Activists to protest Wal-Mart on Friday

By DOUG HARLOW

Staff Writer, Blethen Maine Newspapers Inc.
November 27, 2003

WATERVILLE -- Members of a local peace action group plan to distribute leaflets Friday protesting the use of overseas sweatshops making cclothing for Wal-Mart stores, the Disney corporation and other American companies.

Waterville Area Bridges for Peace and Justice will hand out informational leaflets beginning at 9:30 a.m. at the Wal-Mart store on Kennedy Memorial Drive, according to organizers.

"Members will wear sandwich boards and hand out leaflets until Wal-Mart sends someone out to ask the social justice group to leave," organizer Peter Sirois said. "At being invited to leave, the group will move on to Elm Plaza and continue leafleting in the common parking area.

"The action will not call for a boycott. It will ask that shoppers contact state legislators and private CEOs to suspend all support of sweatshops and the laws that make them possible."

Members will hand out 400 two-sided leaflets with information about Disney and Wal-Mart support of third world sweatshops, Sirois added.

"We are simply calling attention to sweatshops," organizer Claire Prontnicki said. "There is quite a lot of evidence for it. It's pretty horrible."

Prontnicki said the group showed a film on the subject last week in Waterville. Footage showed sweatshops in Bangladesh where workers are paid 11 to 17 cents per hour, an unlivable wage even in the poorest of nations, she said.

The rain date for the leafleting is Saturday.

"We started this winter when we were doing the bridge demonstrations against the war in Iraq on KMD," Prontnicki said. "There were some from that group who wanted to carry on peace and justice work."

Since starting up in the spring, the expanded group has sponsored a film and discussion series devoted to peace and justice at the Waterville Public Library. Members participated in Madison's Father Rasle Day parade with the theme Peace Around the World.

Members are planning a Peace & Justice Garden in Castonguay Square and the group is putting together an informational program dealing with militarism for local schools , according to Sirois. The group also supported the anti-Patriot Act resolution at a recent Waterville City Council meeting.

The group has approximately 25 active members from several surrounding towns and a mailing list of over 200 area supporters.

Wal-Mart set to super-size in California

By Bob Walter -- Sacramento Bee Staff Writer
November 30, 2003

The first Wal-Mart Supercenters won't open in California until spring, but their impending arrival is already changing the state's retail landscape.

The looming presence of these super-sized grocery stores, which are about half the size of Arco Arena and offer 100,000 products at cut-rate prices, is roundly blamed for the supermarket strike/lockout that has idled 70,000 workers in Southern California since October.

That strike/lockout has been underscored by efforts among unionized supermarkets to cut costs while competing against nonunion powers such as Wal-Mart.

Union and supermarket officials say a similar strike is all but inevitable next summer when labor contracts expire in Northern California.

In preparation for Wal-Mart's arrival, the Raley's and Bel Air supermarket chain has cut administrative costs with an early retirement offer and some layoffs. At the same time, the West Sacramento-based company is planning unprecedented growth, with 25 new stores scheduled to open in the next four years, said William J. Coyne, president of Raley's.

Like most of the supermarket officials and representatives interviewed, Coyne was reluctant to talk about specific competitors. But he acknowledged that Raley's is trying to become leaner, gearing up for a more competitive environment that includes everything from Supercenters to specialty grocers such as Trader Joe's and Whole Foods.

"We try to work every day with a sense of urgency," Coyne said, "to become more efficient in every area, from logistics and distribution to buying and service."

Starting in the Coachella Valley desert, Supercenters are coming to Southern California in the spring and to the rest of the state as fast as Wal-Mart can get permits.

Confirmed targets in Northern California include Lodi, Woodland, Stockton, Tracy, Yuba City, Turlock and Redding.

The Supercenters will employ thousands. Most of them will have $1 million in sales every 10 days or so, analysts say, a third higher than the typical Raley's and about double the average Safeway in the capital region.

Their low prices will reduce the cost of food, especially in the Sacramento area, which has some of the highest grocery prices in the nation, retail analysts say.

Some analysts say each of the Supercenters, which morph together a Wal-Mart discount department store and a large supermarket, will result in the closure of two traditional grocery stores. Others say entire supermarket divisions may flee the region.

And still others, mostly union officials and their supporters, say the Supercenters will spur economic policies that lower the standard of living for tens of thousands of supermarket employees. For those reasons, municipal and grass-roots forces have been marshaling from Calexico to Chico to keep the Supercenters from being built.

Bentonville, Ark.-based Wal-Mart says it plans to open 40 Supercenters in California in the next four years -- none of them closer to Sacramento than Lodi or Woodland. Analysts and Wal-Mart watchers say the number will be much higher and undoubtedly will include the capital.

David S. Rogers of suburban Chicago, a grocery analyst and academic who has done research on Wal-Mart for more than 10 years, said the company wants to open "100 to 200 stores" in California.

"With Wal-Mart," he said, "you have to look at what they do rather than what they say."

And what Wal-Mart has done -- using a combination of low prices and saturation -- in market after market is dominate or at least become a major player.

In Dallas, for example, Wal-Mart has 51 Supercenters, discount stores, neighborhood markets and Sam's Clubs, and has moved from being the sixth-ranked grocer to the top spot in less than five years, according to consulting firm Retail Forward.

In the Oklahoma City metropolitan area, where Wal-Mart operates 11 Supercenters, it went from capturing about 6 percent of that region's grocery business in 1997 to more than 30 percent in 2002, the latest year for which such data are available.

Such dominance helped push Wal-Mart's annual sales in 2002 to $247 billion, which is greater than the combined sales of the 10 largest supermarket chains in the United States.

When Wal-Mart topped the Fortune 500 for the second time this year -- by $60 billion over runner-up General Motors -- the magazine pondered whether anybody ever would displace the Bentonville behemoth.

The conclusion: not in this lifetime, barring something as unlikely as a merger of GM and Ford or Exxon Mobil and ChevronTexaco.

With about 1.45 million employees, Wal-Mart has more people in uniform than the U.S. Army (480,000 on active duty).

The company expects to hire more than 600,000 people next year, based on growth (160,000 new jobs) and turnover, said Christi Gallagher, Wal-Mart's human resources specialist in Bentonville.

Gallagher says Wal-Mart's turnover rate is about 45 percent. The industry average is 65 percent, according to the National Retail Federation.

Wal-Mart says it offers competitive wages in all of its markets and that 90 percent of its employees have health benefits, half of them through Wal-Mart. Most analysts estimate that Wal-Mart employees are paid a quarter to a third less than unionized workers in supermarkets and other retailers.

And in part because of lower labor costs, the company's relatively new Supercenters have turned Wal-Mart into the country's biggest grocer in less than a decade.

In 1992, Wal-Mart had 34 Supercenters that generated about $1 billion in sales, according to Retail Forward. By the end of 2002, the company's 1,258 Supercenters topped $100 billion.

As Wal-Mart has grown, so has its clout with suppliers. According to Retail Forward, the company accounts for 28 percent of Dial Corp.'s total sales. For Del Monte Foods, the proportion is 24 percent. Other totals, according to Retail Forward, include Clorox and Revlon at 23 percent, and Procter & Gamble at 17 percent.

And all those percentages are rising.

"If you are Procter & Gamble," said Jim Watt, a vice president at Modesto-based Save Mart Supermarkets, "and in five years, 30 percent of your business is Wal-Mart, then who owns whom?"

Wal-Mart says its relationship with its suppliers, plus its legendary distribution system, allows its Supercenters to sell groceries that cost 10 percent to more than 30 percent less than groceries at most warehouse and conventional supermarkets.

For much of the competition, the results of Wal-Mart's success are often brutal.

In Oklahoma City, more than two dozen supermarkets have closed or been converted to other uses in recent years. And the former market leader, Homeland Foods, though it still has more than 20 stores, has been in and out and back into bankruptcy protection.

In Sacramento, Raley's says it is waiting and ready. "Tom Raley would have relished this competition," Coyne said.

Raley, who died in 1991, started the $3.2 billion company that bears his name and has grown to 134 stores in California, Nevada and New Mexico. In the greater Sacramento region, Raley's controls nearly 35 percent of the grocery market share, according to Trade Dimensions, a Connecticut-based retail analyst.

Coyne said Raley's will compete not only with its "core competencies" such as service, quality products and community involvement, but also with aggressive growth.

Along with the 25 new stores in the pipeline, he did not rule out even faster growth through acquisitions of the kind that put Sacramento's Bel Air Markets and Bay Area-based Nob Hill Foods under the Raley's flag.

Raley's ultimate advantage, he said, comes from being "local," whether the store is in Land Park, Reno, Elk Grove or the Bay Area.

"We just have the ability to know our customers better than competitors that are based in Cincinnati or Boise or elsewhere," he said. "At the end of the day, I can assure you that Raley's will be standing tall."

Analysts agree with the Raley's president, though they say the company undoubtedly will lose some market share to Wal-Mart.

But not even the Supercenters will knock Raley's from the top of the charts in the Sacramento area, said Burt P. Flickinger III, a noted New York-based retail analyst.

Wal-Mart will move from nowhere into the second spot, he said, mostly at the expense of Ralphs, Albertsons and Safeway.

"The national chains will be caught in the middle," unable to compete with Wal-Mart's low prices or the loyalty of Raley's customers, he said.

Safeway spokesman Alexander Winslow wouldn't talk about competing with Supercenters but said Sacramento is a major market for Safeway, which has grown to two dozen stores in the capital region.

Trade Dimensions said Safeway has increased its market share in the last two years from about 13 percent to 17 percent.

Ralphs spokesman Terry O'Neil said his Kroger-owned firm has not grown as fast as planned in the Sacramento area and, in fact, closed five stores last year. Ralphs' market share dropped from almost 9 percent in 2001 to about 5 percent this year, Trade Dimensions said.

But O'Neil said Sacramento still holds an important place in Ralphs' long-term plans. Kroger has plenty of experience against Wal-Mart in other states, he said, "and we'll compete with what we do best: higher quality, better variety and better service."

Albertsons declined to comment.

David S. Rogers, the Chicago-area academic, and Paul Adams, an Olathe, Kan.-based analyst, agreed that the national chains were the most vulnerable.

"I think you will see significant division closures," Rogers said. "There is no God-given reason that anybody will survive, big chain or not."

Graphic: Wal-Mart overview

THE WAL-MART EFFECT
Grocery Unions Battle to Stop Invasion of the Giant Stores; Wal-Mart plans to open 40 of its nonunion Supercenters in California. Labor is fighting the expected onslaught, but the big retailer rarely concedes defeat.

