Wal-Mart, Small Business and the Community
* Predatory Pricing: Basically, the higher Wal-Mart’s market share, the higher its prices. Wal-Mart will go into a town, charge below cost until their competition is gone, and then raise prices. Examples include Conway, AK where Wal-Mart’s attempted to undercut drug stores and Fresh Farms in Va. where the prices of goods near the competing supermarket were markedly lower than at another Wal-Mart 20 miles away without much competition.
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* Economic Importance of Local Business: Neighborhood businesses contribute to local charities, advertise in local papers, buy from local suppliers, utilize local professionals (e.g. accountants, lawyers), pay local taxes and are often homeowner in the community. With this “multiplier effect” local business dollars are three times more likely to re-circulate within the community than those of mega-retailers like Wal-Mart. Box stores often supply themselves from outside the community;
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* Sales Tax Revenue – Especially in New York City, Wal-Mart proponents often mention that people already shop at Wal-Mart in New Jersey so why not keep the tax dollars and shoppers in New York State? Though convincing on the surface, this claim is flawed. People shop in New Jersey because they pay a significantly lower sales tax, can fill up their car with less costly gasoline and buy their soda without a deposit. Even with a Wal-Mart, consumers will continue to flock to surrounding areas as long as New York City maintains its high taxes and prohibitive business environment. If pundits and politicians are concerned about the “leakage” of business, they should make it easier for all merchants to do business in New York , not encourage the building of megastores that threaten neighborhoods and put a strain on public resources.
* Cannibalization: Studies show that Wal-Mart, unlike claims to the contrary, draws most of its business from local stores, not from new shoppers (84%).
* Job Growth: Wal-Mart’s entry results in the replacement of entrepreneurs and local wholesalers with low paid clerks and out-of-town suppliers. Where you once might have had a town with ten florists, each with numerous employees, you know have 1 Wal-Mart flower manager with a couple of low wage employees. Moreover, because the company outsources so much of its production oversees, the United States continues to lose its manufacturing base and those put out-of-work either remain unemployed or have to take lower paying jobs.
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* Quality of Life: Crime and Traffic– A major concern of residents all across the country is their quality of life. Though box stores like Wal-Mart promise the benefits of low prices and one-stop shopping there are tremendous costs to the community. Due to its immense size and inventory, Wal-Mart is often a magnet for crime and because it relentlessly pursues even minor offenses community police resources are taxed. The 200,000 sq. ft. stores also bring with it incredible traffic as well as all the related problems of air pollution, asthma and the increased response time for emergency services.
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* Connection to the Community – Unlike Wal-Mart and other large box stores, small businesses are strongly rooted in the community and do not have the luxury of shutting down even if profits start to shrink. Wal-Mart however, is only considering an overall bottom line and won’t think twice about closing stores, no matter the local effect. It has also been known to open up a discount store, drive out all competition and then close that same store to open up a supercenter somewhere else. Therefore, the community is deprived of both local business and its Wal-Mart.
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* Government Subsidies: Wal-Mart, the largest retailer in the world, is the beneficiary of billions of dollars in incentives and tax breaks not available to smaller competitors. According to Good Jobs First, Wal-Mart receives over 1 billion dollars a year in subsidies and that only takes into account 244 stores and distribution centers for which data was available. Contrary to what Wal-Mart proponents say, neighborhood retailers are not afraid of competition. They are, however, worried when the government creates an unlevel playing field in favor of retail behemoths.
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* Health Care: More than two thirds of Wal-Mart workers do not participate in the company’s health plan, due to high premiums and deductibles. In order to obtain care, many of these low wage earners turn to government-funded (i.e. taxpayer-funded) program, costing each and everyone one of us in the end. Nearly 700,000 Wal-Mart employees rely on government programs and Wal-Mart workers and their families are the number one users of public healthcare in states such as Florida, Georgia, Iowa and Arkansas.
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* Competition: Though Wal-Mart is often held up as the standard-bearer for competition, its actions reveal a company that sees competitors as nasty inconveniences. If Wal-Mart was truly competitive it wouldn’t demand enormous subsidies for a good number of its stores, subsidies that either aren’t available for or aren’t advertised to small business. If Wal-Mart was truly competitive it wouldn’t price items below cost, force out competitors and then raise its prices again. If Wal-Mart was truly competitive if wouldn’t pass along health care costs to taxpayers. In a more general sense, because Wal-Mart has eliminated businesses large and small, it is creating a more homogenous marketplace, one bereft of diverse, competitive merchants.
