing business in the United States?
Finally, there is a powerful
alliance to be made here. Labor unions, for obvious reasons, want to
halt Wal-Mart's appalling persecution of its workers.
Environmentalists are alarmed at Wal-Mart's role in quickening the
pace of suburban sprawl. Small businesses are a natural ally because
they feel the heavy Wal-Mart boot crashing down on their necks,
driving them into bankruptcy throughout the nation. That coalition
work has already begun. It should thrive and grow.
[back to top]
Wal-Mart, Driving Workers and
Supermarkets Crazy
By STEVEN GREENHOUSE, New York Times
[back to top]
October 19,
2003
In February Wal-Mart will open its
first grocery supercenter in California, offering everything from
tires to prime meats, and that could be a blessing for middle-class
consumers. The reason is simple: Wal-Mart's prices are 14 percent
lower than its competitors', according to a study by the investment
bank UBS Warburg.
But not everyone is rejoicing about
Wal-Mart's five-year plan to open 40 supercenters in California,
stores combining general merchandise and groceries that are expected
to gobble up $3.2 billion in sales. California's three largest
supermarket chains, Ralphs, Vons and Albertsons, are scared, and so
are tens of thousands of supermarket workers whose union contracts
have put them solidly in the middle class. The three grocers' fears
of fierce competition from Wal-Mart and their related drive to cut
costs are widely seen as the main reason behind the week-old strike
by 70,000 workers at 859 supermarkets in Southern California.
Wal-Mart has already helped push
more than two dozen national supermarket chains into bankruptcy over
the past decade. That list includes names like Grand Union; Bruno's,
once Alabama's largest supermarket chain; and Homeland Stores,
formerly Oklahoma's largest. And unionized supermarket workers fear
that Wal-Mart's invasion will oust them from the middle class by
pulling down their wages and benefits, which, taken together, are
more than 50 percent higher than those of Wal-Mart workers. At
Wal-Mart, the average wage is about $8.50 an hour, compared with $13
at unionized supermarkets.
"Wal-Mart's superstores are going
to have a devastating impact on California's supermarkets," said
Burt Flickinger III, a retailing consultant, noting that union wages
and prices are higher in California than in most of the country.
Eager to stay competitive against
Wal-Mart, Albertsons, Vons (owned by Safeway) and Ralphs (owned by
Kroger) have demanded a two-year wage freeze for current workers, a
lower pay scale for new hires and greater employee contributions for
health coverage. Those employees now pay no health insurance
premiums, while Wal-Mart employees often must pay premiums of $200 a
month and deductibles of up to $1,000 a year, if they qualify.
With Wal-Mart in mind, supermarkets
have engaged in tough bargaining across the country. That has led to
a 12-day-old strike by 10,000 supermarket workers in Missouri and a
six-day-old strike by 3,000 workers at 44 Krogers in West Virginia,
Kentucky and Ohio.
It is hard to underestimate the
power of Wal-Mart. It has 1.4 million employees and had $245 billion
in revenues last year, equaling 2.5 percent of the gross domestic
product. Each week 138 million shoppers visit Wal-Mart's 4,750
stores. Last year, 82 percent of American households bought at least
one item there.
Wal-Mart sells 32 percent of the
nation's disposable diapers, and it is the largest customer for Walt
Disney and Procter & Gamble. It has singlehandedly persuaded music
companies to issue sanitized versions of CD's. Its 1,397
supercenters account for 19 percent of the nation's grocery sales,
making it the largest grocery retailer. With Wal-Mart planning 1,000
more supercenters in the next five years, Retail Forward, a
consulting firm, estimates that Wal-Mart's grocery and drug sales
will double to $162 billion, giving it 35 percent of the domestic
food market and 25 percent of the drug market.
When Wal-Mart goes like gangbusters
into an area, as it plans to do in California, competitors often
feel panic. In Dallas, its share of the grocery market has soared to
16.4 percent from 8.5 percent in the past two years, according to
TradeDimensions International.
