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    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?
    From: Issue 77 December 2003, Page 68
    By: Charles Fishman
    URL: http://www.fastcompany.com/magazine/77/walmart.html

    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
    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 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
    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
    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
    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
    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
    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
    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."
    Charles Fishman ([email protected] ) is a senior writer at Fast Company
    Andrew Moesel provided research assistance for this story.

    Some other interesting tidbits turned up by a little research:
    -for every two jobs created by a Wal-Mart, the community loses thee others
    -80% of Wal-Mart employees are women
    -Wal-Mart has a 50% annual turnover rate
    -Each day, Wal-Mart sends all deposits from all stores to its Bentonville, AR headquarters - none remains in the local economy
    -Wal-Mart buys almost 10% of all Chinese exports to the United States
    -Mexico now houses 81 Wal-Mart stores, 52 Sam's Club stores, 52 Suburbia department stores, and 267 Vips restaurants
    -In the U.S., a union supermarket worker makes about $19 an hour on average; at Wa-Mart, where there are no unions, that worker makes about $9 an hour; in Mexico, a newly hired Wal-Mart cashier makes about $1.50 an hour
    -Wal-Mart is the world's biggest company in terms of revenues, with $245 billion in annual sales (that's more than the economies of all but 30 of the world's nations)
  2. MikeD

    MikeD Sports Genius

    Sep 5, 2002
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    I read this article a while back and there are certainly problems that Wal-Mart creates. I had an Anthropology class and remember something about some European countries not allowing Wal-Mart to come in and displace the local supermarkets.

    But man those pickles sure are a bargain.
  3. bayareatiger

    bayareatiger If it's too loud YOU'RE TOO OLD

    Oct 23, 2002
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    I rarely, if ever, shop at Wal-Mart.

    I find that there service sorely lacks and at times the quality of some of their items leaves a lot ot be desired.

    I don't begrudge folks that want to go there, but here is my belief:

    Always buying items because they are cheaper comes with a eventual price tag.

    The economies of our world are today are too linked to not expect what is happening here.

    To the extreme, if you buy a cheaper car without safety features you might pay with your life.

    I don't know of anyone who wants the lowest priced heart surgery!!!
    (But I would suspect that there are many people that do...)

    The ultimate beauty of capitalism, freedom of choice of where to buy, could also be its part of its failure, in this instance.

    If someone told you that you could buy EVERYTHING for 50% less than what you are buying it for today, but it might cost you your job, would you do it? The link that this is something that could happen is becoming clearer and clearer every day...

    Here the ultimate question is:
    Is the "value" of a low price to us really worth jobs (and therefore people's abilities to buy these low cost items) in the long run?????

    Do we really care as long as WE get it cheaper?

    Based strictly on the last line in the previous post, I'd say in a word: NO.

    (Not to pick on MikeD in particular - I think a lot of folks would say the same thing...)
  4. Sourdoughman

    Sourdoughman TigerFan of LSU and the Tigerman

    Oct 11, 2003
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    Let me say that I worked for Walmart for almost 3 years and that thier health benefits for thier employees are horrible for a company that size.
    In some places you start out at minimium wage and others the pay isn't as bad.
    I worked there at a time when times were tough for us.
    I wouldn't recommend a career there unless you become a store manager.

    As bad as the wage and health insurance is there it is still peoples choice to
    work there or not.
    Almost anywhere you work has its good and bad points about it.

    I have to take Walmarts side however because in a free market society its up to the competition to compete with Walmart such as Kmart and Target.
    They need to get there act together along with everyone else to be more competitive.
    I use to comp shop and Target was always in the middle of the 3.
    I went to Kmart and they were always so much more expensive than Target or Walmart that I don't feel sorry for whats happened to them.

    Why should a pint of oil be $1.20 more at Kmart than Walmart?

    As far as Vlasic is concerned, they didn't have to sell thier product at Walmart, they could've sold them at any grocery store in America along with Kmart at thier Price!

