November 14, 2005

Suddenly, The End

Sadly, this will be my last substantive post on Always Low Prices.

Soon, this website will go dark.

I appreciate your readership and participation in this venture; it's been very exciting to have a ring-side seat at such an interesting commercial, political, and ideologically prize-fight. I'm sorry to have to exit during an early round, and it is unlikely that I will return to blogging about Wal-Mart any time soon.

I have not been bullied by Wal-Mart into this decision, but have decided -- not without considerable disappointment -- that my direct involvement in an often over-heated public-policy discussion is no longer in the best interests of me or my employer.

Why am I leaving the blogosphere? Well, I'm not -- I just won't be writing anything about Wal-Mart. My other blog , Truck & Barter will host the ALP archives (which will be closed to new comments), and I will continue writing about economics generally. I take this severe measure to prevent even the appearance of a conflict of interest. My recent public exposure brought this risk to the forefront...

But something more fundamental has happened: I'm getting ready to perform serious research -- on my own -- about Wal-Mart. At the recent economic conference, I asked a Wal-Mart representative if it would be possible to perform reasearch about Wal-Mart's logistics and disaster response activities. While Wal-Mart expressed no firm commitment, and no dialogue has been started between me and Wal-Mart, the mere existence of any such potential personal contact with Wal-Mart that would benefit my career is inconsistent with the independent stance of ALP. In short, I don't want a credibility problem in the future, so I'm taking harsh measures now.

Posted by Kevin at 4:08 PM

November 10, 2005

The Importance of Branding for Big-Box Stores

A friend of mine was recently bemoaning the disappearance of small stores and old-time department stores, where clerks knew the products and had information and advice that we, as customers, could trust. Understandably, he is frustrated when he walks into a Big Box store, asks a clerk a question about a product, and the clerk starts looking at the box to read whatever is there (as if my friend, perhaps because he is a sociologist, is unable to read that information himself).

One reason Big Box stores have become so successful has to do with the success and reliability of brand names and branded products (yeah, yeah, I know changes in technology, the legal environment, and relative factor prices play a role, too):

If we want to buy a standard household appliance, we can search the internet or consumer magazines for information about quality and reliability, and then go shopping; Alex Tabarrok at the Marginal Revolution last year posted on the importance of the internet in this regard.

But even if we didn't have the internet to search for information about product quality, big box stores would still become important by emphasizing low prices for well-known branded products. The strength of the branding replaces our need to rely on store clerks for information.

So when I want to buy something, I just go to a big box store and buy it at a low margin -- there's much less need to rely on knowledgeable clerks because the brand names themselves convey tonnes (hey, we're metric in Canada) of information.

From a different perspective, what I'm suggesting is that the knowledge we have about different branded products is a necessary condition for the existence of many Big Box stores. If we as customers didn't know about the qualities of different brands, or if we couldn't learn about them through experience or word-of-mouth or advertising or the internet or something, then Big Box stores would not be able to just schlep out the merchandise and sell it. If they tried that, customers would not shop there but would go to the full-service stores that provided more point-of-sale information about the products they carried. And without branding, there wouldn't be a free-rider problem that is so often identified with resale price maintenance arguments.

Here is Russell Roberts' excellent piece on the impact of Big Box retailers on the quality of life (link via his piece in Cafe Hayek).

I wonder what will become of the importance of product branding as Walmart develops and markets more of its own, in-house brands and products.

Posted by TheEclecticEconoclast at 9:23 PM

November 9, 2005

Why Wal-Mart Works -Trailer

why_smiley.jpgGo here to see a three-minute trailer for the upcoming Why Wal-Mart Works film. If the trailer is representative of the film, I think you will find that "pro-Wal-Mart" is not exactly a good phrase to describe the film. Neither is "fair and balanced"; instead, it goes in an entirely different direction...

You can pre-order on Amazon, where reviewers are already panning and praising the film, even though it hasn't yet been screened.

