25. Wal-Mart Brings Inequality and Low Prices to the World

MULTINATIONAL MONITOR, October 2003
Title: "Welcome to Wal-World"
Author: Andy Rowell

Faculty Evaluators: Phil McGough, Laurie Dawson
Student Researcher: Mariah Wegener-Vernagallo, Doug Reynolds

"Country by country, the world is discovering the great value of shopping at Wal-Mart," says John Menzer, president of the international division of Wal-Mart, the world's largest retailer. Menzer's vision is one where Wal-Mart becomes a global brand, just like McDonald's or Coca- Cola, monopolizing the global retail market.

What Menzer fails to tell shareholders is the fact that Wal-Mart is also facing lots of consumer pressure both at home and abroad for some of their business activities. Wal-Mart's strategy of corporate takeovers in other countries has come into question. When entering a new market, the company never opens directly to the public; instead they buy into an already fully operational company and slowly take control. First, a large competitor is eliminated, then Wal-Mart gains real estate and employees creating a massive presence in its targeted location.

In addition, by taking over existing stores rather than opening new ones, Wal-Mart avoids the community opposition that it faces in the U.S. Al Norman, the founder of Sprawl-Busters, who has been described by CBS's "60 Minutes" as the guru of the anti-Wal-Mart movement says. "What Wal-Mart did in Mexico was very instructive. Mexico was a testing ground for the method of operation. They basically acquired existing stores. They moved into Mexico and that became the theme in other countries like the UK, Germany, and Japan. They would buy into an existing operation, rather then start from scratch."

Wal-Mart opposition overseas has been from unions (over low pay), local regulators (over predatory pricing), and small businesses that face financial ruin. Recently, the company has also come under pressure from the United Food and Commercial Workers (UFCW) in the US for not allowing union representation in their superstores. With new superstores opening that contain groceries as well as all other Wal-Mart amenities, competitor supermarket chains with unions are worried about their future revenues.

Just as Wal-Mart exports sprawl, it exports bad labor practices. Uni-Comerce, the global trade union for commercial workers, characterizes Wal-Mart as "an obsessively anti-union company at home and abroad." The company "builds its competitive advantage on low wages, poor benefits, and a squeeze on producers. Through predatory pricing, it can force both large and small competitors out of business," according to Uni-Commerce. "Worldwide, Wal-Mart is the most serious threat to employment, wages, and working conditions in commerce." The problem with low pay and unions is one of the main obstacles the company faces in its international expansion plans. The rift between unions and Wal-Mart, say financial analysts Fallstreet.com, is "intensifying with each global step the company makes."

Wal-Mart also threatens small shops in countries in which it does not even operate. In 1998 the Irish government adopted a cap on the size of stores. But companies like Swedish furniture retailer IKEA and Wal-Mart are believed to be pressuring government officials to lift the cap. The only place such large stores would be built would be out of town, creating sprawl. "Any country that has predominantly smaller stores will be shocked by the superstore format," argues Norman.

"In five or six years, you could be talking about 5,000 to 6,000 Wal-Mart stores outside of the United States," says Norman. "Wal-Mart is Americanizing retailing around the world. It is a really undesirable outcome both culturally and economically for a U.S. company to be exercising so much power."

UPDATE BY ANDY ROWELL: Wal-Mart's unstoppable spread continues. In September 2003 Wal-Mart announced the "continuation of its aggressive unit growth for the fiscal year beginning February 1, 2004". In the U.S. Wal-Mart planned to open approximately 50 to 55 new discount stores, 220 to 230 new Supercenters, 25-30 new Neighborhood Markets and 35-40 new Sam's Clubs. Wal-Mart International planned to open 130 to 140 units in existing markets.

In March 2004, Wal-Mart Brazil announced the acquisition of Bompreco, a retail chain in northeastern Brazil with 118 units (hypermarkets, supermarkets and mini markets).

In April 2004 the company's international operations stood at 1,494 total units; Mexico (641) Puerto Rico (53) Canada (236) Argentina (11) Brazil (144) China (35) South Korea (15) Germany (92) United Kingdom (267). Its international sales were $47.5 billion, a 16.6 percent increase over the previous year. International operating profit was $2.3 billion, an increase of 18.6 percent compared to the previous fiscal year.

And so it goes on. Where will the next Wal-Mart be? Will it be your local community? Do you want a world run by Wal-Mart, where raw economic muscle of a huge global retailer can out-price any local competitor and put them out of business? In this cut price war the consumer will lose, the environment will lose and communities will lose.

In the U.K, Wal-Mart's takeover of Asda has had a devastating effect. Award-wining food journalist Joanna Blythman's new book called "Shopped: The Shocking Power of British Supermarkets" published May 2004 outlines how: "I learned that UK supermarkets now jump to the tune of our second largest chain, Asda. Since 1999 when it was taken over by the biggest retailer in the world, the U.S. chain Wal-Mart, Asda's strategy of 'Every Day Low Pricing', has triggered a supermarket price war in which chains without buying muscle are disadvantaged. In order to keep up with Asda, our leading chains in the UK must be ever more ruthless in the way they operate or else risk losing their place at the supermarket superpowers, top table".

This means that suppliers are squeezed, farmers are squeezed and supermarkets source from the cheapest overseas suppliers where labor, human rights and environmental standards are the lowest. Every week in the UK, 50 specialist shops like butchers and bakers are closing and one farmer or farm worker commits suicide. We enter a race to the bottom where everyone loses, especially the consumer.

Additional information: Al Norman's Sprawl-buster, www.sprawl-busters.com; Joanna Blythman's "Shopped", http://harpercollins.co.uk/books/default.aspx?id=27115; Friends of the Earth supermarket campaign, http://www.foe.co.uk/campaigns/real_food/press_for_change/; Coalition of groups in the UK against supermarkets, http://www.breakingthearmlock.com; Wal-Mart and unions, http://www.union-network.org/; selection of Andy Rowell articles, www.andyrowell.com.

Resources: Al-Norman ˆ guru of the anti-Wal-Mart movement has a new book out called The Case Against Wal-Mart. To order: Call toll free (in the US) 877-386-5925 or E-mail ruth@raphel.com or visit: www.raphel.com