Posted on 6/16/2003, 12:10:01 AM by Sonny M
In 1952, General Motors President Charles Erwin Wilson told a congressional committee that "What is good for the country is good for General Motors, and what's good for General Motors is good for the country." The implication was that the nation's largest manufacturer—in the 1950s, GM's revenues accounted for about 3 percent of GNP—was a reasonable proxy for the economy as a whole.
More than 50 years later, the economy has changed, and so has GM's standing. Last year, Wal-Mart—the nation's largest retailer since 1991—displaced GM atop the Fortune 500 as the nation's largest company by sales. Wal-Mart's revenues constitute close to 2.5 percent of GNP. Given the degree to which our collective health relies more on the insatiable American consumer than on the declining American manufacturer, does it make sense to consider Wal-Mart as today's best economic proxy? Should there be a Wal-Mart Index?
There are two long-standing indexes of weekly retail activity. The Instinet Redbook Retail Average counts same-store sales at a sample of large retailers. And the Bank of Tokyo-Mitsubishi issues a weekly index of chain store sales, of which Wal-Mart and Target are the main components.
But some pretty smart observers believe that Wal-Mart alone gives the best real-time snapshot of what's going on in the American economy. Every Monday, the chain issues weekly sales figures from its 2,870 stores and 520 Sam's Club warehouses, In February, Marc Zandi, the highly quotable economist at Economy.com identified Wal-Mart's weekly sales, which you can find through the "Sales & Summaries" link here, as his favorite indicator.
Business-friendly author Robert Slater's new book, the Wal-Mart Decade, makes the case that Wal-Mart has morphed into today's GM. When founder Sam Walton died in 1992, Wal-Mart had 1,714 stores, 371,000 employees, and $43.8 billion in annual sales. But in the past 11 years, the discount chain that used to cater almost exclusively to rural consumers has become far more representative of the U.S. economy, in all its girth and complexity. Last year, Wal-Mart had $244 billion in sales. With 1.38 million employees, Wal-Mart is the world's largest private employer. It profits by feeding cheap imports to insatiable, leveraged American consumers. Like the nation as a whole, Wal-Mart is a massive user of technology. Few companies have made more efficient use of logistics, merchandise-tracking, electronic payments and invoicing, and inventory management. This study by McKinsey suggests that Wal-Mart alone accounted for a big chunk of U.S. productivity growth between 1995 and 1999.
Wal-Mart has also vastly expanded its offerings so that it is more broadly representative of the American retail scene. Today, it sells more toys than Toys 'R' Us. It entered the grocery business in the mid-'90s and is now the nation's largest grocer. The company operates gas stations at 700 locations. From consumer electronics to books, Wal-Mart is proving the ultimate category killer. Just today, Wal-Mart announced it was going to get into DVD rentals.
This Fortune article shows just how significant a force Wal-Mart is. Writer Jerry Useem identifies massive companies — Revlon, RJR, and Tandy Brands, to name a few—that derive more than 20 percent of their sales from Wal-Mart. As Useem writes:
Wal-Mart is not just Disney's biggest customer but also Procter & Gamble's and Kraft's and Revlon's and Gillette's and Campbell Soup's and RJR's and on down the list of America's famous branded manufacturers. It means, further, that the nation's biggest seller of DVDs is also its biggest seller of groceries, toys, guns, diamonds, CDs, apparel, dog food, detergent, jewelry, sporting goods, videogames, socks, bedding, and toothpaste—not to mention its biggest film developer, optician, private truck-fleet operator, energy consumer, and real estate developer.
Of course, there's reason to be cautious about placing too much credence in the Wal-Mart weekly sales figures, which are delivered in a deadpan by an anonymous investor relations official. For instance, Wal-Mart doesn't sell automobiles, which can account for 10 percent to 20 percent of overall retail sales. And while Wal-Mart entered its 50th state, Vermont, in 1995, the company is nowhere near as geographically distributed as, say, McDonald's. Since it built out in concentric circles from Arkansas, the chain is disproportionately concentrated in areas of comparatively low population. Like the Republican Party, it is weak on the affluent urban coasts and dominant in the comparatively poorer and rural interior. Wal-Mart's New York operations are roughly the same size as its Mississippi operations.
Also, weekly reports are notoriously volatile—a spate of bad weather or an event that momentarily distracts the attention of the nation (the war on Iraq, the D.C. sniper story) can affect it. This volatility is precisely why some of the other department stores no longer report weekly data. Earlier this week, J.C. Penney said it would no longer give sales updates, following recent dropouts like Federated Department Stores and Sears. (These chains, and virtually all others, provide monthly figures.)
Ultimately, the Wal-Mart weekly sales figure's best use may be as a potential negative indicator. "Because they're a discount retailer, they're one that is going to do comparatively well in a weak economic environment," said Scott Hoyt, director of consumer economics at Economy.com. "So if you see Wal-Mart sales start to turn negative, it's hard to imagine that consumer spending is growing anywhere."
An example would be if I had a hardware store, then Wal-mart comes in, slashes its prices and runs me out, and if I'm lucky, they'll give me a job working for them, but more likely, they probably booted me out of my house before they ran me out of business, which leads me to my biggest gripe.
Emminent Domain, in the article it mentioned there "real estate" development, Wal-Mart is one of the worst (COSTCO is the worst and ranks number 1 nationally in use and abuse of) offenders in using emminent domain. Politicians generally side with them and help them because as Wal-Mart would say "We will pay alot in taxes and create alot of new jobs". Wal-Mart simply has the local government delcare an area to be condemned, then goes out and buys it from the local government for well below market value and builds its superstores while running its competitors out of business. Yes they create jobs and pay alot in taxes, but by that logic I could make the whole country homeless and build costco's everywhere, with all the goods manufactered overseas to boot.
I don't know that that would be a bad thing. But what makes you say that?
I don't know. It might be because millions of us are earning a lot less if we are employed. That is because Wal-Mart has helped ship good American jobs to China. Wal-Mart is simply the Chinese dictatorship's biggest chain of stores in America.
How did they do that?
I don't like them either.
They import a bunch of crap from China, not to mention the fact that they had Hitlery on the board of directors. The latter alone is indictive of corruption.
I'd much rather spend my money with smaller businesses that aren't part of some incesticous (sp) monster.
Uh, I wouldn't bet a dime on that happening.
You're saying that a company that employs 1.38 MILLION people will soon be on the verge of bankruptcy? Do you realize how little sense that makes? Did you even read the friggin' article? All they don't sell is cars, and if you blink, they'll probably be selling THEM!
Because you don't like them, doesn't mean they are going away. It's not that easy.
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