Monday, April 20, 2009

Wal-Mart The Destroyer

Last week on another blog in a comments section, I read a comment from someone who loved Wal-Mart and it's one-stop shopping. As some of my oldest readers know, I dislike Wal-Mart for a variety of reasons. The biggest reason however is that Wal-Mart destroys businesses that are American standards sending their jobs overseas and killing the American Dream. I run into someone like this person, who shall remain nameless, at least once a week. It is not their fault for they simply don't know the truth. I have tried linking articles in the past but ever changing links render them useless within weeks and so I have copied the articles into one post in one place so that I can link to them in the future when I run into another person who doesn't know the truth behind Wal-Mart.

The Destruction of Vlassic

The Wal-Mart You Don't Know
Fast Company magazine (www.fastcompany.com)
By: Charles Fishman Wed Dec 19, 2007 at 12:44 AM

The giant retailer's low prices often come with a high cost. Wal-Mart's relentless pressure can crush the companies it does business with and force them to send jobs overseas. Are we shopping our way straight to the unemployment line?

The gallon jar of pickles at Wal-Mart became a devastating success, giving Vlasic strong sales and growth numbers--but slashing its profits by millions of dollars.

There is no question that Wal-Mart's relentless drive to squeeze out costs has benefited consumers. The giant retailer is at least partly responsible for the low rate of U.S. inflation, and a McKinsey & Co. study concluded that about 12% of the economy's productivity gains in the second half of the 1990s could be traced to Wal-Mart alone.

There is also no question that doing business with Wal-Mart can give a supplier a fast, heady jolt of sales and market share. But that fix can come with long-term consequences for the health of a brand and a business. Vlasic, for example, wasn't looking to build its brand on a gallon of whole pickles. Pickle companies make money on "the cut," slicing cucumbers into spears and hamburger chips. "Cucumbers in the jar, you don't make a whole lot of money there," says Steve Young, a former vice president of grocery marketing for pickles at Vlasic, who has since left the company.

At some point in the late 1990s, a Wal-Mart buyer saw Vlasic's gallon jar and started talking to Pat Hunn about it. Hunn, who has also since left Vlasic, was then head of Vlasic's Wal-Mart sales team, based in Dallas. The gallon intrigued the buyer. In sales tests, priced somewhere over $3, "the gallon sold like crazy," says Hunn, "surprising us all." The Wal-Mart buyer had a brainstorm: What would happen to the gallon if they offered it nationwide and got it below $3? Hunn was skeptical, but his job was to look for ways to sell pickles at Wal-Mart. Why not?

And so Vlasic's gallon jar of pickles went into every Wal-Mart, some 3,000 stores, at $2.97, a price so low that Vlasic and Wal-Mart were making only a penny or two on a jar, if that. It was showcased on big pallets near the front of stores. It was an abundance of abundance. "It was selling 80 jars a week, on average, in every store," says Young. Doesn't sound like much, until you do the math: That's 240,000 gallons of pickles, just in gallon jars, just at Wal-Mart, every week. Whole fields of cucumbers were heading out the door.

For Vlasic, the gallon jar of pickles became what might be called a devastating success. "Quickly, it started cannibalizing our non-Wal-Mart business," says Young. "We saw consumers who used to buy the spears and the chips in supermarkets buying the Wal-Mart gallons. They'd eat a quarter of a jar and throw the thing away when they got moldy. A family can't eat them fast enough."

The gallon jar reshaped Vlasic's pickle business: It chewed up the profit margin of the business with Wal-Mart, and of pickles generally. Procurement had to scramble to find enough pickles to fill the gallons, but the volume gave Vlasic strong sales numbers, strong growth numbers, and a powerful place in the world of pickles at Wal-Mart. Which accounted for 30% of Vlasic's business. But the company's profits from pickles had shriveled 25% or more, Young says--millions of dollars.

The gallon was hoisting Vlasic and hurting it at the same time.