    These other companies didn't have to sell thier product at Walmart either and I think it
    speaks well for Walmart to make the companies they do business with become more efficient.
    These other companies could've sold thier products at stores that carry thier kind of product, there are plenty of stores out there people shop other than Walmart.

    I don't have a problem with jobs going overseas, it works both ways.
    There are alot of jobs that come into this country from other countries.

    I would argue that most jobs going overseas, people don't want to do them in this country anyway and If that happened to me I would look at it as an opportunity to
    better myself and find a new job doing something I'd like to do.

    I don't know why people are always reluctant to change there field of work when things like this happen, its not total gloom and doom, its an opportunity just waiting to
    be found.
  5. bayareatiger

    bayareatiger If it's too loud YOU'RE TOO OLD

    Oct 23, 2002
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    ...so if you're not store manager material, then what? It's a crappy job , right?

    Not every place that you can work at is actively trying to devalue the manufacturing jobs in the US due to price alone...therefore putting part of their customer base out of work and unable to shop there...

    OK, in this equation, in the short term Wal-Mart and you win. The US manufacturing worker loses. In the long term, is this a tenable situation???

    ..at the risk of sounding like a smart @ss, NAME SOME.

    This is a COMPLETELY DELUSIONAL STATEMENT. The only jobs LEFT are the ones that people don't want to do! I'm talking farm work, service jobs, retail, and NOT stable, long-term manufacturing jobs!

    We used to make damn near everthing in this country and the day is coming when we won't be making ANYTHING is rapidly approaching...

    Ask the steel workers in the '70's if they didn't want those jobs!

    Ask the folks in the printed circuit board and semiconductor manufacturing business if they didn't want those jobs!

    Ask the software engineers today if they didn't want those jobs that they just recently lost!

    Now granted, many of the manufacturing jobs in this country have been driven to distant shores due to environmental restrictions, but most of this happened because of price pressure...because the global economy is better for EVERYBODY...rii-iiight....

    So now you make $20/hr but the guy in the third world makes $0.25 per day...

    ...won't it be A GOOD THING when that equals out and you BOTH make $2.00 per day????

    ...whose gonna buy plasma TV's then????

    ...this is what will eventually happen when a behemoth like Wal-Mart that actively beats on its vendors and employees so that it can make its handlers the richest group of people in the world...

    ...while offering "jobs" and "the lowest prices" without a concern about what the long tern consequences to the US are...

    ..then where are we headed? I don't exactly know but ITS NOT GONNA BE PRETTY.

    I am NOT normally an activist type of a person, but this issue is beginning to make my blood boil. TOO MANY GOOD PEOPLE are out of work and WILL NEVER find another job that will equal what they used to make.

  6. Sourdoughman

    Sourdoughman TigerFan of LSU and the Tigerman

    Oct 11, 2003
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    Here is your link on jobs coming to America.....
    Another Link http://www.chron.com/cs/CDA/ssistory.mpl/business/2498371

    I'll name some jobs right off the top of my head, car manufacturing is a type of insourcing.
    I bought a Nissian 4X4 pickup in 91 that was made in America

    The Walmart job may or may not be a crappy job, the bottomline is its a job that
    can get you by in some tough times or it could make a good 2nd income.

    Why don't you blame the American People for shopping there instead of blaming Walmart, the American people are the ones that made Walmart what they are today.

    Its funny how Americans want to stop jobs from leaving America but they don't want jobs insourced leaving America.
    Sorry, You can't have it both ways....

    I DON'T Give a crap what people make in another country!
    quote:OK, in this equation, in the short term Wal-Mart and you win. The US manufacturing worker loses. In the long term, is this a tenable situation???
    In your own scenario,
    Technology is bad because it puts the newspaper industry out of business along with the post office, because of the computer and the internet.
    Then the cell phone is going to put the regular phone service out of business.
    Telephone operator?

    Why don't you attack those that buy other than American goods?

    Look at whats happened to the farmers over the years and other industries that have been crippled by the economical times and technology.

