Wal-Mart & how it harms small businesses and communities – Fact sheet


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.

For more info:

1) http://www.findarticles.com/p/articles/mi_m1038/is_n5_v38/ai_17565139

2) http://www.newrules.org/retail/news_archive.php?browseby=slug&slugid=28

* 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;

For more info:

1) http://www.newrules.org/retail/econimpact.html#1

* 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.

For more info:

1) http://www.walmartfreenyc.com/cultural.pdf

* 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.


For more info:

1) http://www.momandpopnyc.com/campaigns/walmart/articles/index.htm#crime

* 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.

For more info:

1) http://www.sprawl-busters.com/search.php?readstory=1757

* 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.
For more info:

1) http://goodjobsfirst.org/pdf/wmtstudy.pdf

* 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.

For more information:


1) http://www.walmartfreenyc.com/waronhealthcare.pdf

2) http://www.goodjobsfirst.org/gjfhealthcaredisclosure.htm

* 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.

For more info:

1) http://www.walmartfreenyc.com/waronhealthcare.pdf

* 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


FDI in retail – This is a harsh reality – Is FDI really a boon for India at this time ?

Government’s arguments for FDI in retail are a proof of the fact, that this government does not understand India, and looks at Indians from USA’s businessmen’s perspective. Congress government has become the biggest lobbyist for pursuing the business interest of nuclear & retail corporations from USA & Europe at the cost of India’s middle class

Today’s Economic Times (26th November 2011) headline ‘ Govt Sells Multi-Brand FDI with best bargains’ gives a list of reasons why the government is supporting, (rather pushing FDI ) in retail. Let me put the Common Man’s view and take on each of these arguments

1.     It will create 10 million jobs in the next 3 years

A) According to the CII report in 2007, ‘India will need 10 to 12 million skilled workers every year for the next five years to meet the growing demand from the support services and there is a need for strong intervention to ensure the availability of the workforce’. So is the government trying to say that it is only the retail chains that will create 10 million jobs in the next three years?

B) Let us examine how many jobs Wal-Mart created in America & how many jobs did Wal-Mart create in India for the past 3 years of operations both as a wholesaler and as a retailer ? How many jobs our Indian retailers like Future group, Aditya Birla retail and Reliance retail created in the past 3 years?  We will clearly see that they did not even create a million jobs!

C) Also, government does not talk how many Kirana stores will shut down in the next 5 years and how many homes will be denied of a source of income ?

D) Wal-Mart or for that matter any retailer works on the least number of workers per square feet (lean management structures ) ,and so it will kill the 50 Kirana stores thereby get at least 250 people out of jobs and then create 50 jobs per super market.  Is this factored in the statement? I am willing to prove this in the current retail scenario leave alone the scenario when the foreign retailers come in?

 2.     Several billion dollars of investment in retail

A) If retail is a great business, the government banks should give loans from domestic financial institutions and let the homegrown retailers grow and build scale and size and let the profits remain in India. Why should we give 51 % of the ownership to foreign players, as these people will sell to Indians and take the profits out of our country.  USA / Europe will solve their income and earnings problems and India will get into problems of high inflation and more volatile stock market. Also, Indian retailer being less than 50 % of their share in the retail will become servants to these MNC chains under the current 51 % FDI norms.

B) Why did the government not start with 26 % FDI in multi brand retail for the first five years? Why suddenly start with 51 %. Please justify?

C) Often it has been quoted that the foreign retailers will bring technical know how to Indian retail market and boost the economies of scale and productivity? Which technical know how is the government talking, it needs to explain? I have been a COO / Board member of a major fortune 20 company’s retail operations in India, and I can tell you that these foreign retailers only bring money and no other expertise! They work on high profits, highly automated environment and lean man power structures.  So government’s reason of the technical know how is fallacious and is showing that we Indians do not understand retail. Let us look inward and see our home-grown retailers like Future group and Aditya Birla retail .They are certainly growing . Government must bring out a detailed white paper on the so-called ‘Technical Know how’ these foreign retailers bring to Indian retail market?

