What would the world be like without Wal-Mart? It's not a simple answer.
For those who love the $312-billion-a-year behemoth retailer, the answer will likely touch on the 1.8 million jobs it provides as well as the company's low prices, which make life's necessities and luxuries more accessible to those with limited incomes (a large part of Wal-Mart's 176 million weekly customers).
For Wal-Mart haters, the answer will likely refer to the "externalities" of those low prices -- the environmental degradation caused by sourcing cheap goods, the public services (food stamps, welfare) required by low-paid employees unable to make ends meet, and the poor labor conditions under which many of its suppliers' products are made -- that aren't covered by the prices of goods sold in the stores.
Love it or hate it, a world without Wal-Mart would be a different place. But what would replace it?
Small-Mart, perhaps?
That, at least, is the foundation of Michael Shuman's new book, The Small-Mart Revolution. "Small-Mart" refers to locally owned businesses that are, in aggregate, more reliable generators of good jobs, economic growth, tax dollars, community wealth, charitable contributions, social stability, and political participation, according to Shuman.
His very readable and entertaining book makes clear that this "revolution" is about "far more than fighting chain stores." In fact, he says, it is notable as much for what it stands for than what it is against. Shuman is for profit-making businesses, even big ones (under certain circumstances). He is for jobs and, presumably, some reasonable level of consumption. In fact, the only thing for which he is demonstrably against is "the vast web of laws and public policies that directly disadvantage small and local businesses" in favor of large, global ones. Oh, and the global financiers that facilitate this: It's the capital markets, stupid.
Shuman isn't the first to pitch the notion that local is beautiful. Across the U.S. and around the industrialized world, communities have been exploring alternatives to global mass-marketers for -- well, as long as there have been global mass-marketers. In the U.S., groups like BALLE, Global Exchange, the Institute for Local Self-Reliance, and Co-op America have been actively promoting the notion of "local living economies" for years. But Shuman (a co-founder of BALLE) may have coined the meme -- "Small-Mart" conjures up just the right imagery -- and articulated the vision better than anyone.
And he paints a compelling portrait of how small, local business networks can work and succeed. In Shuman's Small-Mart Nation, many of your neighbors run their own businesses, you spend more of your money on locally produced, high-quality goods and services, some of your savings sit in a local bank or credit union, and communities don't bend over backwards -- financially or otherwise -- to lure global companies to set up shop nearby. It's not that they don't want automobile factories, big-box stores, and other manifestations of globalization in the 'hood. It's just that these entities will have to compete on a level playing field when it comes to zoning, taxes, schools, policing, and other government services. If they succeed, they're welcome.
Sometimes, Small-Marts can be not-so-small. Shuman tells the story of the Hershey Chocolate Co. The $4.6 billion candy company is publicly traded, which normally makes local ownership impossible, but a local charity, the Hershey Trust, keeps ownership local by controlling 77% of all voting shares. The Trust "is effectively the heart that pumps monetary blood" throughout the region surrounding Hershey, Pennsylvannia, writes Shuman.
So, can Small-Mart replace Wal-Mart? Probably not for a while, if ever, concedes Shuman. "I believe that over time Small-Mart will reduce the size and the influence of Wal-Mart with a bunch of local alternatives," Shuman told me recently. "It will never get rid of it, and we may never want to get rid of it. At the end of the day there are some economies of scale that some global companies have that are superior to local companies."
Which, of course, is the key to Wal-Mart's success: Its laser-perfect attention to sourcing, pricing, and distribution, allowing it to leverage its size -- and clout -- as no company has ever done to keep prices dirt cheap. However, as Marc Gunther points out in his fine article in this week's issue of Fortune, those economies of scale, deployed effectively, could create positive impacts:
If each customer who visited Wal-Mart in a week bought one long-lasting compact fluorescent light bulb, the company estimates, that would reduce electric bills by $3 billion, conserve 50 billion tons of coal, and keep one billion incandescent light bulbs out of landfills over the life of the bulb.
Will that happen? In the brave new world of Wal-Mart, in which the company has recently pledged to green up its stores, its trucks, and some of its products, it could. And that could make Wal-Mart a force for good, or at least better, in the eyes of at least some of its critics.
