New York Times - March 6, 2005
ON THE CONTRARY Welcome to Sherwood Forest, Er, Wal-Mart
By DANIEL AKST
THE recent bankruptcy filing of Winn-Dixie Stores, the supermarket chain, would seem to be the latest evidence that Wal-Mart, dreaded by competitors as retailing's 24-hour-a-day death star, has lost none of its price-cutting potency. The company's apparent invincibility is part of what galls its critics, whose opposition led to the cancellation of a proposed Wal-Mart in Queens.
The conventional criticism of Wal-Mart is that it's an insatiable capitalist juggernaut, reaping private benefit at the expense of the public good. The view retains some currency, I suspect, because many of Wal-Mart's critics haven't really shopped there.
The funny thing is that, for quite a while, this view has had the situation almost exactly backward. Instead of producing private benefit at public expense, Wal-Mart has been producing public benefit at private expense. And the equation is likely to become ever more lopsided.
Like the airlines, whose investors generously provide low fares and convenient service while forgoing gains for themselves, Wal-Mart has kindly mustered considerable capital from investors with the goal of providing all kinds of basic goods under one roof at convenient locations and amazingly low prices. These investors must be charitably minded because they aren't the main beneficiaries of Wal-Mart's business.
For several years now, the shareholders, who have more than $200 billion tied up in the company, have not done especially well. Since the end of 1999, Wal-Mart stock is off 23 percent, while Target is up 43 percent and Lowe's is up 95 percent.
The big winners during this period were the juggernaut's customers, who gained by having Wal-Mart drive down the price of consumer goods. Assuming that Wal-Mart investors are more affluent than its shoppers, the system offers a progressive transfer from rich to poor - from capital owners to less prosperous American consumers and hard-working Chinese factory hands. It's like Robin Hood, only with parking.
It's tempting to say that some of the benefits to shoppers come at the expense of Wal-Mart's roughly 1.2 million employees, but it's a tough case to make. Many Wal-Mart employees presumably can't get better jobs; if they could, they would. By continuing to work at the chain, they are showing that they prefer the jobs they have to no jobs at all. If Wal-Mart vanished, in fact, they would be in big trouble indeed.
For Wal-Mart shoppers, the good news is that, for a variety of reasons, they can expect the investors' largess to continue. If you shop at Wal-Mart or its Sam's Club unit, you know that the company cannot afford to raise prices much, because prices are almost the only reason to go to these places. I shop at Wal-Mart stores occasionally, and the ones I visit are poorly lit, poorly organized and unenthusiastically staffed. The clothing is mostly relentlessly unfashionable, and the groceries far from tempting when compared with those of a first-class supermarket chain like Wegmans, based in Rochester; that chain is a perennial on Fortune magazine's list of best places to work. If Wal-Mart does improve its stores, it's hard to see how customers will be made to pay for it without the risk of sending them elsewhere.
WAL-MART'S low cost of labor, meanwhile, appears to be under pressure. Sooner or later, union organizers may succeed at some of its stores, and in any event, the company may have to spend more on wages, benefits and working conditions, if only to improve its public image and to keep the unions at bay. Then there is sheer arithmetic: Wal-Mart is already so big that it simply will not be able to match the hypergrowth of its own past unless it soon employs everyone in the world.
If you don't have much money, Wal-Mart is a godsend, and, in a way, that's the trouble. Wal-Mart's hold on its shoppers is largely mercenary, and therefore tenuous. To me, shopping at Wal-Mart feels like a chore, and Sam's Club is better only if there's no Costco nearby. In other words, I think the juggernaut is vulnerable. It may well be, for the foreseeable future, that it's smarter to buy stuff at Wal-Mart than to buy stock in Wal-Mart. The stock may or may not be a good deal. The stuff is a sure thing.
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Daniel Akst is a journalist and novelist who writes often about business.