* The Race to the Bottom: Devastating Impact on Supermarkets and other Businesses: During the past decade, over 13,000 supermarkets have closed, which led to the replacement of unionized workers earning family-sustaining wages with low-paid and under-benefited workers. In Mississippi, a study found that in small towns in the state, five years after the opening of a Wal-Mart, the dollar volume of grocery store trade had collapsed 17%. For the supermarkets and other businesses that remain open after a Wal-Mart has been built the affects can be just a detrimental. As has been seen in California, St. Louis, Missouri, and Eugene, Oregon, Wal-Mart creates a “race to the bottom” by forcing competing stores to either lower their workers’ wages and benefits or face extinction.
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* The Affect on America’s Downtowns and Commercial Districts – Wal-Mart has destroyed communities and cities. For example:
Author Al Norman describes the effect of Wal-Mart and Home Depot “When I went for a walk in downtown Toledo, I passed the old Lamson dry goods store: 9 stories of empty retail space. Each floor is the size of a football field. The building served as the home of a Macy’s Department store from 1924 to 1984. For the past fourteen years, the store has been empty. The City now owns it, which means the taxpayers of Toledo are paying the freight for its upkeep.”
Nowata, Oklahoma. In 1982, Wal-Mart opened a store on the outskirts of Nowata, a town of 4,000 people. Half of the small businesses in downtown Nowata shut down. Then in 1994, Wal-Mart abruptly closed this store, as well as another in a nearby town, and opened up a supercenter in Bartlesville, which is 30 miles away, leaving Nowata
* The Need for Economic Impact Studies – All of the abovementioned issues reinforce the need to conduct thorough and economic impact studies when large box stores want to build. Wal-Mart claims that jobs are created but what is the nature of those jobs, how many jobs will be lost and how will existing jobs be affected? Wal-Mart claims that the town or municipality will gain much needed tax revenue but does this potential benefit outweigh the subsidies, drain on public resources and traffic that results? The only way to find the answer to these and other questions is a complete cost-benefit analysis.
Wal-Mart has been probed for bribing officials , so Wal-Mart is not just a wholesaler / retailer of products but also, a ‘wholesaler of corruption’
Time to rise up and say ‘ Back Off Wal-Mart, India does not need you’
Rajendra Pratap Gupta
Last week you made a statement that , ‘ 50 grams of potato chip are sold for Rs. 10 , and that this is made from just half potato’ ! Correct ! But again , Rahul don’t forget that the foreign companies no lesser than Wal-Mart ( likes of Pepsico ) are selling these expensive potato chips made from half a potato . So, does it not make more sense to check the growth of MNC retail chains / companies in India, who are buying cheap potato but ‘profiteering’ by selling chips at Rs. 10 per packet and the poor farmer is losing his produce at a throw away price ?
Also, I wish to draw your attention towards the fact that currently the farmers are paid Rs. 1 per KG. I cannot understand why will ‘Profit & balance sheet obsessed’ Retail chains pay more to these poor farmers !
Simply stating that the middlemen would be removed and so farmers will get more, is a fallacious statement and conveys a lack of your ignorance about the realities. I think your party and Maya ji are fighting in the ‘aerial warfare’ with no touch of realities on the ground
I read another news that Rae Bareilly will get a commercial airport
Let me enlighten you about the Awadh region where your dad , mom & yourself have fought & won elections for decades
The Awadh region once ruled by nawabs and taluqdars and known as granary of India because of its fertile Gangetic plain. The area has given prime ministers to the country – Indira Gandhi, Rajiv Gandhi, and Atal Bihari Vajpayee. But most districts are still backward.