Young remembers begging Wal-Mart for relief. "They said, 'No way,' " says Young. "We said we'll increase the price"--even $3.49 would have helped tremendously--"and they said, 'If you do that, all the other products of yours we buy, we'll stop buying.' It was a clear threat." Hunn recalls things a little differently, if just as ominously: "They said, 'We want the $2.97 gallon of pickles. If you don't do it, we'll see if someone else might.' I knew our competitors were saying to Wal-Mart, 'We'll do the $2.97 gallons if you give us your other business.' " Wal-Mart's business was so indispensable to Vlasic, and the gallon so central to the Wal-Mart relationship, that decisions about the future of the gallon were made at the CEO level.

Finally, Wal-Mart let Vlasic up for air. "The Wal-Mart guy's response was classic," Young recalls. "He said, 'Well, we've done to pickles what we did to orange juice. We've killed it. We can back off.' " Vlasic got to take it down to just over half a gallon of pickles, for $2.79. Not long after that, in January 2001, Vlasic filed for bankruptcy--although the gallon jar of pickles, everyone agrees, wasn't a critical factor.

The Destruction of Rubbermaid

Blame Wal-Mart for this catastrophe
World's largest retailer decides which suppliers live, die, even how their products should look

By Mary Ethridge, Beacon Journal business writer
10 December 2003
Akron Beacon Journal (Ohio)

Rubbermaid is shriveling and 850 of our neighbors are soon to be out of work.

I blame Wal-Mart.

If you shop there even if you could afford to shop someplace else, then I blame you, too.

In 1993 and 1994, Rubbermaid Inc. was named America's most admired company by Fortune magazine. Its descent into mediocrity is a sad, sad story that is used routinely in college classrooms to illustrate the immense power and vicious corporate culture of Wal-Mart.

Rubbermaid's been dying since late 1994, when it found itself in a war of wills with Wal-Mart Stores Inc., the world's largest company.

At that time, Rubbermaid wanted to raise the prices of some of its products because the cost of raw materials had risen suddenly by 80 percent. (Rubbermaid lost $250 million on resin costs alone in 1995, according to the company's annual report.)
Rubbermaid executives traveled numerous times to Wal-Mart headquarters in Bentonville, Ark., to plead their case. Wal-Mart kept saying no.

Look-alikes substituted.

When Rubbermaid refused to go along with Wal-Mart's hard line on price, the retailer pulled Rubbermaid products off the shelf and replaced them with those manufactured by Sterilite, a little-known Massachusetts company adept at making Rubbermaid look-alikes at lower cost.

Sterilite, a closely held company with a manufacturing plant in Massillon, saw double-digit sales increases in 1995, according to industry estimates at the time; Rubbermaid'searnings fell 30 percent that year, according to its annual report.

When Rubbermaid finally made peace with Wal-Mart, it was by succumbing to the retailer's demands for cheaper products made to Wal-Mart specifications.

Rubbermaid planned to introduce a line of housewares in a shade it called Euro Blue. Rubbermaid designers had seen the color's emerging popularity abroad and believed it would catch on in the United States.

It manufactured the Euro Blue line, but Wal-Mart refused to carry it, forcing Rubbermaid to return to making its country blue and hunter green for Wal-Mart.

Euro Blue soon became one of the hottest hues in housewares, and Wal-Mart executives were frustrated and ashamed.

Wal-Mart has brought some good things to retailing. It has forced inefficient operations to get their acts together. It pioneered just-in-time inventory and expanded the use of technology to improve the flow of products. It has taught other retailers how to demand accountability from their suppliers.

But, as one former Rubbermaid executive told me, Wal-Mart ``squeezed too hard.''

By 1997, the floundering Rubbermaid was widely seen as takeover bait -- just three years after it was named the most admired company.

In 1999, Rubbermaid was purchased by Newell Inc., a lesser-known company with a reputation for whipping weaklings into shape.