"We have been in business for 68
years, and in that period of time, we have seen dozens of
competitors come and go," said Jack Brown, president of Stater
Brothers, a supermarket chain in the Orange County and San Diego
areas. "However, Southern California has never seen as big a
competitive threat as the Wal-Mart supercenter."
Many factors explain Wal-Mart's
ability to charge low prices, including economies of scale, the
pressures it puts on suppliers and its embrace of imports — it
imported $12 billion in goods from China last year, one-tenth of
American imports from China.
Another big factor is Wal-Mart's
relatively low wages. Its sales clerks average about $8.50 an hour,
or about $14,000 a year, while the poverty line for a family of
three is $15,060. In California, the unionized stockers and clerks
average $17.90 an hour after two years on the job. Mr. Flickinger
said wages and benefits for Wal-Mart's full-time workers average $10
to $14 per hour less than for unionized supermarket workers.
"The strike out here involves
workers who enjoy decent wages, vacations and health benefits," said
Kent Wong, director of the Center for Labor Research and Education
at the University of California at Los Angeles. "These things were
taken for granted, they made them part of the middle class, but now
these workers are threatened with having these things taken away."
A big savings for Wal-Mart comes in
health care, where Wal-Mart pays 30 percent less for coverage for
each insured worker than the industry average. An estimated 40
percent of employees are not covered by its health plan because many
cannot afford the premiums or have not worked at Wal-Mart long
enough to qualify.
"What this means is, if I'm a
Wal-Mart employee and I hurt my hand and go to the emergency room,
who's going to pay for it? The taxpayer is," said Mr. Brown, the
supermarket executive. "Wal-Mart's fringe benefits are being paid by
taxpayers."
Wal-Mart officials say that their
expansion will be a boon for California consumers and that their
wages and benefits are competitive. Why else, they ask, would
600,000 workers take jobs at Wal-Mart each year?
Greg Denier, chief spokesman for
the United Food and Commercial Workers, said the fear of Wal-Mart's
supercenters is the main cause for the California strike, but he
argued that the supermarkets have exaggerated the threat as a
strategy to squeeze their workers.
"They keep saying they have to do
this because Wal-Mart is bringing supercenters to California," he
said, "but it's part of a national program to ratchet down wages and
benefits."
Yet Wall Street analysts and
retailing consultants say the California supermarkets, like others
across the country, risk being stomped by Wal-Mart.
[back to top]
Wal-Mart's benefits come under fire
By Janet Adamy, CONTRA COSTA TIMES
[back to top]
October 19, 2003
When Pamela Robasciotti was a
cosmetics department manager at Wal-Mart, she had to borrow money
from her boyfriend or parents to pay for the $25 inhalers she uses
to control asthma attacks.
On a wage of $9.27 per hour, every
expense stretched her pocketbook. But the prescription cost seemed
particularly unfair. Robasciotti already paid about $130 per month
for Blue Cross HMO health care coverage.
"They take $130 a month out ...
plus the pay wasn't really good," said Robasciotti, a 45-year-old
Gilroy resident who worked in the town's Wal-Mart for more than six
years. "I just got tired of it."
Robasciotti illustrates Wal-Mart
Stores Inc.'s tough approach to benefits, an approach that has its
employees paying more for health-care than most workers across the
country, including their peers at other large retailers. It's a key
part of the Wal-Mart cost-cutting model that has helped the retailer
grow into the largest company -- and employer -- in the world.
But Wal-Mart's health insurance
strategy is acquiring a growing number of critics. A San Jose
assemblywoman claims health benefits are so unaffordable that
workers instead sign up for government health care at the urging of
the retailer. And perhaps the most visable opponents are the 70,000
striking Southern California grocery workers, who blame the retail
giant for forcing their traditional grocery employers to phase out
one of the best health benefits packages in the retail industry.