Nancy Cleeland and Abigail Goldman
Times Staff Writers 

25 November 2003 - Los Angeles Times

Inglewood seemed to offer the perfect home for a new Wal-Mart Supercenter, with low-income residents hungry for bargains and a mayor craving the sales-tax revenue that flows from big-box stores.

But nearly two years after deciding to build on a 60-acre lot near the Hollywood Park racetrack, Wal-Mart is nowhere near pouring concrete. Instead, the world's biggest company is at war with a determined opposition, led by organized labor.

"A line has been drawn in the sand," said Donald H. Eiesland, president of Inglewood Park Cemetery and the head of Partners for Progress, a local pro-business group. "It's the union against Wal-Mart. This has nothing to do with Inglewood."

Indeed, similar battles are breaking out across California, and both sides are digging in hard. Wal-Mart Stores Inc. wants to move into the grocery business throughout the state by opening 40 Supercenters, each a 200,000-square-foot behemoth that combines a fully stocked food market with a discount mega-store -- entirely staffed by non-union employees. The United Food and Commercial Workers and the Teamsters are trying to thwart that effort, hoping to save relatively high-paying union jobs.

The unions have amassed a seven-figure war chest and are calling in political chits to fight Wal-Mart. The giant retailer is aggressively countering every move, and some analysts believe that Wal-Mart's share of grocery sales in the state could eventually reach 20%. The state's first Supercenter is set to open in March in La Quinta, near Palm Springs.

"If we have an advantage," said Robert S. McAdam, Wal-Mart's vice president for state and local government relations, "it's that we are offering what people want."

In fact, Wal-Mart has won allies by providing people of modest means a chance to stretch their dollars.

"We need to have retail outlets that are convenient and offer quality goods and services at low prices," said John Mack, president of the Los Angeles Urban League. "I really think that there are potential economic benefits for this community with the addition of a Wal-Mart."

Yet the Supercenters also threaten the 250,000 members of the UFCW and Teamsters who work in the supermarket business in California.

For decades, the unions have been a major force in the state grocery industry and have negotiated generous labor contracts. Wal-Mart pays its grocery workers an estimated $10 less per hour in wages and benefits than do the big supermarkets nationwide -- $19 versus $9. As California grocery chains brace for the competition, their workers face severe cutbacks in compensation.

"We're going to end up just like the Wal-Mart workers," said Rick Middleton, a Teamsters official in Carson who eagerly hands out copies of a paperback called "How Wal-Mart Is Destroying America." "If we don't as labor officials address this issue now, the future for our membership is dismal, very dismal."

The push for concessions has already started, prompting the longest supermarket strike in Southern California's history. About 70,000 grocery workers employed by Albertsons Inc., Kroger Co.'s Ralphs and Safeway Inc.'s Vons and Pavilions have been walking the picket lines since Oct. 11, largely to protest proposed reductions in health benefits. The supermarkets say they need these cuts to hold their own against Wal-Mart, already the nation's largest grocer.

Rick Icaza, president of one of seven UFCW locals in Southern California, has taken issue with much of the supermarkets' rhetoric since the labor dispute began. But he doesn't doubt that Wal-Mart is the biggest threat ever posed to the grocery chains -- and, in turn, his own members.

"The No. 1 enemy has still got to be Wal-Mart," he said.

The unions and their community allies have stopped Wal-Mart in some places and slowed it down in others. They have persuaded officials in at least a dozen cities and counties to adopt zoning laws to keep out Supercenters and stores like them.

Homeowner groups, backed by union money, sued to stop construction of two Supercenters in Bakersfield, arguing that the stores would drive local merchants out of business. Contra Costa County and Oakland also have passed measures that could block Supercenters.

In Los Angeles, several City Council members are drafting an ordinance to require an examination of how large-scale projects such as Supercenters would affect the community, including the possible loss of union jobs. As envisioned by supporters, the measure would allow the city to insist on higher wages as a condition of project approval.

"We want Wal-Mart to be able to help us with our economic development," said Councilman Eric Garcetti, who is co-sponsoring the measure. "We just want to be able to do it on our terms and not theirs."

Wal-Mart, however, can more than match its foes in resources and resolve.

To soften its outsider image, the retailer has hired local political insiders to coax projects through planning bureaucracies. It has promised jobs and sales-tax bonanzas to cities struggling with deficits and unemployment.

When the answer is "no," Wal-Mart rarely concedes defeat. At least nine times during its latest California push, the company has responded to legal barriers by threatening to sue or to take its case straight to local voters by forcing referendums.

That's what happened in Inglewood after the City Council in October 2002 adopted an emergency ordinance barring construction of retail stores that exceed 155,000 square feet and sell more than 20,000 nontaxable items such as food and pharmacy products. The measure was tailored to block a Supercenter.

Icaza declared victory. "Wal-Mart's plans to enter the retail grocery business in Inglewood are dead!" he crowed in a union newsletter.

But they weren't. Within a month, Wal-Mart gathered 9,250 signatures on petitions, more than enough to force a public vote. The company also threatened to sue the city for alleged procedural violations. Looking at a possible court battle or an embarrassing failure at the polls, Inglewood officials withdrew the ordinance they had passed a month earlier.

Furious with the council, Icaza ran his own candidate in city elections in June. Ralph Franklin, a former supermarket clerk and manager and now a UFCW business agent, won with 70% of the vote, ousting a council member who had gone against the union.

Worried that the council might try to trip it up again, Wal-Mart went on the offensive. In late August, the company, through a group called the Citizens Committee to Welcome Wal-Mart to Inglewood, began gathering a new batch of signatures to force a popular vote on the Supercenter. The initiative, which calls for building permits to be issued without a public hearing or environmental impact study, is expected to be on the March 2004 ballot.

"When people feel they're not getting a fair shake with the legislative process, they take things to a vote" of the electorate, said McAdam, the Wal-Mart vice president.

Wal-Mart's opponents have vowed to sue to block the initiative on the grounds that it oversteps the limits of the ballot process.

UFCW and Teamsters locals have raised dues or diverted funds from other programs to bankroll anti-Wal-Mart campaigns. With more than $1 million now available, thousands of members to draw from and encouragement from national leaders, local labor would seem to be in a strong position.

But union efforts have been hampered by personality conflicts and disagreements over strategies and goals, according to people close to the situation.

As in Inglewood, many union locals have focused on so-called site fights, winning zoning restrictions at the local level. That strategy can temporarily save union jobs and give leaders victories to celebrate, but it does little to stop the long-term march of Wal-Mart, critics say. After all, there are 478 cities in California, 88 in Los Angeles County alone.

Pushing for zoning restrictions also can backfire, stirring resentment among consumers and business owners -- even those who directly compete with Wal-Mart.

Wal-Mart opponents "try to use the government to accomplish things that they may not be able to accomplish in the marketplace," said Alan Zaremberg, president of the California Chamber of Commerce. "It's not government's role to interfere with what consumers want."

For their part, national labor strategists want local leaders to focus less on zoning campaigns and more on the daunting, long-term goal of unionizing Wal-Mart employees. Few take the advice, and those who do quickly realize just what they are up against.

George Hartwell, president of UFCW Local 1036 in Camarillo, hired 18 organizers to hit the nine Wal-Mart stores in his jurisdiction. With few leads to go on and employees in stores forbidden to talk about unions, progress was slow. Then in mid-summer, a group wearing union T-shirts was served with trespassing papers and asked to leave a Wal-Mart in Lompoc. Lawyers tussled over that for months. Now Hartwell and his crew can enter the stores, but with strict limitations. "We go through and say, 'good morning' or 'good afternoon,' just to be visible," he said.

Despite the long odds in taking on the company, many union activists insist they have no choice.

"I've put 29 years of my life into this job, and now they're trying to pull the rug out from under me," said Diane Johnson, a union cashier at a Pavilions store in Los Angeles who is helping to coordinate anti-Wal-Mart efforts in Inglewood through the Los Angeles Alliance for a New Economy.

Johnson and co-workers have made door-to-door visits and spoken from church pulpits, hoping to turn public opinion against the discounter. "For me to go backwards would just be hell," she said.

But Wal-Mart, the nation's largest seller of everything from toys to DVDs, has plenty of defenders too, some of them politically and financially powerful. They range from prominent Los Angeles toy importer Charlie Woo, who recently took up Wal-Mart's case before Los Angeles City Council members, to Jeffrey Katzenberg, a co-founder of Hollywood studio DreamWorks SKG. He lobbied former Gov. Davis against signing a statewide anti-big-box measure passed by the Legislature five years ago; Davis vetoed the bill.

McAdam said Wal-Mart doesn't order its suppliers to lobby on the company's behalf. But it does spell out for vendors the consequences of anti-Wal-Mart legislation.

"It's our belief that on certain issues, they have a vested interest in seeing ... that our company can continue to grow," McAdam said.

Wal-Mart also helps smooth entry into new markets by cultivating relationships with civic groups.

As it prepared last year to buy and renovate a former Macy's in the south Los Angeles community of Baldwin Hills, corporate officials met with leaders of the Los Angeles Urban League and arranged to hire some employees through the organization.

Allies in organized labor tried to dissuade the Urban League's Mack from cooperating. Normally pro-union, Mack turned them down, saying the community badly needed jobs and low-cost shopping options.

"I'd rather have a person on somebody's payroll -- even if it isn't at the highest wage -- than on the unemployment roll," Mack said. "We're not going to punish job seekers by refusing to refer them to Wal-Mart for a job."

By the time the Baldwin Hills-Crenshaw Plaza Wal-Mart opened in January, Wal-Mart had doled out thousands of dollars, mostly in $1,000 grants, to local institutions such as schools and youth programs. The company cut the Urban League a $3,000 check. It also provided $10,000 for new lights at the Martin Luther King Jr. Little League Baseball field.

The ordinance being considered in Los Angeles would ask planners to weigh the "community benefits" of a mega-store in any zone that receives federal, state or municipal funding or incentives -- essentially the entire city.

Like an environmental impact report, the community-benefits study would consider possible negative outcomes and propose ways to mitigate them. Wages could be held to "prevailing standards." If supermarkets were deemed the standard, that would mean union scale.

Backed by Garcetti and Councilman Ed Reyes, the ordinance could be ready for a council vote next month.

Several studies commissioned in recent years by independent groups, including the Orange County Business Council and the San Diego Taxpayers Assn., found the state would suffer a net economic loss if union jobs were traded for jobs at Wal-Mart.

