October 31, 2005

The Healthcare Struggle

Excellent article by Reed Ableson. Read it all, which overall presents a nicely balanced discussion. But once again, the idea of paying for healthcare is muddled with who should be providing it:

The Wal-Mart quandary involves a fundamental national issue: Who, if anyone, should provide care to the bulk of Americans.

"Whose responsibility is this?" said Carolyn Watts, a health professor at the University of Washington. "Is it the government's responsibility or the employer's?"

I presume doctors and nurses and pharmacists and technicians should be providing care, while people should be paying for their own routine care, and should be paying to insure against catastrophes. The real question then, is who will pay for care and insurance for those who cannot afford to pay their own way. Our answer has long been: the government.

Alex Tabarrok comments:

As the value of the wage component of the Wal-Mart benefit package has declined relative to the value of the health insurance component Wal-Mart has attracted more workers who want the job for the health benefits, i.e. sicker workers.
Should Wal-Mart try to make its current workers healthier?

UPDATE: Do you want to know which camp I am in? Arnold Kling's:

Health insurance costs will not fall for American workers unless costs in the health care system are reduced. I have spent considerable time looking into this issue, and my belief is that there is no free lunch. That is, none of the usual scapegoats for health care costs -- spending on the last year of life, excess profits of suppliers, administrative overhead, malpractice lawsuits -- is quantitatively large in relation to the level of health care services that Americans consume.

The only way to bring down health care costs is to consume less in terms of health care services. That in turn will require a major cultural change. One change could be centralized rationing of health care, with supply controlled by the government. Another change would be to dampen demand by switching consumers from comprehensive health insurance to catastrophic health insurance.

In the absence of cultural change, I believe that America will continue to be the leader in Activist medicine, with heavy use of specialists and technological apparatus. Activist medicine may or may not be the right way to approach health care. But it is the reason that health care in this country consumes such a large share of our GDP.

I am in favor of getting rid of employers as the health insurance Middle Man. I believe that employer-provided health insurance is inefficient and an economic distortion. However, it is important to recognize that America's large health care bills and the competitiveness of our large firms is not going to be much affected by changing to a different system.

Posted by Kevin at 8:26 AM

October 28, 2005

Have Wal-Mart's Real Wages Dropped by 10% Since 2001?

I'm tempted to write Barbaro and Greenhouse to ask where they obtained their wage figure... :

Some health experts praised the plan for making coverage more affordable, but others criticized it, noting that full-time Wal-Mart employees, who earn on average around $17,500 a year, could face out-of-pocket expenses of $2,500 a year or more.
One would presume that in such an important article, they're not using data from 2001, rounding down, and reporting it as if it were in today's dollars.

If so, the current figure is $300 lower than the figure reported for 2001 by those suing Wal-Mart. Granted, the Wal-Mart Class statistician was using only full-time hourly associates who had worked at least a year, so there could be definitional changes. But let's assume that the $17,500 represents recent data for full-time hourly employees who have worked at least one year.

Then we find, astonishingly to me, that Barbaro and Greenhouse are implicitly assuming that Wal-Mart has lowered real (BLS inflation adjusted) wages roughly 10% since 2001 (in 2001 dollars). I think that this would be an important point to make in the face of plans to lower benefits costs that have skyrocketed in double digits annually...

(Here is the calculation: 10% = 17800-(17500*175/190)/17800 , where 175 is the CPI-U for 01/2001, and 190 is the CPI-U for 01/2005) Note that I'm ignoring price changes in Wal-Mart itself, which some have argued are not well captured by the BLS.

Posted by Kevin at 7:49 AM

October 27, 2005

The Internal Memo: Exhibit 4

It seems worthwhile to discuss the internal memo in detail. After all, these are unadulterated Wal-Mart facts.

Exhibit 4 shows the percentage of Wal-Mart associates covered by health insurance compared to national employers as well as other retailers. Where does Wal-Mart come out? On top, on the bottom, and in the middle:


im_ex4.jpg


81% of Wal-Mart associates are eligible for health insurance, as opposed to 81% for national employers, but only 56% for retailers. 60% of those eligible choose to participate in Wal-Mart's plan, as opposed to 83% for national chains, and 63% for retailers. You multiply those numbers, and you find that 48% of Wal-Mart associates are covered by Wal-Mart's plan, far short of national employers average of 68%, but far more than other retailers' average of 36%. The data were culled from three separate surveys, a Wal-Mart internal survey, one in 2004 by Yankelovich, and the Kaiser/HRET Employer survey in 2003.

Later, we'll look at the juicier Exhibit 5...

Posted by Kevin at 10:19 AM

October 26, 2005

The Academic Microscope

Businessweek has a review of some of the papers from the upcoming Global Insight conference:


Wal-Mart's decision to put itself under the academic microscope is a brave one. The Global Insight study may end up eclipsing all the others, since it will have internal data Wal-Mart has long declined to release. But given the negative conclusions from the outside studies, the entire conference is looking more like a big risk for a major corporation to take.
In the article, BW links to copies of several papers.

All I can say is that Wal-Mart promised objective research while opponents sneered. Wal-Mart seems to be holding to its promise. Will Liza Featherstone take back her baseless accusation that Wal-Mart was tyring to "buy the approval of the intellectual elite"?

Posted by Kevin at 10:37 AM

The Internal Memo

Stephen Greenhouse and Michael Barbaro of The New York Times obtained a copy of an internal Wal-Mart memo discussing how to balance benefits costs with Associate satisfaction and public reputation.