A new law could drastically change
Wal-Mart's strategy in California. The retailer will have to pay for
a greater chunk of health care premiums under the sweeping health
insurance expansion bill that Gov. Gray Davis signed earlier this
month. The cost could prompt Wal-Mart to scale back its ambitious
growth plans in the Golden State, curb hiring at existing stores or
automate jobs, industry observers say.
"Wal-Mart picks its battles
strategically," said Gary Giblen, director of research at C.L. King
& Associates, a New York investment research firm. "They're going to
focus less on an area where they're competing less advantageously."
Research shows that Wal-Mart spends
less money on health care coverage than retailers and
non-competitors. Wal-Mart spent an average of $3,500 per worker for
health benefits in 2002. That's compared with $5,646 per worker for
all employers and $4,834 per worker in the wholesale and retail
industries, according to Mercer Human Resource Consulting.
Nearly 80 percent of Wal-Mart
workers in California have coverage through an HMO. On average, they
pay $106 per month for the insurance premium.
That relatively high cost becomes
even more expensive considering that Wal-Mart's hourly wage is at
the low end of the industry. Wal-Mart will not give exact wage
figures, but workers at Bay Area stores say the starting salary
ranges from about $8 to $8.25 per hour, although it can go higher if
a worker has special skills or experience. By comparison, the lowest
paying job at Safeway, Albertson's and other unionized traditional
grocer chains starts at $8.39, and Costco starts workers at about
$10 per hour. Most importantly, workers at those stores move up the
pay scale more quickly than Wal-Mart employees.
Wal-Mart officials say it's unfair
to compare Safeway Inc. and Albertson's Inc. store workers to
Wal-Mart workers ("associates" in Wal-Mart's parlance) because the
retail giant isn't a direct competitor with the traditional grocers.
But the only significant difference in the work forces is that
Safeway and Albertson's workers are members of the United Food and
Commercial Workers, which gives them more leverage to maintain their
pay and benefits.
Unionized California grocery stores
cover the entire cost of health care premiums for all store workers.
These employees pay a $10 co-pay to see a doctor. Branded
prescriptions cost them $6; generics cost $3. On top of the
$106-per-month premium fee that the average Wal-Mart worker
contributes, they also pay $15 for doctor visits, $5 for generic
drugs and as much as $25 for branded prescriptions. Wal-Mart has
been successful in keeping unions out of all its stores.
At Costco, which is partially
unionized, workers pay for 8 percent of their total health care
costs, while Wal-Mart store workers chip in about one-third of the
cost. A new full-time Costco worker can sign up for benefits in half
the time that a comparable Wal-Mart worker can. For part-time
workers, Costco employees get their benefits in one-fourth the time.
Wal-Mart does offer health
insurance with a monthly premium as low as $26 per month for an
individual plan. But under that coverage, the worker pays up to
$1,000 per year before the plan starts paying for part of any
medical charges.
"Our argument is that our coverage
is intentionally planned for those kinds of catastrophic issues,"
said Bob McAdam, Wal-Mart's vice president of government relations.
Wal-Mart officials say that
although their health benefits package may not be as good as some
competitors, they do offer a profit-sharing plan, a company-funded
401(k) and ample opportunities for advancement.
More than half of store workers in
California subscribe to Wal-Mart's health benefits. McAdam said 40
percent get benefits from other sources including parents or
spouses.
But Assemblywoman Sally Lieber,
D-San Jose, has a different theory on how those workers are getting
their health costs covered. In July, Lieber unveiled Wal-Mart
employee hand-outs telling workers how to use an employment
verification service when applying for social services like
Medicaid, food stamps and temporary assistance to needy families.
Lieber called it proof that the retailer is asking the state and
federal government to make up for what she calls "poverty" level
wages and thin benefits.
"We have been in the worst budget
crisis that California has faced since the Great Depression," Lieber
said. "In that context, we can't keep large, wealthy corporations on
the dole."
