Why Britain Can't Afford Wal-Mart
The Ecologist, September 2000
Andy Rowell explains why Wal-Mart's much trumpeted arrival in Britain is likely to spell disaster to local communities
On 24 July, the world's largest retailer, Wal-Mart, opened its first American-style supercentre in the UK, placing it on the outskirts of Bristol. As queues of cars choked the July sunshine, clamouring to squeeze into the 1,000space car park, both the local and national media, with a disturbing unanimity of message, warmly welcomed the behemoth's arrival. 'Store wars as US giant offers 60 per cent off' blazed the approving headline in the Daily Mail. 'Shoppers set for cutprice bonanza' yelled the Bristol Evening News.
The pundits agreed with the journalists, who in turn agreed with the City analysts and senior members of Britain's government: Wal-Mart's arrival in Britain was a Good Thing. The 50,000 people who visited the Bristol store during its first two weeks apparently agreed. This chorus of almost adulatory approval from all sides of British public life is probably not that hard to explain. After all, Wal-Mart, the vast megastore chain which, in its 40 years of existence, has risen to dominate and revolutionise American shopping, appeals to that most basic of consumer instincts: the purse. Wal-Mart is cheap. Very cheap. It lives and thrives by undercutting all and any competitors.
Ever since last June, when it was announced that Wal-Mart was taking over Britain's thirdlargest supermarket chain, Asda, in a deal worth £6.7 billion - a deal which doubled its overseas business overnight - we have heard the same message from all sides: Wal-Mart is good for the consumer. The government thinks so - Wal-Mart's executives held a toplevel personal meeting with Tony Blair before the Asda takeover, during which they were given the green light for expansion in the UK. The media thinks so - national papers from the Guardian to the Daily Telegraph have praised the store.
We have heard less, though, about what Wal-Mart will be bad for. And when its record in the States and elsewhere is examined, we can begin to get a good idea. Wal-Mart will, in all likelihood, be bad for the British countryside and the wider environment; bad for workers, both in Britain and abroad; bad for jobs; bad for small communities and independent shops; bad for local economies; bad, even, for other supermarkets. Bad, in other words, for almost everyone but Wal-Mart.
Wal-Mart's takeover of Asda is more - much more - than one supermarket merging with, or even being swallowed by, another. It is the likely beginning of a retail revolution, which could change more than just shopping habits. Wal-Mart's aggressive 'lowcost at any price' culture, according to serious retail analysts, looks set to force a series of megamergers that could, within a decade or less, leave only Wal-Mart, and possibly one competitor, standing. Britain could be on the verge of a vast upheaval that it is utterly unprepared for.
THE DRIVE TO DOMINATE
It is just under 40 years since Sam Walton, Wal-Mart's founder, opened his first store in Arkansas. Since then, the company has grown into the US's largest private employer, with over 920,000 staff. Every week some 93 million Americans shop at Wal-Mart and every three days another Wal-Mart opens. Just before he died in 1992, Walton, who had amassed the greatest personal fortune in American history, accepted one of the country's highest civilian honours, the Medal of Freedom, saying that 'We're all working together; that's the secret. And we'll lower the cost of living for everyone, not just in America, but we'll give the world an opportunity to see what it's like to save and have a better lifestyle, a better life for all. We're proud of what we've accomplished; we've just begun.'
And they had. Having saturated its home market, in a country that now has more shopping centres than high schools, Wal-Mart now has its sights set overseas. Over the last decade, it has acquired over 700 stores outside the US, expanding into Mexico in 1991, Puerto Rico in 1992, Canada in 1994, Argentina and Brazil in 1995, and China and Indonesia in 1996. The following year, it moved into Germany and now it is the UK's turn. With over 3,600 stores on four continents, Wal-Mart is now set to become the world's largest corporation in the next five to ten years.
But the company's phenomenal success comes at a huge ecological, cultural and social price. Its growing legion of critics has consistently pointed out that Wal-Mart, in its drive to dominate, has systematically destroyed downtown America. Furthermore, it is notorious for its low wages, and there is evidence that it imports its goods from nations where the workers are either enslaved or paid a pittance. In its wake, the company has destroyed thousands of competitors, crippled and depersonalised local communities and left a sprawling suburban wasteland. Wal-Mart, says one critic, ex-Rolling Stone editor James Howard Kunstler, is 'the exemplar of a form of corporate colonialism - going into distant places and stripmining them culturally and economically'.