I'll read it all later, but I have to note how carefully written even internal Wal-Mart memos are... For instance, contra Greenhouse and Barbaro, the memo doesn't state that Wal-Mart should "discourage" unhealthy workers, but that "Wal-Mart should seek to attract a healthier workforce."

H/T:Credo Advisors

UPDATE: Ah, Ms. Chambers does use the word "dissuade" (She'll think twice about that again), and I agree that the NYTimes did a good job at getting beyond the verbiage. It's true, Wal-Mart proposed that it make jobs more physical so as to make the jobs less attractive to unhealthier people. But there's so much more in this report than that.

What I don't understand is why the unhealthier people like Wal-Mart's health insurance more than the healthy!

Most troubling, the least healthy, least productive Associates are more satisfied with their benefits than other segments and are interested in longer careers with Wal-Mart.

Read the comments below, as the first reflects heart-felt opinion, and the second good thinking.

Posted by Kevin at 9:53 AM

H. Lee Scott on 21st Century Leadership

I believe, in fact, that being a good steward of the environment and in our communities, and being an efficient and profitable business, are not mutually exclusive. In fact they are one in the same. And I can show you why.
That's part of the full text of H. Lee Scott's speech, Twenty-First Century Leadership, which is the source of all the recent articles about Wal-Mart's future environmental and labor plans. (The speech is full of specific targets and goals, and is well worth a read).

Basically, Wal-Mart is going to leverage its size to obtain environmental goals. It will use the same exact tactics it uses against its suppliers to lower prices, only this time very, very few people will bemoan them as an abuse of corporate power. Think I'm exaggerating?:

By being the leader, we will not only change OUR fleet, but eventually change truckseverywhere in the world.
And about "sandwich balers" and waste:
This means working with our 60,000-plus suppliers and educating them. If it has to be thrown away, we don’t want it. We intend to reach the point in the near future where there will be no dumpsters at our stores, and no landfills with Wal-Mart throwaways.

To do that, we have to address packaging.

Posted by Kevin at 8:37 AM

October 25, 2005

North Dakota Illegals (None Found)

On its own initiative, Wal-Mart is cracking down on building contractors using illegal immigrants:

Wal-Mart officials say they're making sure all their workers are legal.

The mega-retailer says it halted construction of all seven stores the under construction in North Dakota yesterday to make sure no illegal aliens were working at the sites.

Company spokesman says [sic] Marty Heires says the shut-downs were done by Wal-Mart. He says authorities did NOT ask for the checks....

Heires says yesterday's shut-downs may have been the first time Wal-Mart had stopped construction statewide anywhere in the United States for internal compliance checks.

UPDATE: No illegals were found. Again, this doesn't mean there are no illegals anywhere constructing Wal-Mart stores; one data point (or 8 points) does not represent the entire population.

Posted by Kevin at 12:17 PM

Xbox 360 in Select Wal-Mart Stores (UPDATED)

UPDATE 10-25: Wal-Mart has pulled the plug on Xbox 360s because of interference with its world-famous inventory system.

It is still unclear which specific part of the 360 console was causing the interference in the first place...and whether it could interfere with other consumer wireless devices as well. When questioned about this issue, a Microsoft spokesman was confident that it would not.

"The issue is specific to the equipment used in a few retail environments," the spokesperson said.

"Xbox 360, like portable phones, wireless network routers, and Bluetooth devices, emits radio frequency in the 2.4GHz band. It is possible that devices that do not comply with FCC/ETSI rules of operation in this band may not properly handle interference from other 2.4GHz sources. Such devices would be extremely rare in a home environment."

joystiq has been all over the recent release of the Xbox 360 display demos in Wal-Mart stores. An evaluation:


Positives:

* Overall, the demos were enjoyable and one of our readers even stuck around long enough to beat the Call of Duty 2 demo (you still have a job after that, dude?)
* 3 readers in Addison, IL read our post and bumped into each other at their local display (Joystiq party!)
* The AC power brick is apparently not as big as we were led to believe

Negatives:

* Caution: the ergonomics of the oddly-angled display may result in neck sprains!
* Bugs: collision detection issues were apparent in some of the games
* Mini boss battles with 6-year-olds who wouldn’t let go of the controllers (anyone work out a hack for this?)

UPDATE: Houston, we have a problem -- the 360 seems to interfere with handheld inventory scanners!:
2.4 RF will screw with the Symbol handhelds which are pretty much the backbone of Wal-Mart day to day business. That’s probably why they shut the consoles off. Even wireless speaker system demos that run on 2.4 will screw things up. — bb

the walmart i live by and sadly work at, has a problem with the hand scanner not working properly because of the 360. strange indeed. — darksar

the scanners they use operate around 900Hz, they cant use cordless phones cuz they mess with the outdated system — darksar

I work at walmart…. the truth is that the 2.4ghz interferes with our “Smart”system. nation-wide all walmarts had to stop using the pa system, because costumers complain, so 360’s 2.4 is a scapegoat. at my store we use wireless home theater systems as our excuse — BugX

Posted by Kevin at 12:11 PM

Why Not Recognize that Critics Had an Impact?

John Wagner writes about the new lower-cost health insurance plan:

What would be wrong with saying that sharp words from critics, coupled with input from employees about their needs, made the company realize that perhaps there were other options?

Good question. It's not a matter of morality -- right and wrong; it's a matter of strategy -- win or lose.

I think publicly recognizing that Wal-Mart critics had an impact on them will only embolden the critics to speak even more sharply, which is not in Wal-Mart's interest.