The pages in the worker information
hand-out explain how to use the Work Number, an employment
verification service. If a worker wants to rent an apartment or
borrow money, the landlord or lender uses the service to check that
the person indeed works at Wal-Mart.
Wal-Mart spells out that workers
can use the same service to apply for government assistance. One
part of the handout details how a social service caseworker can
verify an employee's income and work status to determine whether
they'd qualify for assistance.
Lieber said she is working on
legislation that would require Wal-Mart to reimburse the state for
allegedly providing health care and public assistance to its
workers. But so far, there's no evidence this is actually happening.
Lieber has not documented any cases
of Wal-Mart workers leaning on social services because of
insufficient pay or health benefits. In nearly a dozen Times
interviews with current and former Northern California Wal-Mart
store workers, only one provided examples of workers using a social
service. But that alleged use of food stamps could not be proven.
And whether telling workers how to
apply for social services constitutes encouragement is a matter of
interpretation. Wal-Mart's McAdam called Lieber's allegation
categorically false.
"The fact that it contains that
particular reference does not mean we are encouraging them to do
that," McAdam said.
Regardless of whether Lieber's
allegations have merit, industry experts say it's clear that
Wal-Mart workers are squeezed by the pay and cost of health
benefits. Former Lafayette resident Martin Levitt consulted with
Wal-Mart in the 1970s to help it prevent unions from forming. He
later switched sides and now serves as a labor adviser in Las Vegas.
Health insurance is "not a provided
benefit," Levitt said. "It's so expensive that the vast majority of
Wal-Mart and Sam's Club employees can't afford it." When faced with
criticism of its policies, the retailer justified them by saying it
was providing jobs, Levitt said.
Wal-Mart's hard-line stance on
benefits costs are a key part of its financial success. Industry
experts say that labor costs account for two-thirds of a grocer's
overall costs. Mark Husson, a food and drug analyst for Merrill
Lynch Global Securities, called Wal-Mart's low worker costs its main
competitive advantage.
"Wal-Mart is soon going to be the
lowest common denominator in the food business, and everyone has to
move towards that level," Husson said.
That's already starting to happen.
Two years ago, Northern California members of the United Food and
Commercial Workers saw their doctor visit and branded prescription
drug co-pays double when they renewed their contract with Safeway
and Albertson's. UFCW grocery workers went on strike in Southern
California because three major grocery chains wanted to shift $1
billion in health-care costs to workers, according to the union.
Safeway, Albertson's and Kroger Co. want workers to start paying $5
to $15 per week for insurance that was once free for them.
Many companies are starting to pass
health-care costs onto workers because of the soaring price of
health insurance. But California grocers are clearly shifting the
costs in reaction to Wal-Mart. The retail giant has plans to open 40
supercenters selling fresh groceries in California over the next
several years.
The new health-care law could take
away part of Wal-Mart's labor cost advantage. SB2 would expand
health care to more than 1 million working Californians by requiring
companies with 50 workers or more to offer insurance or pay into a
state fund that provides it.
Although the bill was aimed at
small companies, it impacts Wal-Mart because it requires employers
to pay for 80 percent of health-care costs. Right now, Wal-Mart
covers about two-thirds of those costs. The measure also requires
Wal-Mart to cut about 90 days off its benefits qualifying period for
full-time workers and about one year and nine months off for
part-time workers.
Wal-Mart said it could not estimate
how much the changes would cost the company in California, where it
employs 53,000 workers. But industry experts say that they could be
significant enough to shift the company's California strategy.
"It could make a big difference in
the degree that they expand in California," said Giblen, the
supermarket analyst. The retailer could try to get around the cost
by hiring fewer workers, having existing employees work more hours,
and using machines instead of people for some jobs, he said.
The California Chamber of Commerce
lobbied fiercely against the bill, arguing it would kill jobs in the
Golden State.
