http://www.fool.com/news/commentary/2005/commentary05060205.htm?source=mptoppromo

Does Wal-Mart Deserve to Be Hated?
By Stephen D. Simpson, CFA
June 2, 2005

America's largest retailer, Wal-Mart (NYSE: WMT), is undoubtedly one of the most successful companies of modern times, but it also appears to be among the most disliked. Whatever the merits of the complaints levied against it, there's no denying that Wal-Mart has become a target and a cause celebre amongst those opposed to big business. The question remains, though: Does Wal-Mart deserve this, and should investors be worried?

Unfair wages and benefits
First in the hit parade is the accusation that Wal-Mart systematically mistreats its workers, allegedly boosting its profits on the backs of ill-treated workers and blocking attempts at unionization. Critics point to low wages (even in comparison to other retailers) and few employee benefits as proof that Wal-Mart puts profits above worker welfare.

In some cases, state government officials have even asserted that Wal-Mart costs their states money -- that workers have to rely more upon state-funded entitlement programs, because Wal-Mart allegedly doesn't pay enough or offer enough benefits.

While I'm not going to assert that Wal-Mart is the best place to work, I'd offer a few counterpoints. First, the type of retailing that Wal-Mart does isn't exactly known for paying famously great wages. Second, many large companies have fought hard to keep unions away, and Wal-Mart is in no way unique in this respect. For better or worse, Wal-Mart often offers jobs in places where there are few other jobs available -- and to people with limited education and few employment options.

I'm not going to say that it's completely fair that Wal-Mart pays comparatively less than other employers, but if Wal-Mart can fill its employment needs without offering higher pay or benefits, I'd argue that they have a certain obligation to their owners to do so.

So-called censorship
Another of Wal-Mart's controversial practices is its policy regarding certain books, music CDs, magazines and the like. Basically, Wal-Mart has chosen not to sell materials that could be perceived as controversial or offensive (generally in terms of language, theme, or sexuality).

Personally, this is my single biggest objection to Wal-Mart, and I have chosen not to shop there at all until the policy is reversed. But that's my personal choice let's be absolutely clear about something -- this is not censorship. Pretty much every business in this country has the right to pick and choose what products it will sell. Wal-Mart, as a business, has the right to pick and choose the products it sells, and I, as a consumer, have the right not to shop at stores whose policies I don't support.

Nevertheless, many consumers object to this practice and point to it as an example of Wal-Mart's "tyranny" over its customers -- particularly since it's the only local retail option for books or music in many communities. Of course, there's no reason why customers can't use Amazon (Nasdaq: AMZN) to buy whatever Wal-Mart won't sell them.

Squeezing suppliers
According to its critics, Wal-Mart has also built itself up by impoverishing its suppliers and taking an "unjust" slice of their profits. Not only can Wal-Mart largely dictate pricing, delivery, payment, and frontage terms, but it also has the power to make or break a business by choosing whether or not to carry its products at all. But that's the retail business in a nutshell -- margins are tight and everybody tries to squeeze everybody else whenever they think they can get away with it.

For those unfamiliar with the inner workings of retail, think of it as a capitalist food chain. As the apex predator, Wal-Mart can play suppliers like Kraft, Unilever (NYSE: UL), and Procter & Gamble off against each other -- sometimes dictating price and product-placement terms. These suppliers, in turn, squeeze their suppliers and play them off against each other to get the best terms possible. It may seem unpleasant, but that's business. When you have the power to dictate terms to your advantage, you're almost certainly going to use it.

Wrecking Main Street and American industry
Last, but not least, Wal-Mart has also been tagged as a destroyer of small-town Main Street and a threat to some American industries. It is claimed that Wal-Mart moves into small communities and wipes out the smaller mom-and-pop retailers that can no longer compete with the giant's discount prices. Of course, nobody seems to mention that Main Street was on life support before Wal-Mart even started to get into the game on a national scale.

Enclosed shopping malls and other suburban retail concepts had already done their damage in many communities. What's more, why should anybody expect small-scale retail to avoid the same fate that has befallen small-scale manufacturing, farming, and many service industries?

Wal-Mart has also been attacked for its buying practices -- in particular, favoring cheap imports from countries like China, Bangladesh, or Mexico over American-made (but pricier) goods.

To me, though, these accusations are somewhat hypocritical. Here in my state, there are rampant complaints about American imports of textiles and furniture, yet many of those who complain drive away in Japanese cars and go home to watch DVDs with their Korean-made players. And so, too, in Detroit, Silicon Valley, or anywhere else -- foreign imports are terrible when they threaten your job, but when they make your life easier or save you money, they're just fine.

Wal-Mart's real crime
In my humble opinion, Wal-Mart's real sin is that it has been successful. Extremely successful.

Americans seem to have an odd sort of paranoid schizophrenia with respect to wealth. On one hand, we enthusiastically pat ourselves on the back for living in a country that offers unparalleled economic opportunity. On the other hand, Americans are generally suspicious and resentful toward the wealthy or successful, and "class warfare" is a time-tested political strategy.

Most people in this country hope to have more wealth each year and want their stock portfolios to rise, but we as a nation can often be squeamish about the details of how that's accomplished. Simply put, Wal-Mart is an extant example of capitalism in a very pure form, and pure capitalism seems to chafe some Americans.

A question of PR?
The really interesting thing about Wal-Mart is how common its practices are across American industry. Much of what Wal-Mart does is done by other large companies, yet they escape the outrage and outcry.

Here at The Motley Fool, we have at least two former General Electric (NYSE: GE) employees among the writing staff and I'm related to a current employee. I've heard from all three about the extent to which GE will pressure suppliers and how they don't always treat their employees in a completely warm, cuddly, or even fair manner. Johnson & Johnson (NYSE: JNJ) is another company that is known to be a particularly firm negotiator with its suppliers, and terms are often presented in a "take it or leave it" fashion.