But this is not Sam Walton's worst legacy, says journalist Bob Ortega, in his book, In Sam We Trust: 'Walton and Wal-Mart transformed retailing the way Henry Ford revolutionised transportation', he writes. 'Wal-Mart's way of doing business is the new paradigm, and the company embodies both the shining success and the dark underbelly of modern American business.'
This revolution is now set to sweep the UK. And in case there was any doubt about its significance, listen to the understated words of the Institute of Grocery Distribution (IGD), which analyses the sector. Wal-Mart's takeover of Asda, it says, 'is the most significant entry into the UK by a foreign retailer to date'. Translated, this means: big changes ahead. But what changes? Wal-Mart is playing its cards characteristically close to its chest, and its message is one of caution. Its communications strategy appears to be to reassure: it wants the British consumer to rest safe in the knowledge that it will not change too much, or too fast. It is unlikely, though, based on its record, that this is anything like the truth.
So, although the company maintains that it only plans to open 10 stores in five years, the company's real aim, says the IGD, is 'very clear' - to become the 'leading retailer' in the UK. 'Keep in mind', writes Bob Ortega, 'that Wal-Mart started small in Canada and Mexico, too, and that despite stumbling early on, in less than seven years it had become the largest retailer in both countries'. In Germany, the company moved from the 15th to 4th largest retailer in just two years.
In order to become number one, Wal-Mart will try its best to destroy the competition. But that's not all it will destroy. It also has its eyes on Britain's planning restrictions. Its success in the US has been based on the vast size of its stores, which can sell all and everything under one roof. In the UK, tight planning restrictions on outoftown superstores seem to preclude such expansion - at present. But the company is clear on this point. 'If you really want to make it more competitive, the thing to do is to loosen planning', says Allan Leighton, CEO of Wal-Mart Europe. If that happens, Wal-Mart will be given the green light to move in on Britain's small towns and cannibalise local businesses - with potentially devastating results.
THE CONSUMER 'S FRIEND?
Wal-Mart's claim to be the consumer's friend is the bedrock of its success. But how true is it? Tim Lang, Professor of Food Policy at Thames Valley University, has his doubts. 'It is dubious whether Wal-Mart's takeover of Asda will be of benefit to consumers', he argues. 'Consumers should ask themselves whether a six pence reduction in the price of bakedbeans is worth the environmental cost of having to buy the car and travel even further to get to the tin shed to buy the tin can on the edge of a motorway. Is it really worth it?'
The message from the company's home country is the same. 'The idea that Wal-Mart will be an inducement to lower prices is ridiculous, ' argues Al Norman, founder of the community group SprawlBusters, which has helped 88 communities fight the company over the last eight years in North America. 'Prices will only remain low while there is active competition. Wal-Mart is not the beginning of competition, it is the end of competition. Once it has driven out the competitors, it is free to do whatever it wants with its prices'.
Only one other UK retailer is prepared to say anything at all about Wal-Mart's arrival in the UK. A spokesperson for Iceland says: 'From what we have seen in the States, we can see that Wal-Mart does affect the High Street. They are going to be quite detrimental to consumer choice at the end of the day'. Al Norman's evidence is based on his experience in the US, where, using brutal economies of scale, Wal-Mart has flexed its economic muscle to squash competitors. The company has a history of undercutting the local competition until it goes bankrupt. An employee song goes: 'Stack it deep, sell it cheap, watch it fly and hear those downtown merchants cry'.
'For saving a few cents, we are supposed to sacrifice 20 to 30 acres of land, lose jobs in other stores, and support low wage labour', argues Norman. 'It is a quality of life issue. You're surrounded by gridlock, and the architectural graffiti of a windowless Wal-Mart store. People in America have lamented for years that Wal-Mart is scarring the face of hometown America and turning one community into a lookalike for every community'.