"It imposes a new
multibillion-dollar mandate for doing business in the state of
California," said Richard Costigan, vice president of governmental
relations for the chamber. "It imposes something on Wal-Mart and any
other company that's not required in the 49 other states."
But Wal-Mart's McAdam said the law
won't deter its interest in growing in California. It's also unclear
whether Wal-Mart would be subjected to the measure. Opponents of the
law are investigating whether federal laws would exempt Wal-Mart
from the mandate because it operates across the country and insures
itself. The law doesn't take effect until 2006.
Although politicians have put
Wal-Mart's health benefits in the spotlight, local workers say the
insurance is not a big topic of conversation at their stores. Plenty
of workers say they consider the health costs fair and the coverage
ample.
One sales associates said she
thinks the $50 per month she pays for her PacifiCare health plan is
completely reasonable. After six years working in an East Bay
Wal-Mart store, the worker earns $11.25 per hour. The worker did not
wish to be identified because Wal-Mart employees are not allowed to
speak with the media without corporate authorization.
She said she was not aware of
workers opting out of benefits because they're too expensive or
leaning on social services.
"Why are people saying that they're
outrageous? Because they're not," the worker said. "They're really
not."
Robasciotti, the former Wal-Mart
employee, now has a measure of comparison. Two years ago she left
her Wal-Mart management job to work in a Safeway deli department in
Morgan Hill. She moved up to become a manager at the in-store
Starbucks, earns $13.50 and pays nothing for her benefits. Now
Robasciotti is trying to encourage Wal-Mart workers to form a union
of their own.
"It's just changed everything,"
said Robasciotti. "My dad tells me, 'You should have done this seven
years ago.'"
Two supervisors leading charge
against 'big box'
[back to top]
"Nigger Dave"
That's what they called him at
Wal-Mart. His managers didn't seem to care
BY PETE KOTZ - CLEVELAND SCENE
[back to top]
October 15, 2003
Dave Thomas has found that justice
is for those who can buy it.
The first time David Thomas was
called a nigger, he'd spent just 45 days on the job. Two co-workers
had taken to announcing that they hated "that nigger Dave" to anyone
who would listen.
Thomas, an even-keeled and
courteous man -- the kind who calls you "mister" -- had no idea what
he'd done to piss the women off. "I didn't even know these people,"
he says. But everyone knew they were pissed. "They didn't care who
heard it."
Two managers at the Elyria Wal-Mart
called him into the office. "Did you hear anything?" they asked. He
was told to write it all down. But as the weeks passed, the women
continued to pronounce their hatred for "that nigger Dave."
"The first shift heard about it,
the second shift heard about it," says Thomas. "People would come up
to me and say, 'Are you hearing these things they're saying about
you?'" When he asked managers if they were following up, they'd
simply reply, "We're handling it in our own way."
But a few months later, it happened
again. Thomas was working the overnight stocking shift when, for
reasons no one can seem to explain, another woman called him a
"black bitch."
"Almost the whole shift saw it,"
says coworker Denise Taylor. "There were like six or seven people
there."
Thomas again went to his managers,
who did nothing. So he called a Wal-Mart employee hotline. He went
to store manager Keri Brown. He complained to the district
supervisor.
"It was like talking to a piece of
wood," he says. "That wood is not going to respond back to me. They
would say, 'What do you want me to do?'" Brown, who now works at the
Wooster store, won't discuss the matter. "Sorry, I can't talk to you
about any of that."
But Thomas wasn't about to lie
down. He launched a protest, simply refusing to come to work.
It was a militant move for a father
of two who seems anything but rebellious. "David is the kind of
person who will speak up for himself," says one co-worker, who asked
not to be named for fear of retribution. "He never did it in a
disrespectful way. He wouldn't call them out in front of anybody. He
would pull them off to the side. He was a very hard worker; he
wasn't a slacker."