D) With these billions of dollars coming in India, India’s real estate will become expensive thereby, contributing to keep the inflations levels high for the medium class not just for real estate but for all the sectors

E) Also, these billions of dollars are not charities to India or Indians . These are investments by retailers which follow a ROI ( return on investment concept ) for every dollar spent. So for sure , they people will invest in retail one dollar and take out 10 dollars from India over the next couple of years . Retail is mostly done on inventory management which is on credit from vendors . These retailers follow a credit cycle which ranges from 15 days to over month . So with a double-digit profit margin , these retailers will only be investing one time into infrastructure and then make money without investing at all ,as all the inventory is on a credit cycle . ‘Sell and pay’ is the mantra for these FMCG retailers ! Even the space which is rented by these retailers is leased to product companies for hefty display charges. These retailers charge a heavy fee for listing products in its store before selling .Our policy makers , wake up and understand the real dangerous game of FDI in retail and don’t get carried away by the billions of dollars of investment . It is not true . One time investment by these retailers will be a life long profit for their parent company’s home country

3) Farmers will get more than 12-15 % of the consumer price they get for fruits and vegetables

A)    In reality, farmers will never get a higher price but will be exploited by these MNC Chains  .In fact, these MNC retailers will push in for stringent quality checks and other prohibitively expensive conditions for these farmers thereby, forcing the poor Indian farmer out of his livelihood. Most of the retailers will take to contract farming, and thus the farmers will be reduced to being laborers in the hands of these MNC chains.

B)    The History of these MNC chains has shown the these chains are out to squeeze blood out of their vendors and farmers will certainly be vendors for these MNC chains and nothing else . Wal-Mart and other retailers are facing dozens of cases of exploitation and gender bias in developed country where the legal system is strong . Imagine what will happen in our country ?

4) Consumers will get producers at Cheaper Prices, as competition will bring down the prices

A)    Even without competition the prices will come down by a few paisas or may be a few rupees, but, all these chains will increase the MRP  (Maximum retail prices) of the products, and so the consumer will end up paying more than what s/he pays today. Take an example of the MNC pharma companies. Since there is a ceiling of price increase by 10 %, so every year the pharma companies increase the prices by 9-9.5 % and thereby, circumventing the price increase regulations.

B)    It is clear that the consumer is not a winner, no one pay’s from its pocket OR profits to the consumer. If there is a price increase on the input costs, the same is passed on to the as an increased MRP or the quantity is reduced for the same price. So the consumer’s pocket is always ripped apart by these retailers


5) 30 % mandatory sourcing from small-scale sector will help small industry

A)    This has not been a convincing argument, so we are trying to tell that a small company out of Varanasi will compete with HUL and win? Come on Dr.Manmohan Singh, are you trying to fool Indians? I understand that you studied at Oxford, doesn’t mean that rest of the Indians are going to get carried away with these statements

B)    Also, these MNC chains will put conditions that are either too stringent to be complied to or prohibitively expensive to be implemented by these SME’s, and so finally, these chains will find a reason to evade buying from these SME’s. Also, that the SME’s are not just limited to India, but across the world, so probably, Chinese SME’s would benefit more than Indian SME’s

C)    These retailers charge a heavy fee for listing products in its store before selling. How will SME’s afford that ? The fee currently for Indian retailers varies from few thousand to over a lac for products for companies . SME’s will never be able to benefit from these chains even if they are able sell to them, as they will pay for listing and then cry for the payment – which will depend on the vendor payment cycle varying for weeks to months and small vendors (SME’s ) cannot survive this big box retail game

6) 70 % of retail is in food items and these are mostly sourced locally

A) If 70 % of the retail is in food items and this is sourced locally, why allow 51 % of the profits to go out of India? So FDI should not have crossed more than 30 %!

B) Local Indian retailers (existing Kirana stores ) must be trained to deal in these food items and deliver better value for the country and its economy.