Since 1962, writes Norman in his book Slam Dunking Wal-Mart - how you can stop superstore sprawl in your hometown, Wal-Mart has 'cannibalised the retail food chain from the Mom and Pops on the bottom, to the midlevel regional chains to the very top national chains' in every county in America. His message is clear: local communities pay a big price for low prices.
CRUSHING COMPETITION,CRUSHING JOBS
No company is immune. The Wal-Mart casualty department is overflowing with those who could not compete. According to Iowa State University Professor Ken Stone, for example, in the ten years after Wal-Mart moved into Iowa, the state lost over 555 grocery stores, 298 hardware stores, 293 building suppliers, 161 variety stores and 158 women's clothing stores, 153 shore stores, 116 drug stores and 111 children's clothing stores. In total, some 7,326 businesses went to the wall. There is no reason to believe that the company intends to spare Britain's beleagured High Street the same fate. Ironically, the retail giant also destroys jobs. Study after study in the US has shown that when Wal-Mart comes to town, jobs are destroyed. Last year, in a study in Virginia, economist Tom Muller showed that, while Wal-Mart's arrival would create 246 parttime jobs, 248 jobs in local businesses would be destroyed as a result.
Another survey by Muller found that in nine counties examined, on average 84 per cent of Wal-Mart's sales came from existing businesses. In some areas it was as high as 100 per cent. In a saturated retail market, in other words, Wal-Mart's gains are another store's losses. Another study by Muller and Beth Humstone into a proposed Wal-Mart in Franklin County, Vermont, projected that 'over time, the number of jobs in the county would decline by a net 200 jobs'.
This is due to the fact that the existing retail businesses are more labour intensive than Wal-Mart. For every $10 million in sales in a typical Franklin County retail business, 106 people are employed. For every $10 million sales at a Wal-Mart, 70 people are employed'. In other words, for every job generated at Wal-Mart one and a half jobs are lost elsewhere.
Even studies connected to Wal-Mart admit that job losses are a problem. In the town of Greenfield near Boston, an economic survey underwritten by Wal-Mart in 1993 found that, despite creating a promised 293 new jobs, the net impact of the store would be just 27 jobs, because of jobs lost from other businesses. The study also concluded that 232,000 square feet of retail space would close because of Wal-Mart's store. Nearly half the sales for the new store would be poached from existing businesses. What's more, just as Wal-Mart can come in and close down the competition, it can also leave once all the competition has gone.
There are over 4,000 abandoned shopping malls in America, with 22 empty Wal-Mart stores in Alabama alone. 'They came in and ravaged all the small businesses,' says the President of the First National Bank in Nowata, Oklahoma. 'And when it came to the point when they were not satisfied, they left.'
Wal-Mart UK, though, denies that jobs are an issue. Nick Agarwal, from Asda/Wal-Mart, wants us to believe that Wal-Mart is good for surrounding businesses. 'The evidence is', he says, without producing any evidence 'that the [Bristol] store is attracting trade to the shopping centre in and around the area. That is part of its success.' But claiming that large, out of town superstores are good for local businesses flies in the face of the evidence. UK Government research published in 1988, for example, showed that edge of town and out of town supermarkets have a serious impact on between 13 and 50 per cent of the local market in market towns and centres. The industry's own figures, from the National Retail Planning Forum report, says that a superstore costs on average 276 local jobs.
The Sussex Rural Community Council has predicted that a new supermarket in its region would close all village shops within a seven-mile radius. The Cornwall Association of Village Shopkeepers found that 202 jobs out of 270 were at risk from a supermarket. One of Britain's leading think-tanks has calculated that a typical out-of-town supermarket has a subsidy of £25,000 per week over its town centre equivalent, because of pollution and congestion caused by the car culture that out-of-town stores rely on and encourage.
Wal-Mart's record, then, tells a clear story: the arrival of Wal-Mart in a community doesn't create new jobs, it just steals other peoples'. And its commitment to that community lasts only as long as its profits and its retail strategy allow it to. In Bristol, the company boasts of employing an extra 200 people at its new store. But how many of these will be at the expense of job losses in the surrounding area? And how long will they last? Only Wal-Mart knows - and it's not telling. Meanwhile, local businesses, led by the Bristol Chamber of Commerce, are already publicly expressing their worries.