Nor was he asking for much: just
the courtesy of not being called nigger on the job.
Yet for all its achievements as the
world's largest retailer, Wal-Mart remains a stunningly inept
corporation. Judges have fined it so often for hiding and destroying
records that it might aptly be called the Hillbilly Enron.
Particularly troubling is its labor
history. It's been caught forcing employees to work off the clock.
It's being sued by female employees who claim pervasive gender
discrimination. (One was told by
her manager that "God made Adam
first, so women would always be second to men.") And in California,
a movement is afoot to require Wal-Mart to reimburse the state for
public assistance.
Assemblywoman Sally Lieber says the
company encourages employees to go on welfare to subsidize their
poor wages and health benefits.
Wal-Mart's racial history is
arguably worse. A jury found the company guilty of firing a white
woman because she dated a black guy. The Alaska human rights
commission found omnipresent racism at one store; workers would ask
a black employee to "smile and show his teeth" to light trucks on
the loading dock, among other insults.
Then there's the infamous Cleveland
Heights incident. When $1,000 went missing in 1999, a manager
conducted bathroom searches of 37 black employees. No white worker
was questioned.
It's tempting to conclude that bad
wages simply produce incompetent management. The average Wal-Mart
employee earns about $11,700 a year (working 30-hour weeks, the
company's threshold for full-time). That's $2,000 below the poverty
line for a single mother with two kids. And management-recruitment
fliers read more like punishment for a 4th-degree felony than they
do career opportunities.
Enticements include uneven hours,
forced overtime and transfers -- all for a few more cents an hour.
It's a system designed to attract the children of a lesser Palm
Pilot.
Yet Elyria supervisors were smart
enough to fear their exposure with Thomas.
"If you leave your job for 28 days
in a protest, any other job you'd be terminated," he notes. Instead,
they called him at home, urging him to return, arguing there was no
need to file a complaint. He went back to work.
Then it happened again. He was
pushing a heavy pallet, when a co-worker walked in front of him.
Thomas asked the guy to step around him instead. When they got to
the front of the store, the co-worker said, "'Man, I can't stand
that nigger Dave,' loud enough for everybody to hear, in front of
customers," says Thomas.
Again he went to Brown. Then to
district manager Ray Hartman, who said he would investigate.
A month went by. Nothing happened.
Thomas called again. Hartman told him there never was an
investigation, nor were any witnesses called. (Hartman could not be
reached for comment.)
So Thomas went to the regional
manager. "All she wanted to know after I told my story was, 'Dave,
have you sought legal representation yet?'"
A month later he was fired. The
official reason: too many absences. For all his troubles,
conventional wisdom suggests that Thomas was sitting on a gold mine.
He had been repeatedly called a nigger. There were many witnesses.
Store managers had done nothing about it. Three of the four people
who slurred him were still on the job. The fourth got fired only
after he called a manager a spic, say employees.
Put it all in front of a jury, and
you're looking at a monster payday.
But conventional wisdom would be
wrong. Thomas is evidence. He filed a complaint with the federal
Equal Employment Opportunity Commission, whose rules dictate that a
problem must be "severe or pervasive" for it to act. Thomas's case
would appear to meet that threshold -- especially since courtrooms
across the land are littered with similar cases involving Wal-Mart.
But after receiving a letter from the company explaining its side,
EEOC case worker Brian Shelton dropped the matter. He never
investigated, nor did he call any of Thomas's witnesses.
It's hard to say whether Thomas
simply didn't explain his situation well enough, or whether Shelton,
overworked and weary of hearing so many false cries of wolf, simply
blew it off. EEOC district director Mike Fetzer won't discuss the
case, though he admits the agency has "historically been underfunded
. . .
Some people refer to it as a triage
system."
None of which helps Thomas. He's
tried to find a lawyer who will take up his cause, but he can't
afford a retainer. Such is the fate of an unemployed man with two
kids to feed. Like most people who encounter the law, he's found
that justice is for those who can buy it.