Population | 3.654 Cr
Per Capita Income | Rs 13,150.81
Faizabad division | Faizabad, Ambedkar Nagar, Sultanpur, Chhatrapati Shahuji Maharaj Nagar, Barabanki
Devipatan division | Gonda, Balrampur, Shravasti, Bahraich
Kanpur division | Kanpur, Ramabai Nagar, Auraiya, Farrukkhabad, Kannauj, Etawah
Lucknow division | Lakhimpur, Lucknow, Sitapur, Hardoi, Unnao, Rae Bareli
Now here is an interesting fact : Purulia is better off than Rae Bareli and Amethi and this was quoted in this article of Business Standard & Mid-Day. http://www.mid-day.com/poll2009/2009/apr/270409-Purulia-is-better-than-Amethi-Left-tells-Rahul.htm
Let me walk you through a planning commission report on the per capita domestic product , and the NDP per capita in your family’s constituency.
Net domestic product (total and per capita) 2006-7 as per planning commission, Government of India
|At Current Prices||At Constant Prices 1999-2000|
|Domestic Product (Total) Rs. in CR.||Per Capita Domestic Product (Rs.)||Domestic Product (Total) (Rs. in Cr.)||Per Capita
Domestic Product (Rs.)
So clearly, getting an airport in Rae Barielly is a stupidity of the highest order, and that too, when it is clear that the region is back ward and people can barely survive a year without good rains leave alone travelling by air ! Please read the per capita income and check out if the poor people of that district can even afford the air port taxes leave along the airfare !
I have visited Amethi and met up with dozens of self-help groups that you have formed in Amethi, and let me tell you that, you are just ‘Using’ the emotions of these poor people for becoming a member of Lok Sabha from Amethi
While I was travelling to Amethi, none else than your own people (close associates) have informed me that the worst road in India is between Rae Bareilly and Sultanpur. Do I write more!
Learn from Mr. Vajpayee , who started the Golden Quadrilateral project for the Aam Aaadmi and your government is more interested in airports, so that you can fly directly to Amethi rather than taking the 2 hour road drive to Amethi via Lucknow . You are wasting the hard earned money of common men like myself , who earn by hard work and pay 1/3rd of our income as taxes to the government , and people like you go and throw it for things like building an airport at Rae Barielly !
Gandhi Dynasty has taken India back ward by at least 30 years , and we need to stop it soon.
I also don’t understand what is your intent for the so-called ‘Food Security Bill’ and ‘Job Guarantee Bill’. You will give fixed income to people so that they do not have to work and then you guarantee them food ? So it means that people will not have to work and earn the food , and will get it free ? Where will the Rs. 5 lac crore come from for these schemes ? Will these things take India forward or your party men who will get the ration shops to distribute ( read divert ) grains and sell them to the open market, and finally , the poor Aam Aadmi will be left stranded on the road !
Wake up Rahul ! Time will never forgive your people, and the elections will decide your fate not this ‘aerial warfare’ .
Rajendra Pratap Gupta
Healthcare I Retail I Rural Economy I Public Policy
Why did BJP change the stand on in 2009 elections for FDI?
I was a part of the three-member team that authored the Election Manifesto for the Lok Sabha elections of BJP under the Chairmanship of Dr.Murli Manohar Joshi, and I wrote the first draft of the critical policy document for BJP, after discussions with various stakeholders for the Indian Economy from across the world. I personally made over 100’s of phone calls to people who had submitted their recommendations to BJP for the Lok Sabha elections manifesto, and people would have seen that BJP was the only party that not only incorporated the ‘Aam Aadmi’s aspirations, but have also struck to its commitment without any compromise.
I am reproducing the exact wordings for the Retail Trade as mentioned in the election manifesto of 2009 on page 23,
‘BJP understands the critical importance of retail trade in the context of employment and services provided by them, and thus favors a dominant role for the unincorporated sector in retail trade. Towards this end, it will not allow foreign direct investment in retail sector. After agriculture, the retail sector is the largest employer of nearly four crore people.
- Adopt all necessary measures to safeguard the interest of small and tiny retail vendors
- Ensure availability of working capital needs for such vendors through credit at not more than four percent interest
- Study the feasibility of slab-based ‘Compound Tax’ for traders to free them from needless harassment and end corruption
- Set up an empowered committee to recommend welfare measures, including pension scheme, for small traders
Today’s Economic Times carries an interview of Shri Yashwant Sinha ji and there is a question ‘The Government leadership, particularly the commerce minister, has said that BJP has shifted its policy on FDI in retail. And that the BJP is being opportunistic..