Personally, I think it's obvious that WM is partly responding to critics, but in this case, and in many others, Wal-Mart is not responding in the way that critics like. It is offering a lower-cost health-insurance option, when critics really want it to pick up the tab completely. It is offering to enforce quasi-Western standards in suppliers' factories, but critics are yelling that Wal-Mart is the cause of the manufacturing employment fall. It has been modifying the battleship grey and blue box to meet local design demands, but many critics don't want Wal-Mart at all, and accuse it of causing sprawl and destruction of rural communities. It is offering to lessen its environmental impact, but only in ways that will improve the bottom line. In other words, WM will not cooperate directly with its critics because they don't want cooperation. Neither will it recognize their contribution. Instead, WM has searched for partners to credit who are less vocal, and far more willing to accept changes that will benefit both WM and the public.

UPDATE: Mick Arran's views seem to confirm my suspicion that critics will just want more and more and more:

The problem here, of course, is that so many standard Wal-Mart practices are illegal/unethical/borderline criminal that nothing short of a complete makeover is going to do much good. They cheat and intimidate their employees, connive and manipulate to destroy their competition, browbeat suppliers, and in general treat the market as a place where, as far as they’re concerned, it’s their way or the highway.
What good does it do Wal-Mart to admit that these types of views inform its decisions?

I disagree that "many standard Wal-Mart practices are illegal/unethical/borderline criminal". As far as I know, nearly all of Wal-Mart's practices are retail standards. Those standards are too low for many of its critics, and an organization like Wal-Mart that won't revolutionize will always have mud slung at them.

Of course, Wal-Mart has violated laws, and many complaints against it are justified. However, I think it is unwarranted to abstract from individual cases of misconduct to general operating principles. And it seems to me that many people abstract not even from individual cases but from the beliefs of others around them.

As far as I know nobody has performed a study demonstrating that Wal-Mart is more lawless than competitors, when adjusting for size... anybody up for it?

Posted by Kevin at 11:29 AM

Wal-Mart Supports Increase in Fed. Min. Wage

Do you know why Lee Scott supports an increase in the federal minimum wage? I don't, but I can guess that its for the same reason that unions want Wal-Mart to have to pay for healthcare and a living wage: to hammer and hamper competition:


Scott said Wal-Mart would support an increase in the federal minimum wage from the current $5.15 an hour. On average, the company says, it pays full-time U.S. associates $9.68, so a higher minimum wage would have a much tougher effect on Wal-Mart's smaller rivals.

"While it is unusual for us to take a public position on a public policy issue of this kind," he said, "we simply believe it is time for Congress to take a responsible look at the minimum wage and other legislation that may help working families."

I'm tempted to call this a disgusting abuse of "working families" rhetoric, but I'm even more tempted to remind people that Wal-Mart's smaller rivals really do not pay better than Wal-Mart.

Note also the attempt to buy support of Democratic representatives....

Posted by Kevin at 9:53 AM

$11 Health Insurance?

Yesterday's big news was that Wal-Mart has decided to offer an even lower-cost, high-deductible insurance plan. In The New York Times Michael Barbaro writes about the $11 plan (which is actually $25 in most places):

Wal-Mart said that under the plan, monthly premiums would cost between 40 percent and 60 percent less than those for any existing Wal-Mart insurance policy, and that individuals could visit a doctor three times before paying a deductible, an arrangement aimed at encouraging workers to seek preventive care. In the past, workers have had to pay a deductible before their insurance kicked in.

Those who participate will pay a $1,000 deductible, the maximum under Wal-Mart's insurance for 2005. Monthly premiums will be, on average, less than $25 for an individual, $37 for a single parent and $65 for a family. The $11 premium, for individuals, will be available in a handful of areas, Mr. Fogleman said.

But the plan is unlikely to cover a complicated illness or expensive hospital stay during the first year, when there is a $25,000 insurance cap. (The cap is lifted for the second year.) Out-of-pocket payments range from $300 for prescriptions to $1,000 for hospital stays.

Now, I think that this is something to make one pause and think about carefully. Yes, the deductible is high. Yes, there are other deductibles and restrictions. Providing a health insurance plan with a high deductible in tandem with HSA provides a disincentive to preventative care, so having a three visit exclusion is pretty important. It's smart thinking, meant to increase preventative care but to limit unwarranted visits (such as going to a doctor repeatedly to harrass them into prescribing antibiotics, etc.).

Wal-Mart has tried to offer an option that is truly low-cost, not just low-cost-that-we-can-see, or paid-for-by-higher-prices. Of course, blog reaction is mixed. How does Wake Up Wal-Mart respond?

“Wal-Mart’s so-called Value health care plan offers nothing but an empty promise of higher deductibles that remain unaffordable and out-of-reach to most Wal-Mart workers. With Wal-Mart’s poverty-level wages, the average worker would have to spend up to 40% of their take-home pay to purchase the family option of this so-called Value plan. No wonder Wal-Mart admits the taxpayer-funded public safety net is often a ‘better value’ than their own inadequate health care plan.”

Well, OK... Go there to check their calculations, and see and interesting comparison to Wal-Mart's current plan. But I should note that many Americans on the left have long demanded, and have seen enacted, government programs that help the poor (and now the middle class) pay for and "access" medical care. These programs have not been a "safety net" for at least a generation; they are now a dominant feature of medicine in the US.

Wal-Mart Watch is more on point:

Wal-Mart Watch credits Wal-Mart for recognizing that their employee health plan is inadequate for their employees and unfair to taxpayers forced to support their use of Medicaid. We call on Wal-Mart to go further and address the full range of deficiencies in their plans, from affordability to eligibility to out-of-pocket costs to waiting periods. This is a company that can well afford to remedy those problems.