C) This argument of the government goes against its own policy. So whereas, 70 % of the products would be food items, 51 % profits from these categories would go out of our country, thereby, clearing pushing the inflation higher perpetually for the next couple of decades. As there will be less money in our country chasing more goods ( as money would have found its way to parent MNC)  – Simple economics Mr. Kaushik Basu!


7) Ikea already sourcing 30 % of inputs from India

A) So if Ikea is already sourcing 30 % inputs from India, let other chains also do the same before starting their shop in India.

B) If these MNC chains buy from India and sell in India and take 51% of the profits abroad, what is India’s gain? The government must come out clean on this?

8) Approval only after investors meet all conditions, including 50 % investment in back end

A) This statement of investment in backend is a foolish statement. Already 100 % FDI is allowed in wholesale, why justify it for retail and link it up? Let these retailers first invest in back-end for the first five years and next five years invest in front end

B) Government has FCI (Food corporation of India) godowns and what is the government doing for enhancing the efficiency of this biggest warehousing corporation – Can this FCI not  become the Cash and Carry for small retailers ? A drastic improvement in supply chain of FCI godowns can bring down the wastage of food grains by hundreds of tons if not thousands of tons. Please pursue the project of Mr.Atal Behari Vajpayee of Golden Quadrilateral and link up all the FCI godowns, and start a national Agriculture produce transport corporation to start weekly transport during the harvesting season from the farms to FCI and nearest towns. The farmers co-operative and IFFCO should manage this. With this, farmers will not only get good prices but the wastage will be reduced substantially. Why are you looking at FDI to solve this simple problem of inflation . This can not only solve the inflation problem but also improve productivity at all levels , create more jobs ( may be , millions of low & middle-income but high productivity jobs ) and reduce inflation .

C) Learn from ‘operation flood’ by AMUL and how it solved the shortage of milk problem of our country and created a world-class brand. See what M.S.Swaminathan did with ‘Green Revolution’ to increase the production of grains in our country. Please do not justify that foreign retailers will help you bring down inflation. Remember that ‘Inflation is reversible but FDI is not’ and do not sell our country to foreigners for a short-term gain of a few billion dollars to our economy. This is anyway not the dollars to our economy, but the investment of dollars to take back dollars. I am sure that all these MNC chains a ROI (return of investment) method of calculating the investment returns. So I wish to ask our government that what does the ‘retail FDI dollar’ bring to India, which Indian government cannot do with its own money?

9) Government will have the first right over procurement of farm produce

A) This statement has no value. Government has shown no concern for farmers except considering them as voters and leaving them at the mercy of rain gods.

Questions that the government must answer

  1. What has the government spent to train local Kirana stores in the past five years?  When yesterday only the government asked for Rs.56000 crore of the tax payers money despite a huge budget deficit, why did it not ask for even a Rs. 1000 crore for retailers training and up gradation?
  2. Why did the government not start with FDI in retail at 26 %? Why suddenly at 51 %? Has the government become a lobbyist for MNC chains?
  3. Has the government done its own independent studies for the impact of retail chains on Kirana stores?
  4. The biggest plank of allowing the FDI is that inflation will come down. So despite allowing FDI, if the inflation does not come down, will the government revoke FDI in retail? Does that rider appear in the CP (Condition Precedents) for allowing FDI in retail?
  5. Government needs to prove that FDI in retail can create million jobs every year. How and why, and which retailer will do that. All this must be put in the business case for allowing FDI? Why is government becoming the spokesperson for these MNC retail chains? What is the deal?
  6. Where and how much wills the retailers invest in back-end? This has not been specified?
  7. Why has the government not capped the retail margins of foreign retailers in India?
  8. See point 5 B, why have women self-help groups / handicrafts been excluded from being the beneficiaries of the retail entry
  9. Why are retailers not mandated to invest in retail training ?
  10. More questions to follow

Rajendra Pratap Gupta

Healthcare I Retail I Public Policy

Email:  office@rajendragupta.in , office.rajendra@gmail.com