    The point is people are put out of one industry or another all the time by things other than outsourcing its up to them to learn another trade or
    find an opportunity to "better" themselves.
    Its an opportunity not a gloom and doom scenario.

    I will be honest and say the jobs leaving do out number the jobs coming in for now but I would also point out that our trade with other countries has always
    been to there advantage also, nothing is perfect but everyone makes it seem worse than it is because no one mentions insourcing!
  7. Sourdoughman

    Sourdoughman TigerFan of LSU and the Tigerman

    Oct 11, 2003
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    quote: I am NOT normally an activist type of a person, but this issue is beginning to make my blood boil. TOO MANY GOOD PEOPLE are out of work and WILL NEVER find another job that will equal what they used to make.
    I was laid off from US Airways in Jan of 2003

    Maybe they should do what my wife and I did.
    My wife has a bachelors degree in graphic arts and couldn't find a job in her field so we
    started a business that started out part time and has grown into 2 full time jobs for us
    making more money than we have ever made before.
    We have 3 part time employees working for us and all this has happened in 2 years.

    We have a janitorial business and we bid on properties and do common areas of condos
    and businesses.

    Its not the most glamorous and you may laugh but we are no longer slaves to any company making pennies.
    We both work about 20 hours a week and we make over $80,000 a year gross.

    There is an article that is going to be in the USA Today about our little story here.... ;)
    Sometimes you have to stop feeling sorry for yourself and make your own
    Luck! :)

    America is still great and we're proof of that because we've done it in just 2 years, we have had a little Luck that has helped us but we now have a reputation because of hard work and dependibility.

    Life is what you make out of it!
  8. Bengal B

    Bengal B Founding Member

    Sep 5, 2002
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    I have noticed at several Wal-Marts in different states in different years that during the Christmas shopping season that the heat is turned up to an unbearable level inside Wal-Mart stores even if the weather outside is mild. I refuse to enter a Wal-Mart during that time of year for that reason. The last time was about 3 years ago at the Wal-Mart on Seigen Lane. I asked a cashier why it was so hot and if they could turn the damn heat down. She told me that they didn't have any local control of the heating and air conditioning and that it was controlled from Arkansas. I am sure they must have some reason for this but I damn sure don't know what. I have 2 theories about it:

    1. By making it extemely uncomfortable inside the stores they are able to get people to hurry up and buy what they want and leave in order to make room for more customers and free up the parking spaces during their busiest time of year.

    2. A lot of black people are cold natured and prefer much higher temperatures during the winter than white people. This is not a racist comment but is something I have observed from being in black peoples homes in the winter and from working in the same office where there was a constant battle for control of the thermostat between the employees with the majority of blacks opting for the high temperatures. Maybe by keeping the temperature so high it gets black customers to feel more comfortable and stay longer and spend more money.

    Sourdoughman, since you have worked at Wal-Mart do you have any inside info about this?

    One thing I do like about Wal-Mart is their no questions asked return policy. One time I bought a cordless phone that quit working after a month. I didn't take it back for almost a year and I didn't have the receipt but they gave me my money back for it. Another time I bought a rod and reel and some kind of fishing line they called SpiderWire that was much lighter than regular fishing line and was supposed to be a lot stronger. There may be some of you who have had good experiences with SpiderWire but for me it was a nightmare. The first fish I hooked was a decent sized redfish and instead of being able to fight the fish in a normal manner the fact that the line was so light caused it to dig into the spool and turn it into a birdsnest that was impossible to fix even after cutting a lot of it up with a knife in an attempt to clear up the mess. Even though I had bought everything at a Wal-Mart in Baton Rouge I went to the Wal-Mart in Galliano and they exchanged the rod and reel for an identical model and even gave me my money back for the SpiderWire line.
  9. Bengal B

    Bengal B Founding Member

    Sep 5, 2002
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    Since you are on the computer 24 hours a day your wife must be doing all the work. :D

    Let us know when it comes out so we can read it.
  10. tiger fan 2001

    tiger fan 2001 Founding Member

    Nov 3, 2003
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