Wal-Mart had declined to respond with numbers of its own until a few months ago, when it commissioned the Los Angeles County Economic Development Corp. to measure the effect of Supercenters on the region. Researcher Gregory Freeman said the study balanced wage losses with consumer savings, noting that Supercenter prices are typically 20% lower than at union markets.

The study was completed two weeks ago, Freeman said, but hasn't yet been released.

As he began his study in mid-summer, Freeman told council members that other analyses haven't fairly measured all the pros and cons of the Supercenters. For one thing, he said, savings from lower grocery prices could be used by working-class shoppers for other things, such as buying homes.

As for those merchants who won't be able to compete with Wal-Mart, others say, progress always carries a price.

"I grew up in Pennsylvania; my father had a corner market there. When I was 3 or 4, the A&P moved in and put him out of business," recalled the Chamber's Zaremberg. "That was tough for us, but I don't think anyone would go back and say we shouldn't have supermarkets."

Wal-Mart Discounts the American Dream

25 November 2003

Los Angeles Times - Home Edition

Re "An Empire Built on Bargains Remakes the Working World," Nov. 23: Wal-Mart represents a corporation that has gone amok. Its domination shows why elements of the civil society need to balance capitalism if it is to work for the entire population. When we save 7 cents on the toothpaste we buy, we don't realize that some of that 7 cents we save goes to taxes to pay for Medicaid, food stamps and emergency room visits for low-paid Wal-Mart workers. Wal-Mart has driven many companies out of business and has had the reverse effect of General Motors, which brought people into the middle class.

If Wal-Mart becomes even more dominant, it could enter a phase where it no longer needs to provide deep discounts in some areas because it will so dominate retailing. We will then have higher prices and low-wage workers. Not a pretty picture. It needs to be curbed.

Larry Wiener
Alhambra

*

Your article highlighting Wal-Mart's wage, benefits and anti-union policies explains why I am honoring the supermarket workers' picket lines. Led by Wal-Mart, American business is in a globalized race to the bottom, keeping worker compensation low and increasing productivity, which only means having one worker do the job of two. Even that archconservative Henry Ford realized that he had to pay his workers more in order for them to buy his cars and for the economy to grow. What we are witnessing today is tooth-and-claw competition that is leading to the sunset of the middle class in America.

Carl Martz
Redlands

*

With the huge and ever-increasing profits that Wal-Mart reaps, it most certainly can afford to pay its employees living wages and full health insurance benefits. The Walton family would probably not even notice a change in lifestyle if its profits were reduced by one-half because it decided to take better care of its employees. It's all about greed.

Carol May
Los Angeles

*

One shudders for the future of commercial America and, particularly, free-enterprise employment when reading your article on Wal-Mart. Our nation was built upon the foundation that anyone had the opportunity to build an enterprise to supply competitive goods to eager customers -- a concept that Wal-Mart itself so successfully exemplifies. However, in prior years, competition in most cases meant like comparisons conducted within the American environment of good wages and high standards of living.

Now, manufacturers and free-enterprise workers in our nation must compete against manufacturers and workers from some of the lowest-wage areas of the world. Little wonder there will soon be no meaningful manufacturing conducted in the United States. All the "good" jobs and professional opportunities in the future will go to those who have access to government resources: direct government workers, the medical profession and, of course, teachers and others involved in our huge educational establishment.

No surprise, therefore, that economists from institutes of higher learning are so supportive of Wal-Mart's constraints upon costs.

Daniel Eliason
Santa Barbara

*

Reading about Wal-Mart's relentless efforts to cut prices while providing quality products and listening to its customers leads me to one thought: I hope it decides to get into providing health-care services nationwide.

Ed Kushins
Hermosa Beach

*

In your long story on Wal-Mart you missed the bottom line: While the average "associate" is paid poverty-level wages, Sam Walton's five heirs are worth a combined total of more than $100 billion. Wal-Mart is a national disgrace.

John Horne
Redondo Beach

Wal-Mart stirs up grocery industry

By MARINA STRAUSS
November 25, 2003

From Monday's Globe and Mail

A labour dispute at 15 Loblaw Cos. Ltd. stores in Newfoundland highlights a trend that is transforming the North American grocery industry as retailers race to lower costs and compete with the mighty Wal-Mart Stores Inc.

Last week, Loblaw locked out about 1,600 workers at its 15 Dominion stores after the employees staged rotating walkouts to protest the company's demand for wage and benefit concessions. Underlying the fight is Loblaw's view that it needs to rein in wage and benefit expenses in order to take on non-unionized, lower paying rivals - with much of the focus on Wal-Mart.

The issue has already reared its head in Ontario where Loblaw succeeded this summer in getting the United Food and Commercial Workers Union, which represents employees in that province, to agree to concessions at new, discount Real Canadian Superstores.

In Newfoundland, the Loblaw employees are represented by a different union, the Canadian Auto Workers, which refused to accept the company's wage and benefit proposals.

"This is simply about greed," CAW president Buzz Hargrove said in an interview, adding that Wal-Mart should not set labour standards for Canada. "We're not going to let the lowest common denominator dictate what's going to happen to our members."

Indeed, Wal-Mart appears to be gradually setting employee compensation standards in the North American grocery sector as it aggressively bolsters its food offerings at its conventional stores, its Sam's Clubs and its mammoth U.S. supercentres that sell everything from food to furniture. Already the supercentres have pushed some U.S. supermarkets out of business.

The Wal-Mart supercentres have triggered a wave of labour protests as competing U.S. supermarkets try to gain concessions from employees to take on the non-unionized, low-wage Wal-Mart outlets.

The latest U.S. wrangle is in Southern California where 70,000 grocery workers are on strike, unhappy with supermarket chains' demands for concessions as the retailers brace for the arrival early next year of the first of 40 Wal-Mart supercentres.

In Canada, Loblaw has been no slouch in trying to head off Wal-Mart's challenge since the world's largest retailer entered this country more than nine years ago.

Loblaw's battle plan is to expand its own discount stores, led by the Real Canadian Superstore, already a successful format in Western Canada.

The superstores are a one-stop-shopping destination with general merchandise along with food, and are designed to compete head-on with Wal-Mart. Last month, Wal-Mart launched its first four Sam's Clubs in Ontario with an eye to opening many more across Canada. Sam's Clubs carry a full range of groceries.

Loblaw president John Lederer told analysts last week that the chain - this country's largest grocer - envisages between 30 and 50 Real Canadian Superstores in Ontario "over the next number of years." (A spokesman said later some of those stores will be in Quebec, too.)

Mr. Lederer praised the UFCW for its "strong collaborative" work with Loblaw . "We think that will lead to more union jobs and still allow us to compete toe-to-toe with global players."

Not everyone agrees with this collaboration. The UAW's Mr. Hargrove said Loblaw shouldn't pay "starvation wages" just to keep up with Wal-Mart, but rather should force Wal-Mart to raise its standards.

He said Loblaw is offering a 25-cent-an-hour raise in the first year of the contract for pay that starts at $6.25 an hour - 25 cents an hour above minimum wage - and ranges to $8.32 an hour. (The company spokesman wouldn't comment.)

In Ontario, where wages are considerably higher, a dissident group of UFCW members has challenged the secretly negotiated concessions for superstores at the Ontario Labour Relations Board, and is awaiting a decision.

Michael Fraser, national director of UFCW Canada, said Loblaw threatened to open non-unionized stores under the Real Canadian Superstore banners if the UFCW didn't agree to the contract cutbacks.

The alternative for union members could have been losing their jobs entirely, Mr. Fraser said in a recent interview.

"Loblaw is being somewhat forward thinking," Mr. Fraser said. "They realize Wal-Mart is probably going to come into Canada in a big way with Sam's Club. Loblaw is the only employer in Canada that's prepared to try to compete with them on the same basis ..... If we had sat back and done nothing ..... eventually we would be watching a lot of our members be put out of work by non-union competition."

But even The New York Times has weighed in about the potential dangers of what it called in an editorial last week "the Wal-Martization of America."

" Wal-Mart likes to wrap itself in American values," it wrote. "It should be reminded that one of those is paying workers enough to give their families a decent life."

WORKERS IN WAL-MART SUIT APPLY FOR CLASS ACTION STATUS WORK HOURS, PAY PRACTICES CALLED UNFAIR

24 November 2003 - The Associated Press
South Florida Sun-Sentinel

PANAMA CITY

Lawyers are asking a judge to decide whether as many as 230,000 Floridians can sue Wal-Mart Stores Inc. in a class action lawsuit that alleges the world's biggest retailer doesn't pay low-level employees for extra work.

A former night shift manager in the Panama City Beach Wal-Mart Supercenter and several former employees of Chipley Wal-Mart sued the company in 2001. They said they were forced to work through breaks, skip meals and return to unfinished tasks after they had clocked out.

They want to include all the hourly workers Wal-Mart has employed in Florida since 1997 in a class action suit -- a type of suit that combines the complaints of people with similar claims and damages against the same company. Wal-Mart said that would include 232,358 people.

Circuit Court Judge Glenn Hess will determine whether the arguments meet the legal criteria of class action suits. If he allows the suit to continue, it could open the door for greater claims against Wal-Mart, and possibly punitive damages. If he rejects the request, each employee could file individually, probably in small claims court.

Requests to file similar lawsuits in other states have met mixed success. Minnesota and Indiana allowed class action lawsuits. Seven other states -- California, Georgia, Louisiana, Michigan, Ohio, Oregon and Texas -- did not.

The attorney for Farris Cobb, the former night shift manager, said Wal-Mart files show the company understaffs its stores, pressures managers to overwork employees and strictly prohibits overtime. The attorney, Russell Lloyd, said the company pressures managers to keep wages at 8 percent of each store's sales totals. Competitors allow wages to reach 15 percent to 16 percent of sales, he said.

Lloyd says Wal-Mart provides incentives for the managers to reach these goals, including bonuses that are higher than managers' $50,000 base salary.

Lloyd said Florida employees lost 900,000 hours of pay because of these practices in one year.

Wal-Mart attorneys Bradley Johnson and Weyman Johnson said there are too many different allegations to make this case a class action lawsuit and argued most of the plaintiffs signed onto the suit only after seeing a law firm's advertisement.

They said many of the plaintiffs acknowledged they were only asked to work through breaks during busy times, and one man admitted the store would probably have paid him for extra work if he had pushed harder.