It think it is important for people to recognize that it is both impractical and undesirable for Wal-Mart to pay for all the healthcare expenses of its associates. It is the social expectation and tax policy preference for employer-provided medical care that must change. Paying for your own healthcare is not evil. Out of pocket costs are not evil. People should pay for their own regular routine medical care. Of course it is a tremendous challenge to provide world-class healthcare to people of low means, especially those with prior health issues.. If the cost of this care is beyond the means of somebody whose best alternative is working at Wal-Mart, there are several policy options that can be used; Wal-Mart is blamed for shifting the costs of care onto the taxpayer, but WMW wants Wal-Mart to shift the costs of care onto the consumer. How is that any less "unfair"? All policy options that redistribute to the less fortunate require shifting the cost of the care to others, making them worse off. What I'm trying to say is that you cannot force Wal-Mart to take its profits and pay for medical care without negative consequences: in this case, 1) Wal-Mart deciding to raise its prices, making consumers worse off, or 2) shifting its compensation packages towards greater benefits and lower wages . It is not clear to me that paying for healthcare with higher consumer goods prices or lower cash wages is a desirable or enviable policy outcome, even if it does lower the taxpayer burden.

Others have more interesting discussion. The Arkansas Daily Blog thinks a single-payer universal plan is the solution for giving the poor healthcare. I'd agree that coverage under such a system could be made universal, but I'm fairly certain that costs in terms of dollars and waiting times for doctors would go up, up, up!

For other reactions I think are reasonable see Left in the West and Economists View.

Posted by Kevin at 9:38 AM

October 24, 2005

The Two Wal-Mart Movies

Anita French outlines both Wal-Mart movies:

Greenwald is the New York filmmaker who has made his own Wal-Mart documentary critical of the Bentonville-based retailer. Titled "Wal-Mart: The High Cost of Low Prices," the film presents a negative view of Wal-Mart Stores Inc.'s impact on communities and has been endorsed by several of the company's critics.

Brothers Ron and Rob Galloway are behind the "Why Wal-Mart Works And Why That Makes Some People Crazy" documentary that takes a more favorable look at the company...

Where can you get these films?
The Galloways' documentary is set to be released for sale Nov. 12 at amazon.com.

Greenwald's film is set for a limited run in New York and Los Angeles theaters Nov. 4, and then will be shown at more than 3,000 churches, colleges and community centers nationwide on Nov. 14, according to his press office.

Each has a blog:

Wal-Mart: The High Cost of Low Prices

Why Wal-Mart Works And Why That Makes Some People Crazy

Posted by Kevin at 10:25 AM

October 22, 2005

Didn't Make the Cut

Audi has sponsored a public release of New York Times archives and has put up an advertising section poll that asks, "Who is America's most influential business leader?"

I just wanted to note that Lee Scott is not one of the options...

Perhaps the NYTimes never managed to write a success story about Scott like they did with Jack Welch, Bill Gates, Warren Buffett, and Steve Jobs.

Posted by Kevin at 2:16 PM

October 21, 2005

What a Ben Franklin Store Looks Like Today

bf1.jpgMany people complain that Wal-Mart is too crowded with goods -- and too dark. But if one takes a look at the origin of Wal-Mart -- the Ben Franklin chain of stores -- one senses that Wal-Mart has taken a definite trend away from the crowded & folksy variety format, while managing to retain its essence.

Posted by Kevin at 10:47 AM

Not Wal-Mart's Specialty

The Houston Chronicle presents more evidence supporting my hypothesis that Wal-Mart can only be beaten by increasing affluence:

Kroger, which is still the biggest U.S. grocer, posted its biggest sales gain in five years last quarter, but largely because of heavy discounting. Albertsons, after reporting falling profits in three of the past four years, put itself up for sale last month.

Meanwhile, specialty grocers, such as Austin-based Whole Foods Market, are booming. Upscale stores offer better margins because grocers can charge higher prices. They also offer a broader selection of perishable items, such as produce. At its new "lifestyle" stores, Randalls promises organic fruits and vegetables, more prepared foods, full-service meat counters, and sushi and olive bars.

"They see it as a weakness that Wal-Mart isn't able to duplicate," Hamstra says.

I think Wal-Mart could duplicate this format -- perhaps using a different name entirely -- but at what cost to its other operations? How well can Wal-Mart integrate high-grade with middle-grade produce in one supply chain? Phrased differently, would you eat sushi at a Wal-Mart bar?

Posted by Kevin at 10:43 AM

The Effect of Wal-Mart on Local Labor Markets

David Neumark, Junfu Zhang, and Stephen Ciccarella have an extensive paper The effect of Wal-Mart on local labor markets. Abstract:

We estimate the effects of Wal-Mart stores on county-level employment and earnings, accounting for endogeneity of the location and timing of Wal-Mart openings that most likely biases the evidence against finding adverse effects of Wal-Mart stores. We address the endogeneity problem using a natural instrumental variable that arises from the geographic and time pattern of the opening of Wal-Mart stores, which slowly spread out from the first stores in Arkansas. In the retail sector, on average, Wal-Mart stores reduce employment by two to four percent. There is some evidence that payrolls per worker also decline, by about 3.5 percent, but this conclusion is less robust. Either way, though, retail earnings fall. Overall, there is some evidence that Wal-Mart stores increase total employment on the order of two percent, although not all of the evidence supports this conclusion. There is stronger evidence that total payrolls per person decline, by nearly five percent in the aggregate, implying that residents of local labor markets earn less following the opening of Wal-Mart stores. And in the South, where Wal-Mart stores are most prevalent and have been open the longest, the evidence indicates that Wal-Mart reduces retail employment, total employment, and total payrolls per person.
(Discovered through this article in Businessweek).