UPDATE: I just spoke to Ron Galloway, the producer of the film. He says the not even he has seen the final cut of the film, so all the talk on Amazon is just hot air.

Posted by Kevin at 9:19 AM

Experimental II

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Wal-Mart is opening up another one of those experimental supercenters -- this time in Aurora, CO. Incredibly, the general public can view pretty detailed statistics for the store online in "real time". (Note to WM Facts -- your link goes to the wrong webpage!)

However, klbrowser is ambivalent:

Seems that a brand new Wally World (Wal-Mart) is opening tomorrow in my neighborhood. I have mixed feelings about this. Local Wal-Marts have gotten a bad rap because of their bullying tactics in discouraging unionization. And of course I don't like the way the employees are treated or paid. But on the other hand, this is very near my home, and it would take a lot less energy for me to shop there than it would for me to drive to my neighboring town to shop the nearest Target. If they have elecric carts, that is. And face it, with no income at the moment, I can't afford to shop at the more expensive places. So I am gonna take a peek at the new store tomorrow, mainly out of curiosity. This is one of only two Wal-Marts in the world made primarily of recycled materials. It has solar panels and wind machines, and is heated with vegetable oil. I probably will not shop there regularly, especially once the LTD company starts paying. But I hope no one will see me as the devil for setting foot in there.

liberty_turbine.jpg

The Wal-Mart press kit (WARNING PDF - 17MB) contains lovely drawings and photos, including this one comparing the height of a wind turbine to the Statue of Liberty.

Also, the store has a dedicated RV and parking area, for those of you interested in such things, and a gas station with portable above-ground tanks;

The main benefit of the portable design of the TFS is that the storage tanks and all delivery pipes are above ground... The storage tank is completely enclosed in a traffic impact rated housing that has also been rated to withstand ballistic assaults... Another benefit to having the TFS system is that it allows for other types of future development. This system is portable, and can easily be removed. The site would be clear of any environmental concerns, unlike historic gas station sites.

Posted by Kevin at 8:24 AM

The Value of the Independents

From Don Taylor's Up Against the Wal-Marts: How Your Business Can Prosper in the Shadow of the Retail Giants

game is changing_p5.jpg

CostCo is the largest warehouse retailer, followed by Sam's.

From the snippets I've read, Mr. Taylor's book is about what small business owners and managers can do to make themsleves the greatest competitors to Wal-Mart and the rest of the big-box chains. It may not often sound like it on this blog, but I am rooting for the independents to grow and prosper. It is their dynamism that keeps Wal-Mart in check... You might also want to check out Boomtown USA for the community angle on the same theme

Posted by Kevin at 7:48 AM

November 8, 2005

ALP In BusinessWeek

ALP is featured in the UpFront - Blogspotting section of the November 14th, 2005 edition of Businessweek. Scanned print edition below the fold:

ALP_BW.jpg

Posted by Kevin at 2:49 PM

November 7, 2005

Wal-Martization of Banking in Massachusetts?

If there is one group of people who will benefit most from check-cashing at Wal-Mart in Massachusetts, it is people who are NOT regular bank consumers. But the Massachusetts Bankers Association apparently doesn't care about people who do not use its member's services:

"We think it is a bad turn of events," said Bruce Spitzer, communications director at the Massachusetts Bankers Association. "Do bank customers really want to see the Wal-Martization of the banking industry? We don't think so."
This man cannot be serious. What exactly will the average consumer be missing? Well, it's conceivable that there are bank customers who prefer to pay more for their banking services in exchange for nicer tellers and structures, more locations, etc. but bank customers aren't the only "stakeholders" here -- both bank tellers and noncustomers will be affected. I think non-customers will clearly benefit, so let's move on to bank tellers. As far as they are concerned, the Wal-Martization of the banking industry -- if that process is to be understood as a moving towards a bare-bones, low-cost, low-salary model -- occurred long, long, ago.