Whilst it destroys jobs elsewhere, the jobs Wal-Mart does create are often low-wage and parttime. 'They are pushing down US labour standards. This is a company that pays low wages - on average two to three dollars an hour less than a union employer,' says Jill Cashen from the United Food and Commercial Workers Union (UFCW) in the US. As she explains, 'Wal-Mart has gone to tremendous lengths to deny their own employees a union. Only 10 people out of 920,000 workers at Wal-Mart are members of a union in the US.' Other Wal-Mart business practices also leave much to be desired. In his Wal-Mart exposť, Wall Street Journal journalist Bob Ortega wrote: 'Wal-Mart's executives have demonstrated an often breathtaking contempt for laws and regulations. In the US, courts again and again have found the company to have lied, to have illegally falsified, destroyed and withheld documents, to have committed civil fraud, to have wilfully sold counterfeit goods, to have deliberately discriminated against disabled job applicants, to have illegally fired workers for interracial dating, to have discriminated against black and Mexican employees in other ways, to have allowed managers to sexually harass women workers - and to have fired women who had the temerity to complain.'
Now, Wal-Mart has brought its antiunion agenda to Europe. In July 2000, German Wal-Mart workers launched a twoday 'warning' strike against the company because it had refused to sign the German wage agreement and join the German employers' association. 'Your struggle demonstrates that Wal-Mart is committed to spreading its antiunion, antiworker operation to any country it does business, regardless of national labour laws or international labour standards protecting the right of workers to organise', said UFCW President Doug Dority in a letter of support.
Not content with bullying its domestic workers, Wal-Mart has also taken its attitude to workers' rights towards the Third World, where factories producing clothes for Wal-Mart have consistently been found using forced or child labour. A 1992 American NBC investigation found garments sewn by 12yearolds in Bangladesh for Wal-Mart being proudly touted as 'Made in the USA'. The factory children were locked in at night until they had finished their production quotas. Only a year before Wal-Mart had shifted production to the notorious Saraka factory in the country, 25 child workers had died in a fire at the facility, unable to escape.
The reaction of Wal-Mart's Chief Executive, David Glass, to this, was as tactful as could be. 'There are tragic things that happen all over the world', he spluttered. And anyway: 'You and I might define children differently.'
Subsequent investigations by the human rights group the National Labour Committee (NLC) in the US looked at factory conditions in Honduras and Bangladesh where Wal-Mart clothing is sewn. In Honduras, the NLC found that women as young as fourteen were employed in up to 14hour daily shifts, with occasional mandatory 24hour shifts. They had to work seven days a week, and if they could not, they would be fired.
In response to these allegations, Wal-Mart introduced a much-trumpeted Code of Conduct for its suppliers. But the evidence is that sweatshop labour continued to be used. Last year, the NLC released reports on the continuing use of sweatshop labour for clothes made for Wal-Mart in Honduras, Mexico, El Salvador, China, Bangladesh and Guatemala. Wal-Mart continues to be 'one of the worst sweat shop abusers in the world, if not the worst', says a spokesperson for the NLC.
Meanwhile, only last month, the UFCW announced that Wal-Mart Canada had imported 60 tonnes of garments from Burma, a country reviled for its appalling human rights record and the use of forced labour.
In the UK, the company have followed the same strategy. Asda recently announced a new Code of Practice on sourcing and labour, even though Wal-Mart's similar code in the US has been found to be effectively meaningless. All of this perhaps goes some way towards explaining how Wal-Mart keeps its prices so low.
WATCH OUT BRITAIN
So what is in store for Britain, as the Wal-Mart noose begins to tighten around its local communities? Despite all the positive rhetoric by Asda/Wal-Mart, Al Norman from Sprawl-Busters believes that the company will behave no differently to its operations in the US. 'I don't see why the experience in the UK will be any different from the States, unless consumers in the UK reject the American company and its philosophy', he says. 'This is not really a debate about stores at all, it is a debate about what communities in the UK are going to look like ten years from now. We are talking about community control, quality of life and a unique sense of place. It all adds up to what scale of commercial activity we want in our lives, forcing conspicuous over-consumption. I would hate to see that become the dominant mentality in England. There is a lot at risk here that goes beyond cheap underwear.'
- home -