Posted by Kevin at 7:37 AM

October 20, 2005

Wal-Mart Dominates Kirksville Economy?

In the Truman Index, a bizarre article entitled "Wal-Mart Dominates Local Economy" presents a lot of evidence that it doesn't!

Bascially, the author talks to several WM-boycotting students and describes their shopping techniques. All the students seem to get by pretty well, even though they recognize that only sometimes do they find better bargains elsewhere. (The students claim to know both the prices of Wal-Mart and its competitors, so I have to assume that they go to Wal-Mart just to see the selection and prices that they are boycotting.)

Money quote:

Wire said that anything not available in Kirksville, he can buy over the Internet.

"You can even buy toilet paper off Amazon.com," he said.

Posted by Kevin at 9:11 AM

October 19, 2005

Paige Laurie Does the Right Thing

She's given back what she didn't earn:

Elizabeth Paige Laurie's name was on a sports arena when a former University of Southern California roommate alleged the Wal-Mart heiress paid her $20,000 to do her homework. Now it isn't even on a USC diploma.

Laurie, the granddaughter of Wal-Mart co-founder Bud Walton, has returned her degree, nearly a year after Elena Martinez told ABC's "20/20" that she had written term papers and done assignments for Laurie for 3 1/2 years.

"Paige Laurie voluntarily has surrendered her degree and returned her diploma to the university. She is not a graduate of USC," the school said in a statement dated Sept. 30

Posted by Kevin at 10:38 PM

October 18, 2005

Wal-Mart Serving the Wicca Community

The Canada Free Press notes Wal-Mart's wide offering of Wicca books and materials:

If you’re not getting what you’re looking for out of Bible classes at the church you attend, there’s The Wicca Bible: The Definitive Guide to Magic and the Craft.

The Wal-Mart of all things Wicca only includes one anti-Wicca book, Protecting Your Teen from Today’s Witchcraft: A Parent’s Guide to Confronting Wicca and the Occult.

If you’re a newcomer to the world of Wicca, there’s the inevitable Wicca & Witchcraft for Dummies.

This gives Cate Kaufmann an idea of the number of her fellow believers:
But, to get to my point, it appears from an article in the Canada Free Press recently, that there may actually be enough Pagan folk out there to support a congregation. After all, Wal-Mart just isn't likely to invest in stuff that won't sell.

Of course, the folks shopping for Pagan material at Wal-Mart might not really be the sort we want showing up at Ritual. On the other hand, I'd rather see them participating in Ritual with me than standing outside of Circle watching us with a shotgun in one hand and a Bible in the other.

Posted by Kevin at 4:55 PM

Palousitics on the Klein Group and Pullman, WA

Tom Forbes of Palousitics notes that a firm, the Klein Group of Coldwater, MI , specializes in building strip malls around Wal-Mart Supercenters. Mr. Forbes is using his blog to support a Wal-Mart Supercenter in Pullman, WA. The Pullman Alliance for Responsible Development seems a formidable foe...

(Note that their website is nearly blank, but Superpages provides contact info.)

Posted by Kevin at 4:10 PM

Balko's Wal-Mart Game

File this under humor: you task friends and family to purchase each other odd combinations of goods at Wal-Mart, but they may spend no more than say the price of a movie ticket:

One version just dictates you come back with the overall best basket of bargain stuff. Another has each player drawing the name of someone else, then coming with $10 worth of items useful and suitable for that person. A naughtier version instructs each person to come back with the most embarassing or bizarre variety of goods

Posted by Kevin at 2:06 PM

October 17, 2005

RFID and EPC

Wal-Mart has given out a status update on its RFID project.

Researchers at the University of Arkansas found a 16 percent reduction in out-of-stocks. Additionally, the study also showed that out-of-stock items with EPC (Electronic Product Code) tags were replenished three times faster than comparable items using standard barcode technology. Equally important, Wal-Mart experienced a meaningful reduction in manual orders resulting in a reduction of excess inventory.

“This is no longer a take-it-on-faith initiative,” said Linda Dillman, executive vice president and CIO for Wal-Mart. “This study provides conclusive evidence that EPCs increase how often we put products in the hands of customers who want to buy them, making it a win for shoppers, suppliers and retailers.”

The 29-week study analyzed out-of-stock merchandise at 12 pilot stores equipped with RFID technology and 12 control stores without the technology.

In addition, Target and Wal-Mart are sharing.

Target and Wal-Mart, two of the largest retailers in the United States, are sharing Electronic Product Code (EPC) data with 13 manufacturers as part of a pilot. The data is being transmitted in a standardized format via an Internet-based electronic data interchange called applicability statement 2 (AS2). The manufacturers have requested anonymity, but they include some of the largest consumer packaged goods (CPG) manufacturers supplying Wal-Mart and Target.

UPDATE: Here's an article (and another) about the University of Arkansas RFID Research Laboratory.

Posted by Kevin at 9:11 AM

October 13, 2005

A Summer at WM

In Chicago Business Online, Alison Nickum writes of her summer working at Wal-Mart HQ in Bentonville.

