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Wal-Mart's low prices carry a high price tag here and abroad

February 15, 2004 1:17 am

WAL-MART HAS become my store of last resort. Price may be everything to some people. But when you consider how Wal-Mart manages to keep those prices so low, you might think twice about shopping there.

There are three basic viewpoints to consider--that of the company, that of its employees and suppliers, and that of the shoppers.

In the end, the company alone comes out ahead.

The last time I shopped the Wal-Mart Supercenter at Central Park, my jaw dropped when I arrived at the checkout area. Half the registers were closed, and those that were open had lines with as many as 25 customers in them--most with heaping-full carts.

I chose a line and stood there, and stood there. After 20 minutes, with at least another 20 minutes to go, I gave up, took my cart to the greeter, and left empty-handed.

That poor service is basic, in-your-face evidence of the high price people pay for Wal-Mart's low prices. The company knows that nearly all shoppers will wait it out.

Once when I actually did make it to checkout, I asked the clerk why so many registers were closed, and she said the store can't find enough people willing to work there.

Yes, the company does pay a few bucks above minimum wage, on average, but then makes it back by denying decent health care and other benefits to its "associates."

By beating back all moves toward unionization, the company is able to keep its personnel costs at rock bottom. The average wage of $8.25 is $2 less than at the average unionized grocery store.

The company also pays less for the goods it sells. Because of its size and clout, Wal-Mart can force vendors to meet its prices, rather than negotiate with them.

The so-called all-American Wal-Mart turns to the cheap labor of Third World countries to keep prices low. A recent Washington Post article reveals that 80 percent of the 6,000 factories in Wal-Mart's database are in China. The company might try to keep tabs on these foreign sweatshop operations, but the factories still routinely employ underage workers and require 80-hour work weeks, and they might pay less than $100 a month. There is no need to improve conditions when there are millions of surplus Chinese workers available.

Made in Myanmar

Wal-Mart factories in Myanmar (Burma), Nicaragua, and the African countries of Lesotho and Malawi also employ workers who work long hours in unsafe conditions and earn less than what would provide a decent standard of living even in those economies.

In this country, federal agents last fall arrested some 300 illegal workers at U.S. Wal-Mart stores, including the one in Culpeper, who were brought in by subcontracted janitorial services.

If Wal-Mart can't keep an eye on its contractors here, how well can it do in China?

The business Web site Hoover's Online reports that Wal-Mart is the world's top retailer with 4,800 stores, three-quarters of them in this country. The company estimates that 93 million Americans shop at its stores. It also happens to be the top retailer in Canada and Mexico.

So things are looking rosy at Wal-Mart corporate headquarters in Bentonville, Ark. The firm had net income of more than $8 billion last year, up more than 20 percent from the year before. It had sales of $245 billion last year, 12 percent more than the year before. But with 1.4 million employees in 2003, it had only 1.2 percent more than the year before.

When you see those vests that ask, "How may I help you?" it should add, "I may be your last chance."

From a strictly business standpoint, the company's record of growth is unmatched. According to the specialized publication Chain Store Age, Wal-Mart plans to spend more than $12 billion on new-store construction in 2004, resulting in some 50 to 55 discount stores and 220 to 230 supercenters across America. About 140 of the new supercenters, which include full grocery stores, will be relocated or expanded units. That was the case with the new one at Central Park that replaced the old one on State Route 3 in Spotsylvania.

There's no denying the success of the Wal-Mart model, and no indication that the company will change what it considers a proven, successful formula. Why should it, when the Walton family is free to amass billions of dollars rather than reinvest it in its own workers or in foreign factories?

But in the long run, will Wal-Mart prove to be an American success story or an American nightmare? Is it really shoppers' Nirvana, or is that simply what Wal-Mart would have us believe?

Wal-Mart has become America's largest toy retailer. As a result, FAO Schwarz has shut down, Zany Brainy has filed for bankruptcy, KB Toys is closing 375 stores (including nine elsewhere in Virginia), and Toys "R" Us is reacting to the pressure by carrying more clothes and fewer toys.

Giant impact

A survey on the supercenters' impact on grocery stores suggests that two supermarkets will close every time a supercenter opens. Locally, the impact may be felt as Royal Ahold, the parent company of Giant Food, reorganizes its holdings, cuts jobs, and turns Giant into a leaner, more price-oriented chain. Ahold blames its troubles, in part, on Wal-Mart supercenters.

Drug stores feel the pinch as well when Wal-Mart pharmacies gobble up their business.

Which local stores will close when Wal-Mart opens yet another supercenter next year at Southpoint? Time will tell.

County officials applauded the company's return to Spotsylvania County after closing the Route 3 store in 2002. But will the new tax revenues be offset by the loss of business elsewhere? How about the less-visible costs of emergency-room visits by Wal-Mart employees who can't afford health insurance? How about the unemployment insurance that's paid to those put out of work by Wal-Mart?

Such costs are borne by everyone, including the low-income families who rely on Wal-Mart to stretch their dollars. The company's very existence depends on people failing to realize that, in one way or another, we all end up paying for low, low Wal-Mart prices.

What we get are fewer stores to choose from, higher insurance costs, unemployed neighbors who face the loss of their homes, and a culture that believes there's nothing more important than saving a few cents on toilet paper and light bulbs.

The richest nation in the world, and all we want are low prices and low taxes. When it finally hits home that we have a cheapened quality of life to match, we shouldn't complain.

Certainly Wal-Mart won't complain. It is supplying itself with an ever growing pool of low-income people who think they're doing themselves a favor by shopping there. And if Wal-Mart took away their jobs, they can wait in line all day.

RICHARD AMRHINE is a writer and editor with The Free Lance-Star.

Copyright 2014 The Free Lance-Star Publishing Company.