In 2002, the median hourly earnings of full-time bank tellers was $9.81 ($10.15 in 2004), in line with what Wal-Mart pays its mean hourly worker. About 1 out of every 3 tellers works part-time. So it's not as if bank tellers will be made worse off financially by working at Wal-Mart (though it is plausible that Wal-Mart will want a check-cashing teller to work odd hours).

Posted by Kevin at 3:40 PM

WM's Effect on Radio

From Radio - The Forgotten Medium, what happens when Wal-Mart moves into town:

radio167.jpg
Posted by Kevin at 9:39 AM

November 5, 2005

Blog Reactions to the GI Conference

It's a small world. Jack Schultz of Boomtown USA wrote this post and later sat down at my table for lunch:

But, it is in the area of productivity that Wal-Mart really shines. The two keys here are information technology and supply chain management. In the area of supply chain management, one of the factors that I have argued for the past five years is that part of their advantage is the location of their Distribution Centers (DCs) in rural markets. I’m convinced that the lower costs and more productive labor in these markets is a huge benefit to the company.
Wal-Mart Watch profiles David Neumark, who sat down next to me at the same lunch:
Today we’ve chosen Dr. David Neumark, an economist with the Public Policy Institute of California who co-authored a paper for Wal-Mart’s self-funded academic conference today in Washington, DC. Neumark dared to challenge the company on its own dime, and presented a paper that contradicts today’s other rosy presentations. His study examined Wal-Mart’s effect on employment and earnings, and concluded that “Residents of a local labor market do indeed earn less following the opening of Wal-Mart stores.” From Neumark’s paper:

The Fark tagline is amusing: "Behold! Mighty Wal-Mart hath suppressed U.S. inflation". And in the comments, a serious discussion has ensued embedded in a flame-war. The first casualty: Tracy Sefl of Wal-Mart Watch, who is being quoted and satirized pretty unfairly,, although ""Wal-Mart is only telling part of the story, which is not the same as telling the whole story" lends itself mightily to such insignificant attacks.

More Later...

Posted by Kevin at 6:32 AM

Big Media (Part II)

The day-after brings more big-media reporting, much of it very diverse in subject matter an conclusions. As expected, the press accounts go straight to many of the pro and con findings, but fail to note just how tentative the results are.

Stephen Greenhouse of the NYTimes announces a mixed report card:

With critics hammering Wal-Mart day after day, the company sponsored an unusual conference on Friday about its impact on America's economy, and it got some good - and a few not so good - grades.
Amy Joyce of the WaPo talks about two things that I, personally, did not experience:
The event was a strange hybrid of academics and public relations at which attendees toted around registration information in plastic Wal-Mart shopping bags. A room full of people asking questions was reminded -- after a journalist asked about a statistic in a paper -- that reporters were not allowed to take part in the Q&A.

[KB: The reporter was Steven Greenhouse of the Times; he asked David Neumark to try to reconcile competing datapoints, and since the question was very good, nobody in the audience really cared that he's not an academic.]

Outside, Wal-Mart critics greeted attendees. About a dozen demonstrators with the United Food and Commercial Workers union and its Wake Up Wal-Mart organization gathered outside the J.W. Marriott to protest the conference, some arrayed behind a large Wake Up Wal-Mart banner. A few others handed out fliers headlined "Research Confirms: Wal-Mart Needs to Change" that touted some of the more critical findings of the academic papers.

Security guards checked attendees' identification before allowing them to the registration table.

Strange hyrbid, yes. But I did not even see the UFCW folks, because I entered using the Pennsylvania Avenue entrance, while the union folk were on the other side of the building. I hadn't even known that they protested until I was talking to some people after the conference. Also, I was NOT asked to ID myself when I registered, and very, very few people toted around plastic bags, although they were offered when you picked up the symposium materials.

Reporters were asking for opinions from economics Ph.D's. For the most part, I had to hold my lips sealed. But others could talk more. Alison Vekshin wanted responses to Global Insight's paper:

One academic at the conference expressed doubts about the study's methodology.