Wal-Mart versus the workers

By Neil Buckley
November 19 2003 - Financial Times

For Victor Zavala, the American dream ended at 7am on a chilly Thursday last month. As he walked across the car park of the Wal-Mart superstore in Piscataway, New Jersey, where he had spent an overnight shift

scrubbing floors, two police cars and two unmarked cars sped towards him. Within seconds, he was in handcuffs.

Mr Zavala, an illegal immigrant from Mexico, says he had worked for three years cleaning Wal-Mart stores seven nights, or 60 hours, a week, earning about $6 an hour. He got no overtime pay, health insurance or

sick leave; he also paid no taxes or social security. He never got a day off; his request for a week's honeymoon leave in February was denied.

Now facing deportation, Mr Zavala, 28, was employed by a cleaning contractor, not by Wal-Mart. But he is one of nine cleaners suing the world's largest retailer in what they aim to make a class action suit. It alleges Wal-Mart knew the workers were illegal and violated federal racketeering laws by conspiring with cleaning contractors to pay them low wages.

The nine are among 250 illegal workers arrested in raids on October 23 outside 61 Wal-Mart stores in 21 states, in one of the biggest operations of its kind. Immigration officers also searched a mid-level

manager's office at Wal-Mart's Bentonville, Arkansas, headquarters, taking boxes of documents. Wal-Mart has since confirmed that a federal grand jury is determining whether it should be charged with knowingly employing contractors who were using illegal workers.

"This is a case of the strongest company in the world preying on the most vulnerable poor people," says James Linsey, a lawyer representing

the nine illegal workers. "What is heartening is that the federal authorities are not just picking on the littlest of the little, but have sent Wal-Mart a letter saying they are the target of a criminal investigation. This is very serious stuff."

Wal-Mart says it has no evidence that employees at any level knew illegal workers were being employed, and is co-operating fully with investigators.

"We are as eager as anyone to see what evidence federal officials might have," says Mona Williams, vice- president of communications. "If anyone

at Wal-Mart has broken a law, we want to know who it is, and we will make sure that the person will no longer work for our company."

But the immigrant worker case is throwing an uncomfortable spotlight on to the employment practices of what is the world's largest company by

revenues - with 1.4m employees, $245bn sales and $8bn net profits last year - and is arguably the most powerful.

Coupled with three dozen lawsuits alleging that Wal-Mart forced employees to work unpaid overtime, it raises questions over whether the retailer's relentless drive to cut costs is causing it to stray too close to the boundary of legality.

On top of that, a strike by 70,000 supermarket workers in southern California over their employers' plans to slash healthcare benefits - to compete with cut-price Wal-Mart - has provoked a debate over the

so-called "race to the bottom". The US is already jumpy about domestic industry being undercut by cheap labour overseas. Now many fear that

Wal-Mart's low pay and benefits are undermining efforts by competitors and suppliers to pay their workers a decent wage.

Wal-Mart's size and power make it a magnet for criticism. It has long been accused of destroying Main Street USA by shutting down "mom-and-pop" stores, and driving manufacturing jobs abroad by

aggressively screwing down suppliers' prices and costs. That has not deterred the estimated 138m shoppers who visit its giant stores each week. But for a company whose business model relies, in part, on a

plentiful supply of willing, non-union labour, controversy over its employment standards touches a nerve.

Gary Balter, retail analyst at UBS Warburg in New York, says Wal-Mart is a "very honourable company". But he warns that many powerful businesses

eventually run into an issue that threatens to hold back their progress. With Microsoft, it was regulation. Could labour issues become the kind

of thorn in the side for Wal-Mart that antitrust probes became for Microsoft?

"It is very hard to regulate a company because they are giving you low prices," he says. "But there may be someone looking for the one thing they did wrong, so that they can use that, for example, to force them to let more unions in.

"In the public relations battle, you have Wal-Mart on one side saying we want to cut prices for consumers. And on the other side you have more and more people saying Wal-Mart is hurting the fabric of America."

Wal-Mart's spartan "home office", in a converted warehouse in rural Arkansas, presents an image of thrift and propriety. Employees are reluctant even to let visitors buy them a coffee, so strong is the policy against accepting gifts. And vendors trying to persuade Wal-Mart to carry their products meet buyers in bare rooms with signs proclaiming that Wal-Mart will not accept bribes.

The company admits its workers' basic pay is less than that of rivals, but it insists respect for its workers - studiously referred to as "associates" - is central to its philosophy. Employees carry cards bearing the three core values of Sam Walton, the company's founder. Number one is "respect for the individual".

Lee Scott, chief executive, says he is committed to preserving the folksy culture of "Mr Sam", who died in 1992. Mr Walton, he recalls, said there were only two people to whom he would never give a second

chance: "anyone who stole, or managers who abused their people".

The challenge Wal-Mart faces is to preserve Mr Sam's culture as it grows to 2m or even 3m employees, and - with 4,700 stores worldwide already, two-thirds of them in the US - to ensure that managers always meet the standards head office demands.

A rash of lawsuits against the company allege there have been abuses. The latest is from the immigrant workers but Wal-Mart says 240 of the 250 workers detained last month were employed by third-party contractors for which it cannot be held responsible.

However, federal officials confirm that they have recorded conversations indicating that Wal-Mart employees knew illegal workers were being used.

Mr Zavala, the Mexican immigrant, and his lawyers say it would have been hard for Wal-Mart staff, at least at store level, not to know. Cleaners, they say, were supervised by Wal-Mart assistant store managers.

"Whoever was in charge of making these contracts with contractors knew what they were doing," adds Gilberto Garcia, a lawyer representing the illegal workers. "The people negotiating had to know that there was a reason why one [bid] was cheaper than another."

Wal-Mart's Ms Williams says the company cannot be expected to check every worker's papers at hundreds of outside providers of services and

products. She adds that the immigrant workers' lawsuit is baseless, and Wal-Mart will move to dismiss it.

But, she says: "We are especially concerned about allegations that undocumented workers were not treated properly, that contractors took advantage of [them]. That is wrong. We would never condone such

treatment and we are sorry it happened in our stores."

The immigrant workers' case follows 37 suits pending against the company on a different issue. These allege Wal-Mart tried to cut costs by making

employees work unpaid overtime.

One verdict has already gone against the company. A jury in Oregon last December found a "pattern of practice" at Wal-Mart permitting 400 employees to work overtime without pay between 1994 and 1999. Two similar cases have been granted class action status this month, in Minnesota and California; Wal-Mart is appealing against an earlier class certification in Indiana.

Ms Williams says Wal-Mart's policy - "to pay associates for every minute they work" - is clear. "Any manager who requires or even tolerates

off-the-clock working would be violating company policy and is subject to disciplinary action up to and including termination," she says. "We have had a huge education effort to make sure that all of our managers and hourly associates know that off-the-clock working isn't tolerated. . . We have fired some managers who have been doing this."

A third area in which the company faces a lawsuit - potentially the biggest civil rights class action in US history - is over alleged sex discrimination. The suit, filed by six women in 2001, claims Wal-Mart

systematically denies promotion and equal pay to women. If certified by the federal judge considering the case, it would cover almost 1.6m current and former female employees. The plaintiffs say that while two-thirds of Wal-Mart's hourly employees are female, women fill only a third of store management team jobs and fewer than 15 per cent of top store manager positions. They also say women at all levels earn less than men.

Ms Williams says the case has no merit. She says women are promoted in direct proportion - or better - to the numbers applying for management jobs. Women workers have sometimes been reluctant to apply for senior jobs that would require them to move, or work antisocial hours, and Wal-Mart is working on tackling that.

The retail group has also found itself cited as indirect cause of the strike in southern California by 70,000 workers for the three biggest US supermarket chains. The companies, Kroger, Albertson's and Safeway, say they have to cut healthcare costs and restrain pay increases to compete with Wal-Mart, which plans to open 40 "super-centres" in California. These, unlike older Wal-Mart stores, sell groceries and as well as

non-food goods. The United Food and Commercial Workers Union, the supermarket union, has seized on the issue of health insurance - for which most Americans rely on their employers to pay much of the cost - as a battleground.

It says that while two-thirds of Wal-Mart employees qualify for company health insurance, fewer than half participate, because they cannot afford the high contributions Wal-Mart requires them to make. That

leaves some uninsured or forces either their spouses' employers, or federal government programmes, to provide healthcare for them.

Wal-Mart disputes the figures, saying 78 per cent of its workers are eligible for its healthcare plan and 50 per cent participate. About 40 per cent of its workers, it says, get healthcare through other sources; but this is partly because, for example, they are students or senior citizens.

About 40 per cent of those in its scheme had no health insurance before joining Wal-Mart. "These are people who would have fallen through the cracks or been on the public health rolls," says Ms Williams, noting that the company provides cover to about 500,000 American families.

In the background of all of these issues is a so far unsuccessful four-year campaign by the UFCW to get a toe-hold in Wal-Mart stores (see below).

Wal-Mart says it is not anti-union, but "pro-associate"; it does not believe its workers need unions when it operates an "open-door" policy up to chief executive level, allowing staff to voice complaints to managers. "When it comes to our people, we think we are more effective if we're dealing with you as an individual rather than having to go through some intermediary," says Mr Scott.

Wal-Mart says stores are free to vote to unionise, but none has done so. The UFCW says the reason is that at the first sign of union activity, Wal-Mart dispatches labour relations teams from head office that employ aggressive tactics to persuade workers not to join. The company admits that these teams exist, but only to explain their rights to staff and

use legal means to get the company's views across.

Al Zack, assistant director of strategic programmes at the UFCW, says: "This is all about the fact that the nation's number one employer is setting a lowest common denominator standard - as opposed to the

standard set by General Motors in the past, when it was the number one employer, of setting the bar higher," he says.

Yet however much unions and competitors may attack Wal-Mart, an army of analysts and economists readily defends it. Gary Stibel, chairman of New

England Consulting Group, a marketing management consulting firm, says Wal-Mart is right to be aggressive on costs, and should stand firm against anything that would increase them.

"I've worked with Wal-Mart directly and indirectly for 30 years," he says. "Are they coming close to the boundary [of acceptability]? Yes. Are they stepping over the line? Absolutely not. They are one of the

most ethical companies we work with anywhere," he says. "But the job of the retail industry is to stay close to the boundary, because if you don't somebody else will go round you."

Mr Stibel says the productivity gains Wal-Mart has achieved - he estimates it saved US consumers at least $20bn last year - have given a huge boost to the economy, pushing down prices and creating wealth and jobs.

"In a world where new jobs are not being created every hour, Wal-Mart is creating them every second. I have walked into retail environments where staff are being paid better than those at Wal-Mart and been given much worse service. At Wal-Mart, the service I get is pretty good. People seem to enjoy working there."