My first week on the job consisted of going through orientation with the 50-some other new Wal-Mart home office employees for that day. (They set up that many people there *every day*. And that's just for the home office!) Orientation lasted most of the week. At the tail-end of the week, I got to meet my team, learn about my project, and get going!
It's worth reading just for her description of Retail Boot Camp:
I only had a couple of days to get started on my project, because all the MBA interns were scheduled to spend the beginning part of the following week working in stores! Wal-Mart called it "Retail Boot Camp," and we had one day of working in a Sam's Club, and one day of working in a Wal-Mart Supercenter (the ones with grocery). I was totally excited!
She's an MBA, so I think she really means it.

By the way, Wal-Mart; I'd love to spend a couple of months being educated about your logistics and planning systems. The US Department of Defense (who funds my employer) could learn quite a lot from the experience.

Posted by Kevin at 4:48 PM

KY at WM

Drudge notes that K-Y body oils sold well at Wal-Mart, and some coastal advertising/media elites are shocked that Middle America doesn't fit their stereotypes:

That sex sells comes as no surprise. That it's now selling quite nicely at Wal-Mart Stores -- the naughty-magazine-yanking retail nanny -- may come as a shock, AD AGE reports.
From the full article:
Not that J&J is suggesting anything kinky. K-Y’s growth stems from studying its middle-American consumer base, where it found clinical problem-solution ads weren’t resonating but marketing to “enhance intimacy between committed partners” could, Mr. Peterson said.
Mr. Peterson's talk -- "MEANINGFUL CONSUMER INNOVATION" -- was given here, but no details are available.

Posted by Kevin at 4:25 PM

NYC Passes Health Act to Keep Wal-Mart Out of City

From the New York Post:

October 12, 2005 -- The City Council voted yesterday to override Mayor Bloomberg's veto of an anti-Wal-Mart bill aimed at making the retail giant and large grocery stores provide health-care benefits to their workers.

The Health Care Security Act, which the council has admitted is an attempt to keep big-box stores like Wal-Mart from setting up shop in the Big Apple, was opposed by the Bloomberg administration.

Kip Esquire, who has written several items about this Act, says,

...the Act codifies three simple principles of legislative intent:

--It is better to be unemployed than employed.

--It is better to pay higher prices than lower prices.

--It is better to have less variety than more variety.

K. Brancato adds: The New York Sun is reporting that the bill would actually put smaller grocers out of business. Uh-oh:

An official at a trade group that represents local grocery chains including C-Town and Met Foods, the National Supermarket Association, told The New York Sun that its member businesses, many of which have retail spaces between 15,000 and 20,000 square feet, would be devastated by the law.

As passed, the law would require grocery stores that are at least 10,000 square feet or have 35 or more employees to contribute a "prevailing health care expenditure rate."

"The amount of money that this will cost will put 40% to 50% of our people out of business," the executive director of the trade group, Luis Salcedo, said during a telephone interview.

These markets appear to be unintentional victims of the law.

Of course, the law will eventually be overturned anyway:
A spokesman for Mayor Bloomberg, Robert Lawson, said that with or without changes, the so-called Health Care Security Act violates federal law. The mayor has said that while he wants to get more people health insurance coverage, the council does not have the authority to regulate the plans that private businesses offer.

Posted by TheEclecticEconoclast at 5:59 AM

October 12, 2005

WM Inside the Beltway

The sound you hear would have been excessive snarling traffic, if such weren't already the norm for inside-the-DC-beltway:

UPPER MARLBORO, Md. -- Wal-Mart will be allowed to open its first store inside the Capital Beltway under plans approved by the Prince George's County Council....

It allows Wal-Mart to build a store that will sell food at the Capital Plaza Mall in Landover Hills.

Wal-Mart is inching every closer to DC, the center of the national anti-WM movement.

Here's the location of the proposed Wal-Mart at the Capital Plaza Mall:

capitalhillsmall_wm.jpg

Posted by Kevin at 12:11 PM

Belvidere, IL

Despite the worst fears of some, Wal-Mart's impact on Belvidere's retail community appears to have been most helpful.
Say that again? The Rockford Register Star notes this is an odd case. Successful new car dealerships, and a brand new shopping center cater to an increasing population. These folks don't shop downtown, though it's extremely unlikely that "Most of the people that have moved here don't even know there is a downtown." The article focuses on the Ace Hardware store that lost business, but didn't go under, because it refined its product mix. In other words, it chose to compete wisely:
"There is no way I can compete with Wal-Mart on some things," Rickabaugh said. "But we have expanded some things to make up for those areas we were having trouble in.

"We've kept the specialty stuff, boosted our circulars, and customers know service is our business. When Amtrak and other things take off downtown and the economy comes back completely, I think you'll see us take off. I just have to buy a little time to get there."

What about the downtown?
Downtown Belvidere is another animal. Turnover of small mom-and-pop stores is somewhat common, but thus far it appears that downtown has sustained minimal impact as a result of Wal-Mart.
That includes the small grocer...

Posted by Kevin at 10:37 AM

Rees vs. Karlson

At many times, and in many areas, economics has not meshed well with related disciples. That is to say, economists have frequently disagreed with other social scientists and historians. Along those lines, we have an interesting exchange that recently occured between Stephen Karlson (Ph.d in Econ) and Jonathan Rees (Ph.D. in History). And all over Wal-Mart, at that. I'll leave it to you to follow the discussion and comments at your leisure. Here's a discreet outline of how it went down:

Prof. Karlson asks his Microeconomics class a question about small business owners protesting Wal-Mart's entry. Prof. Rees thinks his question was unclear and his comments belittling of students. Prof. Karlson investigates and reponds. The exchange continues in the comments.

Note: I've known Prof. Karlson online for some time longer than I have known Prof. Rees (aka JRMonsterFodder), although I only permalink to the latter on this blog.