"I think it's a nice, good effort, but some of the analysis is not valid to what they studied," said Vishal Singh, assistant professor of marketing at the Graduate School of Industrial Administration at Carnegie Mellon University in Pennsylvania.

"They ignored the competition," he said. "But competition has to come into play, in the late 80s and 90s certainly, looking at what Kmart is doing or what Target is doing when making the location decisions."

Holling said the retailer created 210,000 jobs last year.

"When Wal-Mart moves into a county there is higher overall retail employment, but, yes, there is disruption in the retail sector," he said. "Wal-Mart does displace other employment."

Disposable income is 0.9 percent higher than it would be if Wal-Mart did not exist, according to the report.

The researchers also concluded that Wal-Mart has contributed to lower prices.

Thankfully, Wal-Mart did not even try to form a final, coherent message from the studies. I should add that Wal-Mart insisted that it will be a more transparent company, and is very interested in its own economic impact. To that end, it will make data available to economists who want to perform economic impact analysis...

Here's an earlier installment of Big Media Reports.


UPDATE: Maria Halkias of the Dallas Morning News was kind enough to quote me. :

Kevin Brancato, management scientist for Rand Corp., said the conference was billed as an event that would point to an overall trend. Nine independent studies were also presented at the daylong session.

"No one disagrees that Wal-Mart has lowered prices," he said. "But what impact on the economy in total does Wal-Mart have? I don't think the conference answered that."

Still, he said, the work presented by Global Insight was sincere and honest.

"The work Wal-Mart has done in the past was propaganda. This is a big first step."

That most certainly is representative of what I said, though the exact words aren't mine, which is perfectly fine, since I was talking off-the-cuff. Also, I think there is a consensus on some issues, but certainly not the hot-button ones of wages and benefits. The propaganda I was referring to were many -- not all -- local economic impact assessments...

I think that the question I want answered is, "If we let a Wal-Mart into Queens, what's the probability that wages in competing stores will decrease?" We're nowhere near that type of resolution, and I doubt we'll ever get there...

I should note that ALP is NOT affiliated with RAND, and that I have performed no RAND work involving Wal-Mart. My use of the RAND label was unwise...

Posted by Kevin at 6:28 AM

November 4, 2005

WM on its own Conference

Here's where Wal-Mart is putting up its PR, links, and even some data... It's hastily thrown up for a corporate site, and includes several typographical errors, but I prefer rapid response to perfection.

Here's Global Insight's page on the conference, and here is their study. (Here's my list of the rest of the studies).

Posted by Kevin at 9:54 PM

Big Media on the Economic Conference

Annie D'Innocenzio writes for the AP:

The all-day session, the latest effort by Wal-Mart to repair its reputation, included rosy findings from a Wal-Mart-commissioned report and mixed results from studies done by other economists. It was attended by about 100 people in the media and academia.

The seminar may have raised more questions than answers on Wal-Mart's impact on jobs, earnings and individual communities, but in the end the company appeared to make progress toward its goal of appearing more open to change.

Bloomberg has an interesting take on corporate sponsorship:
Several conference participants said while the corporate sponsorship was unusual, they welcomed the chance to share their findings. ``Any time a conference is not purely academic, one worries that the conference sponsor may try to influence the discussion,'' Basker said in an e-mail. ``I am hoping that the exchange of ideas will be free and open, and the more academics participate, the better the chance of that.''

Hicks said in an e-mail that he was reassured by Global Insight's reputation for ``unbiased high quality work.''

The sponsorship did dissuade one academic, whose paper on Wal-Mart's effects on local businesses was submitted and will be presented by a co-author.

In an e-mail, a retired Iowa State University economics professor, said he was boycotting the event, calling it ``rather self-serving for Wal-Mart.''

Emily Kaiser at Reuters has the data takeaway:
Wal-Mart Stores Inc. lowers consumer costs and adds jobs but has also led to a decline in wages and an increase in the number of people relying on government aid for health care, studies released on Friday show.