An Empire Built on Bargains Remakes the Working World

Wal-Mart is so powerful that it moves the economies of entire countries, bringing profit and pain. The prices can?t be beat, but the wages can.

By Abigail Goldman and Nancy Cleeland

Times Staff Writers

November 23, 2003

LAS VEGAS -- Chastity Ferguson kept watch over four sleepy children late one Friday as she flipped a pack of corn dogs into a cart at her new favorite grocery store: Wal-Mart.

The Wal-Mart Supercenter, a pink stucco box twice as big as a Home Depot, combines a full-scale supermarket with the usual discount mega-store. For the 26-year-old Ferguson, the draw is simple.

"You can't beat the prices," said the hotel cashier, who makes $400 a week. "I come here because it's cheap."

Across town, another mother also is familiar with the Supercenter's low prices. Kelly Gray, the chief breadwinner for five children, lost her job as a Raley's grocery clerk last December after Wal-Mart expanded into the supermarket business here. California-based Raley's closed all 18 of its stores in the area, laying off 1,400 workers.

Gray earned $14.68 an hour with a pension and family health insurance. Wal-Mart grocery workers typically make less than $9 an hour.

"It's like somebody came and broke into your home and took something huge and important away from you," said the 36-year-old. "I was scared. I cried. I shook."

Wal-Mart gives. And Wal-Mart takes away.

From a small-town five-and-dime, Wal-Mart Stores Inc. has grown over 50 years to become the world's largest corporation and a global economic force.

It posted $245 billion in sales in its most recent fiscal year ? nearly twice as much as General Electric Co. and almost eight times as much as Microsoft Corp. It is the nation's largest seller of toys, furniture, jewelry, dog food and scores of other consumer products. It is the largest grocer in the United States.

Wal-Mart's decisions influence wages and working conditions across a wide swath of the world economy, from the shopping centers of Las Vegas to the factories of Honduras and South Asia. Its business is so vital to developing countries that some send emissaries to the corporate headquarters in Bentonville, Ark., almost as if Wal-Mart were a sovereign nation.

The company has prospered by elevating one goal above all others: cutting prices relentlessly. U.S. economists say its tightfistedness has not only boosted its own bottom line, but also helped hold down the inflation rate for the entire country. Consumers reap the benefits every time they push a cart through Wal-Mart's checkout lines.

Yet Wal-Mart's astonishing success exacts a heavy price.

By squeezing suppliers to cut wholesale costs, the company has hastened the flight of U.S. manufacturing jobs overseas. By scouring the globe for the cheapest goods, it has driven factory jobs from one poor nation to another.

Wal-Mart's penny-pinching extends to its own 1.2 million U.S. employees, none of them unionized. By the company's own admission, a full-time worker might not be able to support a family on a Wal-Mart paycheck.

Then there are casualties like Kelly Gray. As Wal-Mart expands rapidly into groceries, it is causing upheaval in yet another corner of the economy. When a Supercenter moves into town, competitors often are wiped out, taking high-paying union jobs with them.

Wal-Mart's plans to enter the grocery business in California early next year have thrown the state's supermarket industry into turmoil. Fearful of Wal-Mart's ability to undercut them on price, the Ralphs, Vons and Albertsons chains have sought concessions from their unionized workers in Southern and Central California, leading to a work stoppage now entering its seventh week.

Half a century ago, the nation's largest and most emulated employer was General Motors Corp. "Today," said Nelson Lichtenstein, a history professor at UC Santa Barbara, "for better or worse, it's Wal-Mart."

GM brought prosperity to factory towns and made American workers the envy of the world. With a high-wage union job, an assembly-line worker could afford a house, a decent car, maybe even a boat by the lake.

There was a bit of truth, Lichtenstein said, to the famous assertion by Charles Wilson, General Motors chief from 1941 to 1953, that what was good for GM was good for the country.

With Wal-Mart, the calculus is considerably more complex.

'We Have Split Brains'

Glenn Miraflor used to chide his wife for shopping at Wal-Mart.

As a member of Ironworkers Local 416, the 50-year-old father of four is well aware of the retailer's anti-union stance. But when the family's credit card debt topped $10,000, Wal-Mart's deals suddenly looked irresistible.

"Where else are you going to find a computer for $498?" he asked, looking for a PC with his wife, Debbie, at the Supercenter on Serene Avenue, far from the glitz of the Las Vegas Strip. "Everyone I work with shops here."

Surveys by the Teamsters and the United Food and Commercial Workers ? the two unions most threatened by Wal-Mart ? show that many of their own members shop at the discounter.

"We have split brains," said Robert Reich, U.S. secretary of Labor under President Clinton and now a professor of economic and social policy at Brandeis University in Waltham, Mass. "Most of the time, the half of our brain that wants the best deal prevails."

The connection may be lost on many, Reich said, but consumers' addiction to low prices is accelerating a shift toward a two-tiered U.S. economy, with a shrinking middle class and a growing pool of low-wage workers.

"Wal-Mart's prices may be lower," he said, "but that's small consolation to a lot of people who end up with less money to spend."

Others insist there is a net benefit whenever consumers can get more for less. "If you have lower real prices, you're saving money," said Arthur Laffer, a key advisor to President Reagan who is now an economic consultant in San Diego. "The prices' falling, in effect, raises the wages of everyone who buys their products."

That's basically the way the Miraflors saw it as they cruised the aisles of the Supercenter ? Wal-Mart Store No. 2593 ? and snapped up deals: Ragu pasta sauce for 89 cents, Aunt Jemima pancake mix for 48 cents, pork shoulder steaks for $1.49 a pound and five cans of Del Monte vegetables for $2.

After making their way through the groceries, the Miraflors turned their attention to the housewares section, stopping in front of a 20-inch box fan. Glenn Miraflor checked the price and made room for it in their cart.

"Ten bucks," he said. "You can't beat that. That's why we come here."

Vendors' Alley

The fan was made 1,700 miles away in Chicago at Lakewood Engineering & Manufacturing Co. A decade ago, the same fan carried a $20 price tag.

But that wasn't low enough for Wal-Mart. So Lakewood owner Carl Krauss cut costs at every turn. He automated production at the red-brick factory built by his grandfather on the city's West Side. Where it once took 22 people to put together a product, it now takes seven. Krauss also badgered his suppliers to knock down their prices for parts.

In 2000, he took the hardest step of all: He opened a factory in Shenzhen, China, where workers earn 25 cents an hour, compared with $13 in Chicago. About 40% of his products now are made in China, including most heaters and desktop fans. The Miraflors' box fan was assembled in Chicago, but its electronic guts were imported.

"My father was dead set against it," Krauss said of the move overseas. "I have the same respect for American workers, but I'm going to do what I have to do to survive."

Survival in an age when consumers are hyper-vigilant about prices means shaving expenses again and again. "Nobody wants to be on the shelf with the same item for $1 more," Krauss said.

All the retailers he supplies ? including Home Depot Inc. and Target Corp. ? drive a hard bargain with manufacturers. But none is as tough as Wal-Mart, Krauss said.

Twice a year, his sales representatives travel to Wal-Mart headquarters to pitch their products. There, competitors sit side by side, waiting to be ushered into one of 60 glass-sided cubicles ? a space some call Vendors' Alley.

Then the haggling begins. "You give them your price," Krauss said. "If they don't like it, they give you theirs."

The suppliers are at a disadvantage. The Wal-Mart buyer can always go out to the waiting room and find someone who will go lower. "Your price is going to be whittled down like you never thought possible," Krauss said.

After moving much of his manufacturing abroad, Krauss doesn't see any way to push costs lower. "If you're doing things legally, you can't," he said.

He may have to find a way.

At the Serene Avenue store, shopper Sarah Saxon, 17, pulled a $40 Lakewood heater off the shelf. She looked it over, then put it back in favor of an AirTech model selling for $34.88. She said it looked better than the Lakewood.

"Besides," she said, "it's cheaper."

Wal-Mart's culture of cheap emanates from Bentonville, a town of 20,000 tucked into the low green hills of northwest Arkansas, where a young Sam Walton opened his first five-and-dime in 1950. Even then, Walton had a vision of a different kind of retail.

Rather than charging a little less than his competitors, Walton wanted to slash prices as much as he could and still make a profit. Other stores would use price breaks from manufacturers as a way to boost their bottom lines, paying less at wholesale while leaving retail prices untouched.

Walton passed such savings on to his customers as his discount business evolved into Wal-Mart stores in 1962. He figured he would make up the difference in volume. He was right.

By the mid-1980s, Wal-Mart's success had catapulted Walton to No. 1 on the Forbes list of richest Americans. Still, he drove an old pickup truck to haul around his bird dogs, refused to fly first class and shared hotel rooms with colleagues on business trips.

Bentonville, like the man who put it on the map, is a combination of Southern charm and Midwestern practicality. The town square is anchored by the original Walton's five-and-dime (now a visitors' center) and dotted with small shops. But the real action is down Business Route 71, where the Wal-Mart Supercenter rises up, big enough to fit three 747s with room to spare.

Across the street is the base of Wal-Mart operations: the Home Office. The world's biggest company occupies an industrial-looking hodgepodge of windowless work spaces, connected by bunker-like hallways. The drab gray-and-blue walls display the visage and sayings of Sam Walton, who died in 1992:

"Listen to your associates.... They're the best idea generators."

"To succeed, stay out in front of change."

"Swim upstream. Go the other way. Ignore the conventional wisdom."

Lists abound. The best-performing stores. The worst-performing stores. Under a picture of the founder asking, "Who's taking your customers?" is a roster of competing retailers, including Costco Wholesale Corp., Circuit City Stores Inc. and Target, with the name and picture of each company's chief executive.

It's all part of the Wal-Mart culture: a zealous attention to competition, customers and costs.

Wal-Mart employees, unlike their counterparts at other retailers, are forbidden to accept so much as a soda from vendors ? or anybody else the company does business with ? on the theory that such frills ultimately are paid for by consumers. The company's meticulous management of the flow of goods, from the factory floor to the store shelf, has shaved shipping and inventory costs to a degree that retailing experts say is unprecedented.

"You could argue that some of what Wal-Mart does to cut costs has been win-win," said Richard S. Tedlow, a professor of business administration at Harvard Business School. "What's being squeezed out is waste."

The company is so ruthlessly efficient that 4% of the growth in the U.S. economy's productivity from 1995 to 1999 was due to Wal-Mart alone, researchers at the McKinsey Global Institute estimated last year. No other single company had a measurable impact. Wal-Mart also has forced competitors to become more efficient, driving the nation's productivity ? output per hour of work ? even higher.