Posted by Kevin at 10:14 AM

October 11, 2005

"SCARY SERIOUS about the money"

Of course it's true that not all corporations maximize long-run profits; but the notion that people -- employees, consumers, suppliers, etc. -- benefit from companies not maximizing profits is just plain wrong. BBC American would probably not agree with that sentiment, but he's noticed something interesting: endless punishing of incompetence, which gives Wal-Mart a large profit advantage, can make a Wal-Mart job far less of a fiefdom than more respectable workplaces:

Oh, and someone asked which was worse, my real job or my Wal-Mart job. It is a tossup, but I'd actually say my real job at the newspaper. You sort of expect Wal-Mart to be a disaster area. My real job is at a paper owned by a Fortune 500 company and you'd think that working with college graduates and professionals would be easier. Wrongo-bongo.

It is worse than Wal-Mart, because some people have been promoted past their ignorance point. Wal-Mart fires fools fairly quickly, because they usually screw up so much they don't dare let the profits slip. For all Wal-Mart's stupidity, they are SCARY SERIOUS about the money. Department manager slacking off? Back to the sales floor and someone else has that pricing gun and handheld computer.

Posted by Kevin at 3:34 PM

Food Sourcing From India

The Times of India tells us about Wal-Mart's plan to source food there:

BANGALORE: Wal-Mart is working towards sourcing spices, basmati rice, tea and shrimps from India, the first time the global retailer will be getting into the foods segment here.

Its global rival Tesco, which was sourcing from India primarily for its UK operations, is now increasingly doing so for its stores in Central Europe, a region whose lower incomes is making lower cost sourcing imperative. The India sourcing story is fast getting bigger and broader.

This highlights an additional set of problems an analyst of Wal-Mart faces. If you're tasked with finding the share of Wal-Mart's goods sourced outside the US, you really need to specify which stores you're asking about -- stores in Japan, Germany, Mexico, China, Canada, or the US? While the answer should be close for the same format in the same country, different formats and/or different countries should see very different national sources for many goods.

Posted by Kevin at 10:50 AM

October 10, 2005

Farm vs Blue-Collar Wages in China

The latest radioeconomics podcast with Dr. Fan Gang contains this bit of information about Chinese workers (starting at about 17:00):

The labor costs remain low for quite a long time. Why? Because, although in the past 20 years, China has relocated 200 million rural labor force into the industries and the service sectors, there's still 200 to 300 [million] workers -- labor workers -- in the farming sector (in the agricultrual). Most of them are waiting to move out. Their wage is even lower. You know, in the blue-collar workers, in the industries now, can make $1000 US Dollar per year., but the rural farmer only make $400 or $500 US Dollars per year. So they are looking for the job too. They are competing in the job market who are already in the sector, in the industries.... They are waiting for more jobs... People are desperate for the jobs.
Wal-Mart pays about $100-$120 a month to its associates in China; Wal-Mart's suppliers pay about that to their blue-collar workers. Still, the difference between $40 a month and $100 a month is meaningless to me, and I'm looking for a better way to capture the increase in the standard of living for those that move from farm jobs to city jobs...

[Dr Fan Gang is Director, National Economics Research Institute, China Reform Foundation and Professor, Graduate School, Chinese Academy of Social Sciences (CASS)PR of China. Dr. Fan Gang is a highly distinguished economist trained at the Chinese Academy of Social Sciences]

Later on, he makes a much greater point that the most goods that are "Made in China" are really "Made in Asia", since most of the raw materials from Chinese exports come as imports into China...

Posted by Kevin at 3:02 PM

WM Stock Way Undervalued?

Bobby Gerry posts a Barron's article that gives pro-Wal-Mart stock analysts the center stage. (The original is subscriber-only). It contains two arguments that I do not believe: 1) high gas prices mean higher revenues, 2) these revenues come from customers of traditionally upper-scale merchants:

While analysts have voiced concerns that high gas prices will crimp consumer spending, that view may prove to be short-sighted. Wal-Mart's customer base could very well widen in tough times, with the stores maintaining their lower-income base and gaining some higher-income consumers who are looking to save some money. The first look at winter heating bills just might convince some Bloomingdale's shoppers that the time has come to step down to Wal-Mart.
I don't believe that Wal-Mart's own analysts think this will happen.
Posted by Kevin at 7:15 AM

October 8, 2005

Flin Flon

We add a new category today -- 'Destroyed" Communities. In this series, we will examine in-depth all the examples of small towns allegedy destroyed by Wal-Mart.

Today's example is Flin Flon, Manitoba Canada. The local UFCW832 has a nice piece about how the unionized competitors handled their employees when Wal-Mart moved in -- by demanding concessions in wages, and firing people outright. The downtown was hit, but was it destroyed? No, but it was no longer "bustling":

The day that Wal-Mart opened was also the day that Flin Flon changed the laws for Sunday shopping. Prior to Wal-Mart, a store could only open if it had fewer than four employees working. Once Wal-Mart arrived the beginning of the social decline started.

Now in 2005, the once booming downtown is a shell of its former self. Merchants still occupy the downtown, but the bustle is gone. The Flin Flon Hotel has been closed down for a while and is still boarded up. The mine has gone through hard times but still employs almost 10 percent of the population. Young people who once had a choice of good paying union jobs now look outside of the community to earn a living wage.

So we have a complicated story, with Wal-Mart not being the only source of major change...