At a conference sponsored by Wal-Mart to examine its impact on the U.S. economy, researchers found that the world's biggest retailer accounted for some 210,000 net jobs last year while driving nominal wages down 2.2 percent.

The world's biggest retailer also lowered consumer prices by 3.1 percent, and real disposable income was 0.9 percent higher than it would have been in a world without Wal-Mart, researchers at Global Insight concluded.

The LA Times Abigail Goldman gets in a few good words:
When the scholars delivered, some of their findings didn't exactly cut in the company's favor. At the conference Friday in Washington, billed as "An In-Depth Look at Wal-Mart and Society," the retailer will be stuck with them anyway.

"To us it's worth the risk to have a real healthy discussion," said Robert McAdam, vice president of corporate affairs for the Bentonville, Ark., retailer. "We start out with a bias because we think we have a positive economic impact. If the results come back and they show that we don't have a positive economic impact, that will be a disappointment, but at least it's an honest look."

Wal-Mart critics say the company's willingness to hear dissent at the conference will be meaningful only if its executives decide to make changes.

Jennifer Waters of Marketwatch touches on what this conference wasn't:
Elizabeth Cohn, a Takoma Park, Md.-based consultant and professor at the conference, criticized the Global Insight study because it didn't include the indirect impact Wal-Mart has on people, suppliers, and other companies.

"The Wal-Mart business model is very good for consumers, but what does it do for workers and other companies?" she asked. "This study has a limited usefulness."

For example, she said, displaced workers may eventually find work at Wal-Mart, but the study doesn't take into account the disruption to their lives and their income.

Bob McAdam, vice president of corporate affairs for Wal-Mart, said the conference wasn't about the human effect.

"This wasn't a sociological conference," he said. "It was an economic conference and to that extent, the economic issues were what mattered.

"But I don't think the human factor was ignored," McAdam added. "When you talk about how much savings consumers get on an average day, that's a significant impact, not just for the people who shop at Wal-Mart, but those who shop at some of our competitors too.

Posted by Kevin at 9:31 PM

Liveblogging the WM Conference

Sadly, the wireless internet connection at the Marriot was behind a firewall, and I could not liveblog the conferece. However, I will be writing about it over the next couple of days...

Posted by Kevin at 6:04 PM

November 3, 2005

Ted Frank on Wal-Mart's Mysterious Lawsuit

Most of you know that Wal-Mart fired Tom Coughlin for misuse of corporate funds. (Actually Coughlin retired in January, and was removed from the board in March). A big problem with Wal-Mart's civil claim against Coughlin is that the two signed a prior agreement basically absolving Coughlin from telling Wal-Mart about or litigating over conduct that -- as stupid as it sounds -- seems to include pilfering the company coffers. Wal-Mart wants that agreement void, but Ted Frank notes that this is not in Wal-Mart's long-run interest:

Surely the corporation would be better off on the whole with a legal rule that strictly enforces releases than one that judges the validity of a release on a case-by-case basis
The judge in the civil case has thrown out any and all claims by Wal-Mart for damages before they fired him.

Posted by Kevin at 4:57 PM

It Felt Like Home

From Bob Greene's Once Upon a Town:


greene_page90.jpg

Posted by Kevin at 2:47 PM

November 2, 2005

Do Wal-Mart Consultants Have Fair-Use Rights?

In an age of cheap digital media, it's possible for Wal-Mart consultants to go to the anti-Wal-Mart movie and use a cell-phone to record parts of it:

Rick Jacobs, the chairman of Brave New Films, which is distributing the film, said he was considering filing charges against Wal-Mart and the consultant for attempted piracy. "You can't just go in and record a movie," Mr. Jacobs said. "Wal-Mart should know. They are the largest seller of DVD's in the country."
Why can't you go in and record 30 seconds of a movie? Are there no fair use rights when viewing a film? I think there are, but I know little about the impact of The Family Entertainment Copyright Act of 2005 on said rights.