Walton, who still is referred to as Mr. Sam throughout the corporation, worked in a ground-floor office barely big enough for a conference table. The current occupant, Chief Executive H. Lee Scott Jr., is the keeper of Mr. Sam's vision. Like all Wal-Mart executives, he empties his own trash and shares budget hotel rooms when traveling. Everyone flies coach.

"We do not have limousines," said Scott, who certainly could afford one, having made nearly $18 million last year in salary, bonus and stock, plus options with an estimated value of $11.3 million. "I drive a Volkswagen Bug."

Wal-Mart's stinginess reaches from the executive suite to the loading dock.

Some truckers complain that they must unload their own cargo ? or pay Wal-Mart to do it. Other big retail chains absorb that cost themselves. "They're awful," said independent driver George Hauschild of Palm Springs. "They don't even let you use the bathroom."

At every one of the 2,966 Wal-Marts in the U.S., thermostats are kept at a steady 73 degrees in summer, 70 degrees in winter; raising or lowering the temperature is considered a waste of money.

Such measures seem mild compared with what Wal-Mart has done to cut payroll costs. In one case, a jury in Oregon last year found that company managers had coerced hundreds of employees to work overtime without pay.

The managers were driven by intense pressure from Bentonville, witnesses said. Managers whose labor costs were considered too high were singled out during the company's weekly in-house satellite broadcasts. In response, managers tampered with electronic time cards or bullied employees to work off the clock, according to trial testimony.

The Oregon jury found last December that Wal-Mart's behavior was illegal and willful. A separate trial to determine damages for the 290 plaintiffs is set for early next year.

Wal-Mart settled similar overtime suits in Colorado and New Mexico for undisclosed amounts. More than 40 other cases are awaiting trial.

The company says it prohibits off-the-clock work and blames the problems on a small number of rogue managers.

Last month, Wal-Mart ran into trouble because of another cost-cutting practice: using dirt-cheap janitorial services.

A grand jury is investigating whether Wal-Mart knew that janitors provided by subcontractors were illegal immigrants cheated out of overtime pay. Federal agents raided 61 Wal-Marts across the country and seized boxes of documents from the Bentonville headquarters. Wal-Mart has denied wrongdoing.

Scott, the CEO, lauded Wal-Mart's employment record. Even in tight labor markets, he said, the company never has trouble finding workers.

"It is not forced labor," he said. "The truth is, I go to the stores and shake hands with the associates, and they like working at Wal-Mart."

On the Fast Track

Aaron Rios liked working at Wal-Mart so much that he decided to make his career there.

Like two-thirds of Wal-Mart's store managers, Rios started off as an hourly worker ? in his case, stocking shoes on the graveyard shift at the Wal-Mart in his hometown of Hanford in the San Joaquin Valley.

After two years, Rios was recommended for management training ? the company's fast track ? leading him to quit community college and pursue a climb through the Wal-Mart ranks.

"There's just something about a Wal-Mart environment," said Rios, who became manager of the Serene Avenue Supercenter in Las Vegas at age 26. "It changed who I am, where I was going and what my career goals were."

Wal-Mart store managers earn about $95,000 annually, including bonuses, according to the company. Supercenter managers earn $130,000.

A management position requires long hours ? as many as 80 a week ? and, often, a willingness to relocate. Rios worked at six California Wal-Mart stores before taking the helm at Serene Avenue.

"It doesn't come free," said Rios, a divorced father who shares custody of his 2-year-old son.

Still, he said, the benefits outweigh the sacrifices.

"I have an open opportunity. I could go into real estate for Wal-Mart. I could do systems, analysis, accounting. It's endless," Rios said. "If I wanted to go to Germany or Japan or Brazil or any of the markets we have, I believe I could go."

A few weeks later, Rios snared another promotion, moving back to California as a district manager in the Antelope Valley, overseeing seven stores from Barstow to Palmdale.

Larry Allen had his own dreams of climbing the Wal-Mart ladder.

In the fall of 2001, he and his wife, Jacque, left Portland, Ore., where the economy was sputtering, and headed to Las Vegas. He was an executive chef and she worked in catering. They looked forward to a fresh start in unionized casino jobs, making more than $15 an hour, with health insurance and pensions.

But their timing was lousy. Recession and terrorism were hitting the gaming industry hard, and work of any kind was scarce.

Just before their money ran out, the Allens lowered their expectations and took jobs at the Serene Avenue Wal-Mart. Jacque, then 43, worked the counter at the in-store restaurant, Radio Grill. Larry, 46, stocked produce. They each earned $8 an hour.

Despite the letdown, Larry Allen said he attacked the job with enthusiasm. Inspired by tales of well-paid Wal-Mart managers who had started out as hourly employees, such as his manager Aaron Rios, he figured on working his way up. That was Sam's way, he said.

"I've been following Sam Walton since the 1970s," he said. "He's the American dream."

The glow faded quickly. At his 90-day review, Allen said, he received an unenthusiastic write-up and an hourly raise of 35 cents. His supervisor told him that if he continued working hard, in two years he might make his way up to $10 an hour.

Allen thinks he knows why he received such mediocre marks. For one thing, he was prone to question company policy. Then, Allen committed the ultimate act of disloyalty: He openly promoted unionization.

West Coast Ambitions

For decades, Wal-Mart has tantalized and frustrated union organizers. But the company's move into the grocery business ? a labor stronghold ? has raised the stakes dramatically.

Union organizers say the high wages and benefits of their members are at risk, as Wal-Mart expands its Supercenters beyond the South and Midwest. The company recently established a beachhead in Las Vegas, with five centers.

Next stop: California, where Wal-Mart plans to open 40 Supercenters starting early next year. In a sense, it has already arrived. Wal-Mart's low wages are a central factor in the labor dispute between California's three major supermarket chains and the United Food and Commercial Workers.

"They are the third party now that comes to every bargaining situation," said Mike Leonard, director of strategic programs for the UFCW.

Over many years of hard negotiating, the union has won and maintained premier contracts for its 800,000 grocery workers. But with the opening of each new Supercenter, the union's clout erodes.

Every one of the giant stores sucks away about 200 UFCW jobs, said retail consultant Burt P. Flickinger III, who runs Strategic Resource Group in New York. That means less power at the bargaining table and less money to hire organizers.

On average, Flickinger says, Wal-Mart's wage-and-benefit package is about $10 an hour less than those offered by unionized supermarkets.

For shoppers, that makes a big difference. A cartful of groceries is 17% to 39% cheaper at a Wal-Mart Supercenter than at a unionized supermarket, according to a survey last year in Las Vegas, Dallas and Tampa, Fla., by investment bank UBS Warburg.

Wal-Mart's move into groceries has led 25 regional supermarket chains around the nation to close or file for bankruptcy protection, eliminating 12,000 mostly union jobs, Flickinger said.

With this in mind, Safeway Inc. recently aired a videotaped message to employees, whose contract in Las Vegas expires next fall.

"Wal-Mart wants our customers and your jobs," said Safeway executive Larree Renda. Total wage and benefit costs represent 15% of sales at Safeway, Renda said. At Wal-Mart, they account for 9%.

"If we don't change," Renda said, "you bet we'll lose jobs ? and it will be in the thousands."

Staying Unorganized

From their first day on the job, Wal-Mart employees are advised to avoid unions and to report any organizing activities to their supervisors.

"If a union got in here, every benefit we've got could go on the negotiating table, every one of them," says a man identified as Russell, a veteran employee, in a video shown to new hires. "Unions will negotiate just about anything to get the right to have dues deducted out of paychecks. You see, they need big money to pay union bigwigs and their lawyers."

Company policy prohibits any union talk in work areas, and organizers say they routinely are asked to leave stores. The retailer sought, and last year received, a court order keeping organizers out of all of its stores in Arkansas. The state Supreme Court nullified the order in July.

At the first hint of union activity, Wal-Mart managers are supposed to call a hotline, usually prompting a team visit from Bentonville.

Wal-Mart spokeswoman Mona Williams said the intervention was meant to help store managers respond effectively and legally.

"Our philosophy is that only an unhappy associate would be interested in joining a union," she said, "so that's why Wal-Mart does everything it can to make sure that we are providing our associates what they want and need."

But dozens of times in the last four years, attorneys for the National Labor Relations Board have claimed that the company infringed on the supermarket union's legal right to organize.

Although some of those claims have been thrown out, others have been upheld by administrative law judges, who have ruled that Wal-Mart illegally influenced employees with offers of raises, promotions and improved working conditions just before they were to vote on whether to join a union.

Judges also have found that Wal-Mart illegally implied that workers could lose benefits such as insurance and profit sharing if they unionized.

What's more, managers illegally confiscated union literature, threatened to close down a store if workers voted to join the union, fired several union supporters and failed to promote others, according to rulings from Minnesota to Florida.

Stymied in their previous attempts to organize Wal-Mart workers, UFCW leaders adopted a new strategy in 2000. They decided to marshal their resources for a concerted organizing effort in one place: Las Vegas.

The union reached out to workers with a Web site and a weekly radio talk show, and posted organizers outside Wal-Mart stores at all hours. When they could, UFCW members would leave union literature inside stores, hoping that workers would see it before managers ordered the material thrown away.

Larry Allen got his first glimpse at a union pamphlet last year as he carried it to the garbage at the Serene Avenue Supercenter. He was hooked, and began advocating for an election to bring in the union.

"Somebody has got to step up and fight for what is right," Allen said.

Ripple Effect

Less than a mile away from the Serene Avenue store, another shopping center stands deserted, in desperate need of an anchor.

A year ago, the Raley's grocery store here drew thousands of shoppers who spilled out to neighboring businesses, buying flowers, mailing packages, getting their nails done. Today, the store is gone. The remaining shops are struggling.

"I'm probably down 45%," said Bonnie Neisius, who owns a UPS Store franchise in the center. "I just don't get the foot traffic anymore."

A few doors away, Windmill Flowers owner Diana I. Murphy leaned on a table where she would have been arranging bouquets ? had there been customers.

"There are a couple of things in play," Murphy said. "The recession, terrorism. And Wal-Mart. It's had a direct effect on me, because they sell flowers, too.... They even deliver."

Unlike small towns with boarded-up commercial centers, fast-growing Vegas quickly loses track of its Wal-Mart victims.

Wal-Mart's costs to the community tend to show up in subtler ways.