This is totally wrong question or statement from who-so-ever made it
I wish to highlight a few facts that were there in 2002, and in 2008, the global order had changed. Please note the following
- In 2002, the scene was different, when it came to global economies and India; USA was not taking about ‘protectionism’ but selling ‘globalization’.
- Full impact of globalization was clearly seen in the recession of 2008, and USA and Europe have clearly ‘tilted’ towards ‘Protectionist’ economic policies
- Retail trade was just starting up to organize in India in 2002, and by 2008, most of the Indian retailers even had to re-organize due to heavy losses
So, clearly, as the only national party with interest of the ‘Common Man’ at heart, BJP took a cautious call to help its small Kirana stores, than bringing 1000’s of foreign super markets to India at the cost of 12 million retailers! So the 2009 policy decision was the right decision for the nation and its ‘Common Man’, and those who say that BJP changed its stand, have forgotten the rule of ‘market dynamics’ and failed to keep their eyes open to the happenings across the world in the past seven years. A lot has changed in the first 10 years of this century, and a lot more will change in the next 10 years. It is imperative that we keep our heads low and overheads lower! BJP is the only party that can take this nation forward. Congress with all its USA / UK educated politicians can continue to sing the voice of their ‘Real Masters’ and take the economy to drain.
BJP’s stand on FDI in retail is a pragmatic approach with change in market dynamics, and has no politics attached to it , whereas, the Congress is pushing FDI in retail for its failure to check corruption and control inflation, and keep away the Lok Pal bill from the parliament – That is the politics of Congress !
May the good sense prevail in the Congress and it’s so-called leadership!
Rajendra Pratap Gupta
Healthcare I Retail I Rural Economy I Public Policy
Prime Minister Dr. Singh,
Yesterday , I attended the meeting of CAIT ( Confederation of all India Traders ), I felt really bad seeing the plight of the traders, and the hell they would be subjected to , should FDI be allowed in India at this point .
Over the last few months, you have rallied all associated departments and ministries to build a case for FDI in retail. I feel sad that you & your government have ignored the fact , that FDI in retail at this juncture will put a big question mark on the means of livelihoods of over a Crore traders in the country .
I have seen that you / your government has been saying that inflation will come down as Wal-Mart , Carrefour , Tesco’s of the world come to India ( Wal-Mart has already come in few years ago ! ).
Prime Minister , remember, that Inflation has not come down despite Wal-Mart being in India . Your government’s logic that supply chain will get strengthened and prices will fall is fallacious . FDI in retail is a wrong justification for strengthening the supply chain , as FDI in supply chain is already allowed, and a lot of wholesalers are already around and more can come in without needing FDI – Why are you fooling around Manmohan ji ? How low will you stoop now to push to agenda of foreigners !!
Even those who are operating Cash & Carry business , are issuing cards to individuals to buy from them, thereby , stabbing the small retailers . Shut down Cash & Carry immediately after a proper investigation . I go to Sam’s Club in the US ( For your information , Sam’s Club is Wal-Mart’s Cash & Carry Venture in the US). Anyone can buy a card for USD 40 and start buying from Sam’s Club. I have gone twice with my friends to Sam’s club and brought goods from the store , my friends are not retailers , but Indian professionals working in the US . So when these retailers do the same in India , what will we do ???
Your government has failed to understand the cause of inflation , and firstly , you said that recession caused inflation ; then recession got over but inflation did not come down. Then you said that irregular and deficient rainfalls are the cause of inflation. Last year , we had good rains and inflation still did not come down. Realizing that there was no answer with your US educated ( read brain washed ) consultants ( Rajan ,Montek, Kaushik & Sam ) , your government said that inflation was due to high growth and it would continue . Study our next door neighbor – China . They have had high growth with less than 5 % inflation !! All your predictions have failed !!
Also remember dear economist, that ‘inflation is reversible but FDI is not’ . What I mean to say is that , when BJP comes to power, it will bring down inflation , but if you permit FDI ( As your government is hell bent on it ) , we will not be able to reverse FDI . So think before -hand !! Don’t jump like the nuclear deal & do another fiasco !!