These days, he spends his time at
home, taking care of the kids. His wife has two jobs, but the best
Thomas can get is occasional work resurfacing floors. "It's so hard
up here in Lorain County, because everything is shutting down."
There is anger in his voice, but
not the acidic tang one might expect. It's more a sense of
incredulousness that a man can be screwed so blatantly, repeatedly,
and no one will rise to his aid.
"I went to the proper authorities,"
he says. "Nothing happens. I went to the store manager. Nothing
happens. I went to the EEOC. Nothing happens."
This is the true conventional
wisdom.
[back to top]
Voters will have opportunity to
repeal or support ordinance
By Inga Miller, STAFF WRITER
[back to top]
Monday, October 13, 2003
MARTINEZ -- By popular consensus,
another grocery store may be coming to your neighborhood -- a
superstore.
Come March 2, Contra Costa County
voters will be among the first in the country to decide whether to
allow super centers, overturning a county ordinance that prevents
the giant discount markets in unincorporated areas.
Sprawling across three to six times
the floor space of typical grocery stores, Wal-Mart Stores Inc.'s
brand of Supercenters will arrive in California next year. They are
the discount giant's answer to grocery shopping melded with their
range of other wares from shirts to towels and toys.
County supervisors passed an
ordinance in June that bans Wal-Mart and other so-called big-box
retail stores exceeding 90,000 square feet from selling groceries
and other nontaxable goods on more than 5 percent of their floor
space. An initiative to overturn the ban, sponsored by Wal-Mart, was
placed on the ballot Oct. 7 .
If it fails, observers say the vote
could bolster similar big-box restrictions being debated in Oakland
and elsewhere in California.
"I would say it would be an
interesting message if a fairly affluent county like Contra Costa
sent Wal-Mart packing, because I think it is a place that represents
their customer base," said retail location strategist Larry Kosmont,
president of Kosmont Co's, Los Angeles.
Kosmont said the election's result
could forecast the future of stores across the state that pack
vegetables and cereal alongside the regular line of discount
merchandise. Its defeat could make Wal-Mart rethink its Supercenter
entrance into California.
Supercenters already speckle 43
other states. A Wal-Mart announcement earlier this year outlining
plans to open 40 of the markets in California over the next four
years sparked debate about the place of giant chain stores in
several Bay Area communities. The first Supercenter is on schedule
to open this spring in La Quinta in Riverside County.
Contra Costa County officials point
to the typical locations of the stores and like businesses on the
outskirts of towns. Because customers drive from farther away, roads
get more use. And those that specialize in food generate less tax
revenue per square foot than stores selling solely taxable goods.
So the centers don't pan out
financially, Contra Costa supervisors say.
If voters reject the supervisors'
ban, Wal-Mart, Kosmont said, might see it as a green light from
consumers.
Wal-Mart is gearing up to for a
fierce campaign. Super center opponents -- from local officials wary
of building at the county's urban periphery to labor union opponents
of Wal-Mart -- are mounting a challenge.
"Depending on how the vote plays
out, I think it could have a very significant effect on how Wal-Mart
decides it's going to roll out the rest of these stores," Kosmont
said. "If voters uphold the ban on super centers, Wal-Mart may have
to reconsider what their strategy is. And I think that is what their
opponents are hoping for."
Groups from the United Food &
Commercial Workers Union to the Greenbelt Alliance and the National
Organization for Women have taken positions supporting Contra
Costa's ordinance.
Pinole Mayor Maria Alegria said
some groups will meet as early as this week to organize against what
they call the sprawling nature of super centers that reduce wages
and tax bases, snuff out downtowns and clog traffic. Alegria is
executive director of FaithWorks, an alliance between union and
religious groups.