In an informal survey in the late 1990s of people who used Las Vegas emergency rooms for routine medical care, patients who said they were employed but uninsured were asked where they worked.

"Wal-Mart came up more than any other," said Dr. Raj Chanderraj, a Las Vegas cardiologist and chairman of the Clark County Health Care Access Consortium, a group that works to provide medical services to the uninsured.

The reason, say critics: Because Wal-Mart pays such low wages, many employees can't afford the health insurance the company offers. And those who do have health coverage through the company often can't afford deductibles that run as high as $3,000 a year.

"Their employees are ending up at the county hospital and become the burden of the county," said Clark County Manager Thom Reilly.

Wal-Mart disputes that. Williams, the company spokeswoman, said that 48% of employees are covered by Wal-Mart's health insurance plan. Among those who aren't, 26% have coverage from another source such as a spouse's employer or Medicare, Williams said.

The notion that Wal-Mart doesn't provide adequate health coverage is "just rhetoric," she said. "It's simply not true."

According to the Employee Benefit Research Institute in Washington, nearly 44% of workers in the retail sector as a whole have employer-provided health coverage. Among big companies in all industries, the figure is 66%.

Those who accuse Wal-Mart of shortchanging its employees, Williams suggested, don't understand the modern service economy. "Retail and service wages are what they are," she said, "whether you look at a department store, a discount store, the local dry cleaners, the bakery or whatever.

"Wal-Mart is a great match for a lot of people," Williams added. "But if you are the sole provider for your family and do not have the time or the skills to move up the ladder, then maybe it's not the right place for you."

'I Still Believe in Wal-Mart'

Larry Allen spent about a year advocating for the supermarket union while working at Wal-Mart.

In the parking lot and in the break room, he passed out fliers and talked up the benefits of unionizing. But he and his fellow union backers didn't get as far as they hoped. About 42% of workers in the grocery department at Serene Avenue signed UFCW cards ? not enough for the union to feel confident about winning an election.

In August, Allen was fired. NLRB attorneys said it was because of his union activities and filed a complaint against Wal-Mart, seeking his reinstatement.

On a recent afternoon outside the Supercenter, dozens of union members rallied to support Allen. "Larry, Larry, Larry," they chanted. Over at the store entrance, the demonstration was a muffled, distant bit of noise. Store managers watched on a screen as surveillance cameras scanned the crowd.

Asked about the commotion, a gray-haired Wal-Mart greeter named Robert just smiled. "They want to make the store union," he said. "But that would make the prices go up for our customers. We can't let that happen."

On some level, even Larry Allen understands. "I still believe in Wal-Mart," said Allen, who now is on the union payroll as an organizer. "I like the idea of it ? give a quality product at a low price. It's what the American public wants."

COMING MONDAY

Overseas, Wal-Mart's low-cost suppliers feel the heat.

Wal-Mart, county at odds

Letters To The Editor
Silicon Valley Business Times

Published: Friday, November 14, 2003

As a proud resident of Contra Costa County, I am deeply concerned about the effort by Wal-Mart to muscle their way into our county on their terms.

The Contra Costa County Board of Supervisors recently voted unanimously to welcome Wal-Mart to operate on county lands, provided they would operate within certain parameters. The board sought to address several concerns, particularly the negative impact new mega centers will have on traffic.

Given our already-stretched freeways and roads, new mega centers on county lands that do not have the infrastructure to support new traffic could significantly worsen the gridlock.

But, rather than respecting our tradition of locally controlling our own growth, Wal-Mart instead mobilized their limitless financial resources to force a 2004 ballot measure to overturn the ordinance. (Editor's note: To re-affirm the board's original ordinance, voters must vote "yes" on the measure. So, in other words, a "yes" vote on the measure is a vote against Wal-Mart. See full story, Biz Ink, Nov. 7.)

We must not yield to outside interests who are far more concerned with extracting profits from our community than adding value to it.

Contra Costa County is a special place to live because it has been managed by local business, community and elected leaders who care about it. Please reaffirm that tradition and support the ballot measure in March 2004. 

Kish Rajan
Alamo

Wal-Mart: Cruising for a Bruising?

November 14, 2003 - BusinessWeek Online

STREET WISE

By Amy Tsao

The day may be coming when the retailing giant is a magnet for lawsuits and probers. Dubious? Ponder the Microsoft precedent

In recent weeks, the world's biggest discounter has shown up as a fatter target on the radars of those who would shoot it down. In late October, federal officers raided Wal-Mart (WMT ) and accused it of using cleaning contractors that it knew hired illegal immigrants. Based on those allegations, lawyers for some of the immigrants have filed a class action, contending that Wal-Mart conspired to avoid paying overtime. Weeks later, independent gas-station owners accused it of predatory competition by cutting prices so low that smaller operations are driven out of business.

So far, Wall Street has hardly batted an eye. Neither dispute affects Wal-Mart "in the overall scheme of things," Blaylock & Partners analyst Mark Mandel noted a few days before the discounter released its third-quarter results.

Analysts still expect Wal-Mart's sales and profits to rise at a double-digit pace year-in and year-out, as it opens new stores (many of them huge superstores) at a rate of more than one a day and racks up greater market share in toys, groceries, apparel, and jewelry. Ever with an eye for new opportunities, Wal-Mart may even embrace online businesses such as music. Its stock is up 10% this year, to $55.62 on Nov. 13.

POINTING THE FINGER. As Wal-Mart's power grows, some analysts are starting to wonder: What if allegations and lawsuits against it proliferate? What if its growing control over suppliers turns them into subjects that survive only at the discount king's whim?

Outfits like Safeway (SWY ) and Albertson's (ABS ) in groceries, Toys 'R' Us (TOY ), and lower-end department stores have started to blame disappointing financial results on Wal-Mart's competition. What if they were to fall victim to the giant's steady expansion?

If these complaints continue to build, might they transform the behemoth of Bentonville, Ark., into the discount equivalent of that other colossus, the one in Redmond, Wash.? If it isn't careful, Wal-Mart could take Microsoft's (MSFT ) place as both the target of endless government probes and a symbol of heavyhanded corporate practices (see BW, 10/6/03, "Is Wal-Mart Too Powerful?").

"NEGATIVE PUBLICITY." If that happens, it would affect investors' thinking about Wal-Mart -- just as government probes dulled Microsoft's shine. Dominant companies in major industries often become targets by virtue of their mere preeminence, says John Zielinski, portfolio manager at Neuberger Berman Century Fund in Chicago, who adds: "Investors always have to gauge that risk and how much is reflected in the stock."

Certainly, that issue is on analysts' minds in the wake of Wal-Mart's third-quarter report, released Nov. 13. The 13% increase in profits for the period was below Wall Street's forecast, with the company saying this might be due to customers concentrating on its lowest-price goods.

"Recent negative publicity is not likely to help what we view as deteriorating appearances at many Wal-Mart stores and may gradually impact the [price-earnings] multiple," wrote Gary Balter, an analyst at UBS, in reaction to the earnings report. Wal-Mart's stock fell 4% on Nov. 13, even though it expects to earn $2.03 to $2.05 a share for all of 2003 -- in sync with the $2.05 analysts expect.

WHOLESALE SUITS. Whatever the financial effects might be, it's getting harder for Wal-Mart to project a positive image, analysts say. "It worked very hard to develop a corporate culture and persona in the minds of consumers," says Zielenski, who fears Wal-Mart will suffer a loss of consumer goodwill, despite those attractive prices. Adds Zielinski: "The impact may be small financially, but you shouldn't discount it."

Besides the illegal-immigrants complaint, Wal-Mart faces dozens of suits over alleged wage discrimination, gender bias, and antitrust violations. Most analysts don't anticipate significant increases in the outfit's legal costs, which are a pittance in comparison with annual sales of $245 billion.

"Paying a judgment isn't much [of a cost] from a shareholder standpoint," says Peter Cohan, president of Peter S. Cohan Associates in Marlborough, Mass. Yet he adds: "If they have to raise wages and can't offset that, they could be forced to find cost cuts somewhere else" since one of Wal-Mart's biggest competitive advantages is lower wages.

WHAT IF... Realistically, Wal-Mart would have to get a lot bigger and meaner before it could be charged with violating antitrust laws. Blaylock's Mandel points out that it probably has only about 6% of the $3 trillion taken in by U.S. retailers. And while Microsoft had strong corporate enemies who accused it of antitrust activity -- not to mention a legion of state attorneys general -- Wal-Mart's main detractors are all "small, diffuse, and silent," says Donald Luskin, chief investment officer at research boutique Trend Macrolytics.

Nor does Wal-Mart encounter ill feeling in Europe, where Microsoft is now fighting regulators who argue that the Windows operating system was designed to work better with Microsoft's own network software than that of competitors. Microsoft's stock -- $25 as of Nov. 13 -- hasn't budged this year, even as the Nasdaq composite staged its impressive rally. Analysts speculate that its malaise is probably a combination of tech spending's slow recovery and continuing legal issues.

However, if regulators were to reconsider their current definitions of what constitutes marketplace wrongs by a dominant company, Wal-Mart could end up in the hot seat. Antitrust actions traditionally have focused on monopoly abuse by a seller, says Burt Foer, president of the American Anti-Trust Institute, who argues that Wal-Mart's unprecedented buying power could prompt lawmakers to think about "how to draw lines between legitimate use of size by a buyer, and illegitimate use."

CHINA CHALLENGE. That could mean "mid- and large-size suppliers that are getting raked over the coals and are worried there won't be anyone else to sell to eventually" could coalesce as an opposing force, Foer says -- just as a number of computer outfits banded together against Microsoft. Wal-Mart couldn't be reached for comment.

Both Wal-Mart and Microsoft have contributed on a grand scale to a restructuring of the business environment: Microsoft's technology has boosted efficiency at businesses large and small all over the world, while Wal-Mart has exploited information technology to revolutionize inventory control and other business processes, notes Luskin. But Microsoft is viewed as a key U.S. exporter -- a "good guy" role -- whereas Wal-Mart figures in domestic suppliers' fears that Chinese imports will challenge them on their own doorsteps, adds Luskin.

Despite the image Wal-Mart cultivates as a buy-American company, it's a "major catalyst for bringing in cheap Chinese goods" and, as a byproduct, displacing American workers, says Luskin. "That makes Wal-Mart more vulnerable" to image problems, he adds.

WHAT WINS IN THE END. Of course, Wal-Mart's ultimate weapon against public outrage is a powerful one: rock-bottom prices. As much as consumers might fret over the social, economic, and cultural impacts of Wal-Mart's practices "they still want the cheapest price," says San Francisco-based Tiburon Research analyst Rob Wilson, who adds: "That wins out at the end of the day."