Sonia Ji is shouting aloud on NAC podium for poor people on one side, and on the other side , both of you have already done a deal with major international retailers , and are hell bent on cracking the back bone of small retailers by allowing FDI
Government has a flawed policy with regards to FDI, as you are saying that you will allow FDI in top 35 towns to start with. This goes contrary to strengthening the supply chain. If you really want to strengthen the supply chain then please ask this big giants to start retail in ‘C’ class towns and then come to B & A class towns !!
Your statement that farmers will get better value because of FDI in retail : Wal-Mart’s of the world are known for extracting even the ‘blood’ of suppliers !! Their labor policy record needs to be closely examined , and how many times they have been fined !
Also, Wal-Mart is failure in Japan ( social dumping & doubts about its quality ) , Korea ( Wal– Mart failed to understand local customers) , Brazil ( Lack of understanding about local culture ) & Germany ( due to cultural insensitivity ) .
I am producing an excerpt from a report
‘Walmartization does not travel well’ Clearly, neither Wal-Mart’s business concept nor its social dumping – the so-called Walmartization – work in developed economies with a social dimension. Many consumers shun the Bentonville giant and prefer to do their shopping in stores where they know that workers are treated correctly and with dignity. There is also more and more uneasiness and suspicion about many of the products sold. Squeezing the last drop from suppliers can hardly promote safety and quality. There is also a growing aversion against buying, consuming and using products which could well have been made under inhuman conditions. That the tide is fast turning against Wal-Mart at home has not gone unnoticed abroad. Consumers start to know that the retail giant denies its American workers their fundamental rights, and many of them vote with their legs, going to other stores if they have a choice. The poor business results in Germany, Korea and Japan should be taken seriously in Bentonville
Another report : This article appears in the November 21, 2003 issue of Executive Intelligence Review. Wal-Mart Collapses U.S. Cities and Towns by Richard Freeman
During the last 20 years, Wal-Mart has moved into communities and destroyed them, wiping out stores, slashing the tax base, and turning downtown areas into ghost-towns. This is accomplished through Wal-Mart’s policy of paying workers below subsistence wages, and importing goods that have been produced under slave-labor conditions overseas. Often, communities will even give Wal-Mart tax incentives, for the right to be destroyed. Wal-Mart both reflects, and is, a major driving force for America’s deadly implementation of the Imperial Rome model. Unable to produce physical goods to sustain its own existence, the United States, like Rome, sucks in imported goods from around the world, using, in this case, a dollar that is over-valued by 50-60%. America has been transformed from a producer to a consumer society.
I believe that Wal-Mart destroyed American Economy and now it is here to kill ours !! Also, since we know that Wal-Mart is a failure in four countries , please produce a report on those four countries .
Also, let us examine that how many small mom & pop stores have shut down with the advent of Wal-Mart in the United States ? Similar study we must do in China .
Let me also tell you why Biyani’s & Ambani’s of the world are wanting FDI ?
Let me ask these retailers one question ? If the retail trade is so good and profitable , why they have the problem in raising money , investing and growing their business – why do they need foreign investment ? The talk that these MNC retailers bring latest technology is also misleading , as Indian retailers are working in a different environment and all foreign CEO’s have been an utter failure so far in India . You can see the example of Reliance Retail ; How many CEO’s have been brought from outside India in the last four years ? I understand that recently a new CEO was hired from Wal-Mart China !! These traders are actually looking at exiting the business by selling their business to these multinationals to make a quick buck !! That’s the real reason they need FDI .
Once FDI comes , farmers will cry for a good deal and Wal-Mart would never give them a fair deal . On one side , farmers are forced to sell land and other side whatever is left with land & cultivation , they would be forced to sell to these MNC chains at a wafer thin margin .
Congress is a killer party for the poor !! Prime Minister Singh , where is your plan to upgrade the current Kirana stores ? Why are you not excited with their welfare . Give them FDI ( Finance from domestic institutions ) , and provide them training .
I call upon Shri Nitin Gadkari , President BJP to stand behind these standalone Kirana store and oppose FDI . We should post pone FDI for another five years and then revisit the issue. A massive peaceful agitation is called for to stop FDI in Retail for the next five years .
Mail is marked to Montek, Raj Jain of Wal-Mart , CAIT and all leading retailers & political parties in India
A Common Man
Rajendra Pratap Gupta