Moving along, how many coffee bars has Starbucks (Nasdaq: SBUX) pushed out of business and couldn't they afford to pay a little more to the people who pick their coffee beans? How many restaurants failed to withstand the onslaught of dirt-cheap fast food from the likes of McDonald's (NYSE: MCD)? If we're talking Main Street, what has Home Depot (NYSE: HD) or Lowe's (NYSE: LOW) allegedly done to the small local hardware shop?

No, it's clear that Wal-Mart is not unique.

Does it matter?
A fundamental question for investors is whether popular opinion toward Wal-Mart really matters in the long run. Obviously Wal-Mart cannot succeed forever if potential customers choose not to shop there because of its policies, practices, or reputation. Long-term success does require a certain amount of cooperation and goodwill amongst customers, workers, and shareholders.

Shareholders should have some concern about how Wal-Mart is viewed by the larger world. No company really wants or welcomes greater government scrutiny or interference, and no company wants to see protests and websites devoted to complaining about them. Somewhere in between, then, every company needs to strike a happy balance between doing what's best for the business in cold, hard numerical terms and what's best for building long-term public goodwill.

For now, though, people may complain about Wal-Mart, but they still shop there. When push comes to shove, many Americans put their high-minded morality to the side and simply go with the cheapest merchandise they can find.

Conclusion
In some ways it's too bad that Wal-Mart can't enjoy more of its own success (though the heirs to Sam Walton's fortune don't seem overly glum). After all, Wal-Mart has built itself into a colossus principally because it has delivered what people want -- when, where, and how they want it.

When it's all said and done, perhaps Wal-Mart can find ways to smooth off its rough edges and join the likes of General Electric, Johnson & Johnson, and Home Depot as hugely successful companies that are generally well-liked (or at least tolerated) by the public at large..

i honestly don't see the evil in wal-mart

low prices = good
poor wages = bad


What matters more? Then you'll know if you should hate them or not.

nobody makes people work at wal-mart

and that, too.

As Ford/GM move to Mexico, the number of foreign car plants in the US is quickly catching up to "domestic" companies.



GREATEST crime? GREATEST? Not union busting? Not discrimination against it's female workforce?



All of those companies mentioned have groups lined up to hate them as well. Is that a defense? "We're not the only ones who wipe out local business"?

White-Collar Crime
http://www.alternet.org/story/21658/

Lack of Decent Healthcare for Workers
http://www.alternet.org/rights/22093/

Driving Suppliers Under
http://www.alternet.org/envirohealth/21820/

Union Busting
http://www.alternet.org/rights/21531/

Disrespect for Historical Sites
http://www.alternet.org/story/21398/

Gender Discrimination
http://www.alternet.org/rights/19901/

General Skiviness
http://www.alternet.org/mediaculture/21724/

Walmart sucks.

The problem is not Walmart (though it does have more than its fair share of offenses). The problem lies with the culture that created Walmart. It wouldnt exist if there wasn't a need for cheap goods aplenty. We live in a consumer driven society, and everybody wants to be a part of it. Not everybody can afford top of the line, homegrown merchandise but they still wanna play with the big dogs, so in steps Walmart with a cheaper alternative. You get to be a consumer whore AND not go broke doing so.

Walmart is big because we made it big. We have nobody to blame but ourselves. While Walmart's business practices are shady at best (see B's examples above for just the tip of the iceberg), they are no different or worse than those of their peers. The difference is Walmart is the pinnacle of success, and therefore attracts the most critics.

"You can't create a monster and then whine when he smashes a few buildings"

I totally agree with you. I get really sick of seeing hundreds of cars in the Walmart parking lot at all times. I am just as disgusted by most of those people as I am by Walmart itself.

Oh man!! Rampage was such a good game.

i knew you were going to post this pic here.

Of course--it's an RM tradition.

Same here. That parking lot is ALWAYS full! That's 99% of the reason i rarely shop there...i can't deal with the idiot factor.

I simply don't shop at Wal-Mart because from what I have seen on the outside they are too crowded, and from the inside, they simply have alot of crap I don't need *(and/or can easily get elsewhere - Target, Longs, Mervyns, Walgreens, etc.)

I've been inside of a Wal-Mart all of two times, maybe three total, and that was all to frequent for me. I purchased nothing each time. They hold no special interest to me and I dislike the impact I've read about to the surrounding community relative to local economy and small business owners going under,....


I don't go to McDonald's either. Went once while on a trip with my Cross-Country team in college and had two McNuggets, and went through a drive through once with a friend and got nothing. Didn't care for their rain-forest polyur. packaging issues in the 70's.


Don't like them - don't spend my money with them. That's about the best I can do (vote with my wallet).

c-

Hahhahaa like Target or KMart or whoever is just the patron saint or retailing..

Yes.

I cut my thumb open using a WalMart issued mandatory 'safty' left-handed box cutter. Thing is - I'm right handed - so I couldn't hold it correctly, and I got cut. At work. I needed 4 stitches.

A year later, I find out that the medical bills have been turned over to my name because WalMart didn't pay them. I can't afford to.

The store I worked in offered Bennies - to employees working 35hours + a week. Thing is - WalMart considers 28 hours a week "full time." (See that way, they can give out more hours occasionally if the store is short staffed or on a 'hiring freeze' to support other stores that aren't doing so good - without having to ever pay anyone overtime.) It's a really rude carrot to dangle in front of people who bust their asses for minimum wage.

I've got health insurance also but it sure as hell doesn't pay for everything, including emergency room visits. I'd be curious as to what benefits are included.

Insurance is for huge medical expenses, not for stiches.

I got hurt at work while on the job. They're supposed to pay for that.