Posted by Kevin at 2:49 PM

October 7, 2005

Leo Hindery Jr. Goes After WM

One month after his telecom piece attacking Bush appeared in Businessweek, Mr. Hindrey goes after Wal-Mart:

When H. Ross Perot ran for President back in 1992, he coined a memorable political phrase. The passage of the North American Free Trade Agreement, he said, would create "a giant sucking sound" -- the sound of jobs escaping out of the U.S. and into Mexico.

Today, if you listen carefully, you can hear a second giant sucking sound: Wal-Mart sopping up the vitality from middle-class American families, local communities, and the national economy.

Sigh.

Who is this guy? A Nascar Democrat (read it to the end) and, after Gephardt, a Kerry supporter! On the face of it, a former telecom executive. Dkosopedia notes an extensive financial involvement with Democratic politics, and Powerline noted that Mr. Hindrey is a big-time Democratic activist/fundraiser, forcing BW to include this information in his bio.

But I don't care about his politics or his finances. I care about his ideas -- their originality and the evidence supporting them. So what about it?

First of all, Mr. Hindrey's not saying anything new. These are all talking points, and I cannot see why BW needed to reprint the same unproven accusations that have been in its pages before.

Second, as far as I can tell, nobody has ever bothered to even list the towns "clobbered" or "destroyed" by Wal-Mart, let alone try to separate the impact of Wal-Mart's arrival from the large stores that came before it, while adjusting for cyclical business conditions and changes in tax policies.

Given that nobody has studied the issues in a detailed, sophisticated, not to say even mildly comprehensive manner, why whould I take seriously Mr. Hindrey's bombast?

The criticism goes on and on and on without people actually figuring out Wal-Mart's impact...

Posted by Kevin at 5:16 PM

October 6, 2005

WM in South Central

Cotidiapolis (which is usually written in Spanish) wonders, in my words, " where are all those moral grocers? ":

I wonder...why can't we find markets like Trader Joe's Specialty Grocery Stores, Whole Foods Market, or Bristol Farms - An Extraordinary Food Store in poor neighborhoods? Have you seen one of these markets in South Central LA, La Puente, East LA, South Gate?

Well, I am just wondering;

It reminded me of this 2004 BW article on Wal-Mart's store in South Central LA, and Sam's Curse from 2002 in Reason. From the latter:
As it is, Wal-Mart is already here, with four stores in L.A. and fifteen more in surrounding cities. While these aren't the 200,000 square-foot stores with delis and bakeries that L.A. officials want to banish, you can already get cereal and other groceries there. At one store on Crenshaw Boulevard in the Baldwin Hills section of town, you can walk up to the second floor and buy milk and cheese.

These stores aren't in the nicer or easier-to-reach parts of town. The Baldwin Hills store for example, is located within South Central L.A., which is better-known for poverty and gang violence than for its array of shopping amenities.

Here's Wal-Mart in LA today:


crenshaw.gif

Crenshaw is the number 1 on the map. You see why WM wanted to open up in Inglewood, no?

Posted by Kevin at 12:58 PM

October 4, 2005

Podcast with Russell Roberts about WM

You can LISTEN to a flash recording of the podcast here; interestingly, you can view the comments as they occured in the discussion.

Russell Roberts and I will have a half hour live discussion about economic issues surrounding Wal-Mart this Thursday, October 6th at 10am EST. You may listen live to the podcast. And if you want to participate, you may send me questions and comments using Breeze. I will see them instantly, and will try to respond to listener views during the broadcast.

Also, you may download the podcast in MP3 format, for later listening.

Thanks to James Reese, founder of Radioeconomics, for this opportunity.

Posted by Kevin at 4:53 PM

Why Wal-Mart Works

In this post, Jim Gilliam came really, really close to figuring out what's going on:

What do I think Wal-Mart corporate's got cooking? Their own movie, of course!
As far as I know, Wal-Mart won't be making a pro-Wal-Mart movie.

But Ron Galloway is making such a film, entitled Why Wal-Mart Works. He is planning a serious documentary about the economic impact of Wal-Mart -- though from a free-market perspective. Mr. Galloway is an independent filmmaker with a mixed background making TV programs and independent documentaries. What's most important, though, is that he has absolutely no ties to Wal-Mart. (He's financing the film himself).

Why is he making this film? Basically, as he tells it, he spotted a market opportunity.

Mr. Galloway has already begun filming Why Wal-Mart Works. He'll have promotional materials at the Liberty Film Festival, held from October 21st through October 23rd, and he hopes to pick up a distributor -- or at least a whole lot of attention -- there, for a planned November 12 release. (It will be available on Amazon, on 11/12).

On a personal note, Mr. Galloway asked me if I wanted to be interviewed for the film, and I agreed. However, these rules require me to discuss only what I can document in solid research, so outside of bringing up questions I cannot answer, and presenting how the debate is currently framed, I'll probably end up on the cutting-room floor.

Other interviewees are to be announced later.

Note that underground talk about the film has already started booming, and Mr. Galloway's current website has seen a 10-fold increase in hits over the past week, so this is not really news to many of you....

(Please note that eventually, the movie's new website will be the currently vacant whywalmartworks.com).

Posted by Kevin at 4:43 PM

October 3, 2005

Data about Wal-Mart

Over at Wal-Mart Space, Bobby Gerry is doing something I should have done long ago: making all of Wal-Mart's public data -- finances, number of stores, square footage, etc -- available on the net in one easy-to-download location.

I think this is a great public service, and hope that Wal-Mart and its opponents realize that this type of openness -- putting all the cards on the table -- is what I've been looking for all along from them.

Currently available:

1) U.S. Store Count
2) International Store Count
3) Balance Sheet
4) Cash Flow
5) Income Statement

Posted by Kevin at 12:57 PM