If there are fair use rights, then a major problem with the "attempted piracy" charge is that Wal-Mart and its agents will have a pretty good case arguing that recording 1% of a film in order to discuss and rebut that portion -- not to sell or market it -- is fair use, official scary-looking FBI warning posted on the screen be damned.

I guess it's not often for a person or corporation to have such a clear interest as to generate a strong presumption of fair use in the film context...

(Note that I'm not arguing that Wal-Mart's consultant's rights were in any way crushed or violated, as the law gives theatre-owners broad though limited rights to detain those suspected of piracy).

Posted by Kevin at 4:21 PM

Papers from The Wal-Mart Economic Impact Conference

Anybody interested in the economic impact of Wal-Mart will know a lot more after Friday's conference, where in addition to the independent assessments linked to below, the results of Wal-Mart's own sponsored research will be presented. I will be live-blogging the conference, and hope to present detailed information: interviews with authors and corporate types, discussions, and formal analysis that most other media do not have space for:

Emek Basker - Selling a Cheaper Mousetrap: Wal-Mart's Effect on Retail Prices

Emek Basker and Pham Hoang Van - Putting a Smiley Face on the Dragon: Wal-Mart as Catalyst to US-China Trade

Marlon G. Boarnet, Randall Crane, Daniel G. Chatman, and Michael Manville -Emerging planning challenges in retail: The case of Wal-Mart

Jerry Hausman and Ephraim Leibtag - Consumer Benefits from Increased Competition in Shopping Outlets: Measuring the Effect of Wal-Mart

Albert Myles, Kenneth Stone, and Georgeanne Artz - The Economic Impact of Wal-Mart Supercenters on Existing Businesses in Mississippi

David Neumark, Junfu Zhang, and Stephen Ciccarella -- The Effects of Wal-Mart on Local Labor Markets

Michael Hicks has been very busy, and has three papers:

The Impact of Wal-Mart on Local Fiscal Health: Evidence from a Panel of Ohio Counties

What Do Quarterly Workforce Dynamics Tell Us About Wal-Mart?
Evidence from New Stores in Pennsylvania

Does Wal-Mart Cause an Increase in Anti-Poverty Program Expenditures?

Posted by Kevin at 11:28 AM

Cutting Idle Exhaust

Good news for the environment; bad news for people who use idling trucks as an excuse for anti-Wal-Mart NIMBYism:

In a settlement with nationwide impact, officials from Wal-Mart, the country's largest retailer, have agreed to pay $50,000 in fines and equip the company's big-rig fleet with portable generators after a federal investigation found their trucks idling illegally last year in Massachusetts and Connecticut.

Under the pact, announced yesterday by the New England Regional Office of the Environmental Protection Agency, Wal-Mart will install generators in each of the company's roughly 6,500 semi-trailers, a spokesman for the retailer said yesterday.

Now, I'm not certain what type of generator Wal-Mart has in mind, but I gather it is still an engine just a cleaner-burning engine than the one used to drive the rig. Anybody have details?

Posted by Kevin at 8:26 AM

November 1, 2005

Waking the Sleeping Giant

Wal-Mart lets Michael Barbaro inside the war room:

Wal-Mart is taking a page from the modern political playbook. Under fire from well-organized opponents who have hammered the retailer with criticisms of its wages, health insurance and treatment of workers, Wal-Mart has quietly recruited former presidential advisers, including Michael K. Deaver, who was Ronald Reagan's image-meister, and Leslie Dach, one of Bill Clinton's media consultants, to set up a rapid-response public relations team in Arkansas.

When small-business owners or union officials - also employing political operatives from past campaigns - criticize the company, the war room swings into action with press releases, phone calls to reporters and instant Web postings.

I'm thinking two and five years down the road... what will we all make of this?

Posted by Kevin at 5:49 AM