Since 1988, Wal-Mart Supercenters
have been popping up across the country, and now number 1,300. Only
about three dozen cities and counties have ordinances limiting the
size and scope of the stores -- and few, if any, have actually gone
to the ballot box, said Al Norman. He operates a Web site,
sprawl-busters.com, that tracks the fight against Wal-Mart across
the country.
"I call them the Great American
Dust Machine. They grind through the middle class of any community
and help destroy the backbone of any small town. Once the small
merchants are gone, they don't come back. And those merchants are
the only thing that keeps Wal-Mart's prices competitive," said
Norman, who has helped a number of anti-big-box campaigns across the
country during the past decade.
The bans that are in place amount
to corporate protection for major grocery chains, counters Amy Hill,
Wal-Mart's public affairs manager for the Western Region.
"I believe special interest groups,
particularly the food workers union, has a larger agenda to prevent
Wal-Mart stores from bringing Supercenters to California, and Contra
Costa is part of their plan to prevent our growth," she said.
"I think that our customers really
appreciate the one-stop shopping where they can purchase a myriad of
items right under one roof. They can combine what would take a day's
worth of driving from errand to errand."
If so, it's at the cost of reducing
wages for local residents, said Mike Daley, conservation director
for the Sierra Club's Bay Area chapter.
"Livable wages are very much an
environmental issue because if you can't afford to live 20 miles
from where you work, then that becomes a transportation issue. You
have people who work in the Bay Area and live in Fairfield and
Vacaville," Daley said.
That view is shared by the United
Food Workers Union Local 1179 in Contra Costa County, said President
Barbara Carpenter. But she said the union was far from "behind the
whole thing."
Daley cited a 1999 study by the
Orange County Business Council that estimated Southern California
alone could take a $2.8 billion yearly hit if super centers made an
aggressive entrance into the market there. The loss stemmed from
lower wages paid at discount companies such as Wal-Mart, and fewer
benefits.
"When people are making low wages
and don't have health benefits, that creates a burden on our already
strained health care system," Pinole's Alegria said. "You get
employers that don't provide benefits and then their employees rely
on the public health system."
Wal-Mart maintains it was never
contacted for wage information and Hill said the Orange County study
-- conducted by the University of California -- was biased toward
labor.
Because a pending lawsuit by six
California women accuses Wal-Mart of wage and promotion
discrimination, the National Organization for Women can't support
Supercenters, California area Executive Director Helen Grieco said.
"I think you will hear a lot of
people talk about more global issues -- health care for employees,
for example. For me, as a former planning commissioner and land use
official, this is a land use decision and a transportation decision
and I think it is a good ordinance," said Supervisor Chairman Mark
DeSaulnier, one of the ban's sponsors. "I think big corporations can
make money under this ordinance. They are right now and they will
continue to."
Contra Costa's code passed in a 3-0
vote by supervisors on June 3. In unincorporated parts of the
county, it puts a 90,000-square-foot limit on all retail stores
where 5 percent or more floor space displays groceries or other
nontaxable goods such as pharmaceuticals. The average large grocery
store is about45,000 square feet.
The ban doesn't apply to membership
clubs such as Costco, which county planners say don't generate as
much traffic. But it effectually rules out a Wal-Mart Supercenter.
"It is a direct attack on our
business. We have to preserve customer choice," said Hill of
Wal-Mart. So the company will appeal to its customers -- the voters,
Hill said. "We don't have a specific campaign in place yet, but I
think it will encompass many of the traditional campaign strategies,
including direct mail."
Within a week of the ban's passage,
Wal-Mart started the drive to overturn it. Wal-Mart spent $100,000
gathering signatures for the referendum.
"Wal-Mart always wants to say that
this is about Wal-Mart. And I want to make clear this is not about
Wal-Mart. This is about the county controlling land use in the
unincorporated areas," said the ban's other sponsor, Supervisor John
Gioia of Richmond.
"In this case, we want to make sure
we recover tax revenue from large-scale retail stores that impose
traffic and bur | 
