by Joe Snyder
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I can’t admire Wal-Mart for what it has done to traditional business, nor the change it has produced for rural America and its communities, but I do admit admiration for its business skills and management capabilities. Face it, we are fast becoming a Wal-Mart nation.
Wal-Mart is now the top seller of groceries, grown big and powerful enough to launch its own brands. It is also the top seller of jewelry and photo processing. I am told it has plans to move into banking , used car sales, travel and internet activities. Today the company serves 100 million customers each and every week. It has gotten so big it doesn’t have to answer to anyone and with 1.3 million employees it is the world’s largest employer.
The only speed-bumps Wal-Mart has to contend with include a growing labor challenge, employment lawsuits and higher costs as it expands. Pay for retail workers in America rose 43% from 1990 to 2001 but no one knows exactly how big a part Wal-Mart played. Its influence in wage levels cannot be challenged because it created more jobs in the 1990’s than any other company.
The end is not in sight because Wal-Mart plans to add 800,000 workers in the next five years.
In the case of wages, the company disputes studies that show their hourly wage for the average employee is a bit less than $10. The company disputes that, saying their wage scale is close to equal to the union scale. Union leaders say that while Wal-Mart pushes into the unionized supermarket industry, Wal-Mart has no unions to deal with. This usually means its employees earn less than those at competing supermarkets.
Wal-Mart is now big enough that it can often control its suppliers. In some instances they are developing more of its own products, called private labels. It speeded this up in the mid-1990’s. Today its Great Value grocery line has over 1,500 items, up from around 200 only two years ago.
Suppliers who do not choose to go along with Wal-Mart’s "orders" suffer. Kraft, for example, has not been able to raise its prices as quickly as it once did because of Wal-Mart pressure. Rubbermaid raised it price to Wal-Mart a few years ago because of a big price increase in one of the ingredients in its products. Wal-Mart responded by giving more shelf space to lower-priced competitors. This resulted in Rubbermaid being forced to merge the Newell Company or go broke.
The lesson here is, don’t mess with Wal-Mart.
Today, the company has the biggest private satellite system in the nation, one that connects stores with Bentonville, Arkansas by voice, data and video. Suppliers can connect into Wal-Mart’s computers to find anything from soup to nuts. There is nothing in sight, it seems, to stem the power and might of this company. If and when it manages to drive all of competitors (like K-Mart) out of business, how many price rollbacks will the public be able to spot.
The Wal-Mart saga will be interesting to watch. I don’t write a column like this to be mean, but I remember smart businessmen telling me that competition is the spice of life.
The spice better begin showing up someplace.