Of course, thousands of small, local merchants could have a similar impact, should they decide to coordinate, cooperate, or simply get into the same marketing groove. And Small-Mart even offers a model. In our conversation, Shuman described how True Value and Ace, two U.S.-based hardware chains, are comprised of individual, locally owned hardware stores banded together into marketing and buying co-operatives. They allow local hardware stores to buy collectively and engage in the kind of global bargaining that only giants like Wal-Mart can do.
Says Shuman: "Sooner or later, we're going to do that with general merchandise. And when we do, the Wal-Mart hegemony is cracked. It's going to take some time, but that's what needs to happen."
The Jolly Green Giant
On July 26th Fortune Magazine released a cover story on Wal-Mart under the banner “Wal-Mart Saves the Planet, well not quite…”
Something is going on here that I’m not quite sure we understand.
Whether you believe Wal-Mart is the devil incarnate or are a cheerleader for what they are doing – the truth lies somewhere else.
Call me crazy – but I believe this is a bigger, more significant, pattern changing event. We can’t understand it by looking back – we need to understand it as a new possibility that is rushing toward us. The future in the making.
Think, the end of the cold war, the Berlin wall coming down, our first trip to the moon.
That is not to say it’s all good – but here are 7 things to ponder.
1. First read Mark Gunther’s article http://money.cnn.com/magazines/fortune - while he took my quote out of context, it’s still a great story!
2. I believe that no organization on the planet has more power or potential to very quickly effect positive social and environmental change – what you’ve seen is just a taste of what is to come. More fuel efficient trucks is easy low hanging fruit, when Wal-Mart starts telling P&G to reformulate and redesign their products – we’re in uncharted territory.
3. Organic food from China – good or bad?
a. First, who am I to tell a low income family with both parents working two jobs, that total almost 150 hours a week living in West Texas that they shouldn’t have access to cheap organic food. It’s the only way they can afford it. The fact that they can’t afford to shop in Whole Foods isn’t their fault.
b. Second, it makes no sense to grow organic lettuce in China for consumption in the US, how do you battle global warming if your developing new unsustainable distribution systems. We must grow and distribute food locally. Is this Wal-Mart’s responsibility – yes – but not alone.
4. With out full cost accounting, where consumers and business take full responsibility for externalities we are all incentivized to behave in way’s that are truly unsustainable. We need the corporate and political will to change this – Wal-Mart could be a leader here – but it isn’t yet! (For example; if traditional agriculture had to pay the cost of dumping pesticides into the environment, polluting ground water and paying the health care costs of exposing workers to toxic chemicals – then organic food would cost about half the price of traditionally grown food! Add the cost o the war in Iraq to the price of gasoline and it would already be over $4.00 a gallon.)
5. Is Wal-Mart Serious? YES absolutely, I’ve looked Lee Scott in the eyes – he’s a believer. This is not about green washing. The traditional Wal-Mart business model is broken, The stock is in the toilet. This is a smart strategic move with a sound business case. How far they go remains to me seen.
6. What about the social issues? This is the elephant in the closet. They don’t know how to deal with health care, raise wages to livable levels, or how to grow with out killing local downtown communities. But they’re working on it. The question is how much the Board of the company will really invest today, reduce short term earnings for solutions and a payback that may be several years away.
7. What should we (you and I do)? Well I’m still not ready to sell to or shop at Wal-Mart – but I can imagine for the first time in my life that that day might come. Now, we need to applaud the good work they are doing and continue to ask the tough questions (a few of which include☺
a. When will we see real corporate transparency in the form of a GRI corporate responsibility report?
b. When will Lee Scott sit down with Andy Stern (head of the labor union) to have an honest open conversation?
c. What are they doing, and willing to do, by when to, provide health care insurance to all employees?
d. What percentage of organic purchases is Wal-Mart willing to commit to purchasing locally?
Posted by: The Inspired Protagonist | July 31, 2006 at 06:34 AM
Life doesn't get any better than a cold Coca Cola and a trip to Wal-Mart Heaven.
Posted by: Lamar Cole | September 08, 2006 at 05:10 AM