For now, analysts and investors are still focusing on the bright side of the Wal-Mart story. Many of those who patronize the stores adore it. But that was also true of Microsoft -- before it started to swing more weight than any rival could counter.

Fighting mega-center may cost city mega-bucks

By JACK DOO and TIM MORAN

BEE STAFF WRITERS

November 16, 2003,

If Turlock wants to block Wal-Mart from opening a supercenter, the city should brace itself for a long and costly fight, said a Contra Costa County supervisor battling Wal-Mart over a similar ban.

"They should start raising money," Supervisor John Gioia of Richmond said. "Probably working with busi-nesses that think they might be im-pacted."

The Turlock City Council is considering an ordinance, similar to one Contra Costa County adopted in June, that would prevent discount stores of more than 100,000 square feet from using more than 5 percent of the space for groceries and other nontaxable items.

Wal-Mart, which opened a 125,000-square-foot store on Fulkerth Road in Turlock in 1993, has proposed building a 225,000-square-foot supercenter, which would feature groceries.

The company's relationship with city officials already has deteriorated.

Mayor Curt Andre and City Councilman John Lazar said Wal-Mart's tactics have been "threatening" and "heavy-handed."

Wal-Mart representatives checked political contribution records for elected city officials before meeting with them, Andre and Lazar said.

They also said Wal-Mart officials threatened to do whatever they could to oppose the ordinance, including an initiative drive, a lawsuit or simply moving the supercenter outside the city.

"It alarmed me that Wal-Mart would take the low road before it is even before the council," Andre said.

The mayor said Wal-Mart community relations official Peter Kanelos told him the company would use "any means, legal, political or otherwise" to get the store built.

"I was shocked," Lazar said. "For people who want to do business in the community, instead of coming in friendly, it's 'do it my way or be executed.'"

Kanelos said researching the records of the council members is a normal practice for many companies.

"It's perfectly legitimate and logical for anyone who has an issue before the council to look for potential conflicts of interest," Kanelos said.

As far as being aggressive and heavy-handed, Kanelos noted that the city officials had met with grocery store and union representatives before drafting the ordinance, but not with Wal-Mart.

"The fact that the City Council is even considering an ordinance against a company already doing business in their city without input is disappointing," he said.

Kanelos said he didn't intend to threaten officials when he told them about the possibility of a lawsuit, an initiative or locating the store outside the city limit.

"I wanted to make sure they had all the facts. It's important for them to understand our intentions, so they don't cost the city tax dollars down the road," Kanelos said. "I apologize if they perceive it as a threat."

Wal-Mart challenged the Contra Costa ordinance by hiring a Sacra-mento firm to secure 27,000 signatures to qualify for a referendum overturning the ban. The issue will be on the March ballot.

Amy Hill, community affairs man- ager for Wal-Mart, said the retail giant previously collected signatures for referendums overturning similar bans in Calexico and Inglewood as well as Clark County, Nev.

She said Inglewood and Clark County repealed their ordinances rather than putting referendums on ballots, and Calexico voters overwhelmingly supported Wal-Mart's position.

"We got a 70 percent margin to overturn," she said. "It demonstrates the public is not supportive of these ordinances. They don't want local government telling them where they can shop."

In Contra Cost County, Gioia said he expects Wal-Mart to pull out all stops. "We won't be surprised if they decide to spend over $1 million," he said.

The other side plans to fight back with a direct-mail promotion, Gioia said.

"We're raising money to run a campaign," he said. "We know they will out-spend us, but we need to spend enough to get our message out of sound public policy."

Lazar suggested the Turlock ordinance, and Andre brought it to the council.

As for the Wal-Mart tactics, Lazar commented, "Turlock is growing up. I guess we are not in Kansas anymore."

Kanelos said it is premature to say whether Wal-Mart would challenge Turlock's ordinance, because it is only a proposal, but he is watching it closely.

"I will be up there. This is nothing we're going to ignore or take lightly," Kanelos said. "We will be participating in the process.

Public hearing coming up

WHAT: The Turlock Planning Commission will hold a public hearing on a proposal to limit large discount stores with substantial grocery departments.

WHEN: 7 p.m. Thursday.

WHERE: Turlock City Hall, 156 S. Broadway.

The commission's recommendation will go to the Turlock City Council, which is scheduled to hold a hearing Dec. 9 and could make a decision in January.

The Wal-Martization of America

New York Times Editorial
November 15, 2003
 The 70,000 grocery workers on strike in Southern California are the front line in a battle to prevent middle-class service jobs from turning into poverty-level ones. The supermarkets say they are forced to lower their labor costs to compete with Wal-Mart, a nonunion, low-wage employer aggressively moving into the grocery business. Everyone should be concerned about this fight. It is, at bottom, about the ability of retail workers to earn wages that keep their families out of poverty.

Grocery stores in Southern California are bracing for the arrival, in February, of the first of 40 Wal-Mart grocery supercenters. Wal-Mart's prices are about 14 percent lower than other groceries' because the company is aggressive about squeezing costs, including labor costs. Its workers earn a third less than unionized grocery workers, and pay for much of their health insurance. Wal-Mart uses hardball tactics to ward off unions. Since 1995, the government has issued at least 60 complaints alleging illegal anti-union activities.

Southern California's supermarket chains have reacted by demanding a two-year freeze on current workers' salaries and lower pay for newly hired workers, and they want employees to pay more for health insurance. The union counters that if the supermarkets match Wal-Mart, their workers will be pushed out of the middle class. Those workers are already only a step — or a second family income — from poverty, with wages of roughly $18,000 a year. Wal-Mart sales clerks make about $14,000 a year, below the $15,060 poverty line for a family of three.

Wal-Mart may also be driving down costs by using undocumented immigrants. Last month, federal agents raided Wal-Marts in 21 states. Wal-Mart is facing a grand jury investigation, and a civil racketeering class-action filed by cleaners who say they were underpaid when working for contractors hired by Wal-Mart. Wal-Mart insists that it was unaware of its contractors' practices. But aware or not, it may have helped to deprive legally employable janitors of jobs and adequate pay.

This Wal-Martization of the work force, to which other low-cost, low-pay stores also contribute, threatens to push many Americans into poverty. The first step in countering it is to enforce the law. The government must act more vigorously, and more quickly, when Wal-Mart uses illegal tactics to block union organizing. And Wal-Mart must be made to pay if it exploits undocumented workers.

Unions understand that the quickest way to win this war is to organize Wal-Mart workers. And Wal-Mart's competitors have to strive for Wal-Mart's efficiency without making workers bear the brunt. Consumers can also play a part. Wal-Mart likes to wrap itself in American values. It should be reminded that one of those is paying workers enough to give their families a decent life.

The trouble with Wal-Mart

By Dan K. Thomasson - Scripps Howard News Service

Thursday November 13th

It used to be that what was good for General Motors was good for the nation. At least that's what people said in the old days before the Japanese invasion when the industrial behemoth was running roughshod over the rest of the world's automobile manufacturers.

Now it seems there are those who would apply that slogan to Wal-Mart, the world's largest retailer. But is it an accurate assessment of the Arkansas-based giant's value to the free enterprise system? There are a growing number who would disagree, citing numerous instances where the Wal-Mart way - and the way it built its business - isn't quite the American way. In fact, it frequently appears to be the antithesis of fair competition, deriving its enormous selling power through an injection of questionable practices.

Substantiation of those allegations came recently when it was revealed that Wal-Mart was subcontracting its daily cleaning chores in many of its stores to companies that employed illegal immigrants at low wages and without overtime or benefits and apparently without collecting payroll taxes. Federal agents raided 60 stores in 20 states rounding up more than 250 illegal aliens and the company has been notified that it is the target of a grand jury investigation.

There are serious charges that Wal-Mart executives were aware of the practice, which by all estimations saved the company millions of dollars over what it would have had to pay otherwise. Not to have known is almost incomprehensible for a company that is tightly managed at all levels. One commentator noted that Wal-Mart is not the kind of place where they permit janitors to run around in their stores at night without some company supervision. Some of those janitors now have filed a class action suit against the company charging that it violated federal racketeering charges by conspiring with cleaning contractors to cheat them out of wages.

This is just the latest questionable event in the spectacular life of the late Sam Walton's brainchild. There have been charges of predatory practices almost from the company's humble beginnings, ranging from the sale of goods produced in foreign sweat shops to using its enormous buying power to sell near or below wholesale until its competitors are put out of business to low wages that destroy the prevailing local pay scales. In smaller communities a rule of thumb has been that five local businesses will fail during the first year after a Wal-Mart opens as the under pricing bites off an ever increasing percentage of sales of everything from groceries to drugs to dry goods and, in some areas, even haircuts.

In my hometown of 15,000 to 20,200 residents where there was once a wide array of retail stores, virtually only Wal-Mart and a few grocery outlets survive. For variety one must drive the 25 miles to downtown Indianapolis. Some of the town's retail demise can be blamed on the Interstate highway system that allowed easy access to a large urban area, but not all by any means. When Wal-Mart arrived the remaining vestiges of local retail businesses disappeared overnight. Now Wal-Mart can charge what it wants without fear of competition.

An entire cottage industry has grown up to coach smaller to midsize communities on how to avoid the Wal-Mart menace. Mainly it boils down to advising chambers of commerce to let them in at peril to their own existence, a strategy that obviously hasn't worked well given the company's incredible growth.

There is no better example of the Wal-Mart impact than the current battle being fought by 70,000 unionized grocery workers against three supermarket chains in Southern California over wages that the companies claim are too high in the face of Wal-Mart's plan to open 40 grocery-selling super centers in that part of the state over the next five years. Picketing workers carry signs that proclaim, "Don't Let Us Become Another Wal-Mart." The grocery workers now earn from $7.40 an hour for baggers after 30 months on the job to $17.90 for cashiers. Wal-Mart grocery workers reportedly earn $9 an hour average.

While GM was undoubtedly good for the country in many respects and so is Wal-Mart, which remains a symbol of one man's retail vision of providing ever increasing numbers with one-stop shopping, there also were downsides that caused complaints that General Motors, like Standard Oil of another time, had gotten too big and should be broken up. As it gobbles up more and more of the nation's retail business, Wal-Mart is going to face increasing criticism and with that more and more government attention. It's the American way. Perhaps there is such a thing as too big.

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: Fast Company Magazine -  Issue 77 December 2003, Page 68

By: Charles Fishman

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 brand."

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.

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.