Suppliers succumb Rubbermaid is hardly alone in bowing to Wal-Mart pressure.

Wal-Mart represents the largest chunk of business -- anywhere from 10 percent to 35 percent of annual revenues -- of all of the major consumer products companies.

About 450 suppliers have opened offices in tiny Bentonville and 800 more plan to do so in the next five years.

Wal-Mart, by all accounts, played a big role in Kellogg's purchase of Keebler in 2001: The company wanted as much muscle as it could develop to deal with the retailer.

Procter & Gamble sold its Crisco and Jif peanut butter brands to the J.M. Smucker Co. of Orrville so it could focus on peddling heavy hitters such as Tide detergent to Wal-Mart.

Many, many other companies have changed their products to please Wal-Mart. Most major manufacturers make special products for sale at Wal-Mart and nowhere else. Those who make large products, such as plastic backyard toys, have had to alter their products or packaging to make it easier for Wal-Mart to shelve them.

Sometimes the changes seem small, but they are insidious.

Planet Moon Studios altered a video game by coloring blood green instead of red, toning down the language and putting a bikini on a topless character -- all to win Wal-Mart's approval.

Newell Rubbermaid Inc. insists that it is still committed to the Rubbermaid brand. After all, it incorporated the name.

But as Wal-Mart grows more powerful, as it does every single day, the chances of the brand's survival in any recognizable form are diminished greatly.

So next time you elbow your way into Wal-Mart to get a dirt-cheap television or bargain shoelaces, think about the price you, and the American economy, are really paying.

The Destruction of Huffy

The Wal-Mart You Don't Know
Fast Company magazine (www.fastcompany.com)
By: Charles Fishman Wed Dec 19, 2007 at 12:44 AM

What does the squeeze look like at Wal-Mart? It is usually thoroughly rational, sometimes devastatingly so.

John Mariotti is a veteran of the consumer-products world--he spent nine years as president of Huffy Bicycle Co., a division of Huffy Corp., and is now chairman of World Kitchen, the company that sells Oxo, Revere, Corning, and Ekco brand housewares.

He could not be clearer on his opinion about Wal-Mart: It's a great company, and a great company to do business with. "Wal-Mart has done more good for America by several thousand orders of magnitude than they've done bad," Mariotti says. "They have raised the bar, and raised the bar for everybody."

Mariotti describes one episode from Huffy's relationship with Wal-Mart. It's a tale he tells to illustrate an admiring point he makes about the retailer. "They demand you do what you say you are going to do." But it's also a classic example of the damned-if-you-do, damned-if-you-don't Wal-Mart squeeze. When Mariotti was at Huffy throughout the 1980s, the company sold a range of bikes to Wal-Mart, 20 or so models, in a spread of prices and profitability. It was a leading manufacturer of bikes in the United States, in places like Ponca City, Oklahoma; Celina, Ohio; and Farmington, Missouri.

One year, Huffy had committed to supply Wal-Mart with an entry-level, thin-margin bike--as many as Wal-Mart needed. Sales of the low-end bike took off. "I woke up May 1"--the heart of the bike production cycle for the summer--"and I needed 900,000 bikes," he says. "My factories could only run 450,000." As it happened, that same year, Huffy's fancier, more-profitable bikes were doing well, too, at Wal-Mart and other places. Huffy found itself in a bind.
With other retailers, perhaps, Mariotti might have sat down, renegotiated, tried to talk his way out of the corner. Not with Wal-Mart. "I made the deal up front with them," he says. "I knew how high was up. I was duty-bound to supply my customer." So he did something extraordinary. To free up production in order to make Wal-Mart's cheap bikes, he gave the designs for four of his higher-end, higher-margin products to rival manufacturers. "I conceded business to my competitors, because I just ran out of capacity," he says. Huffy didn't just relinquish profits to keep Wal-Mart happy--it handed those profits to its competition. "Wal-Mart didn't tell me what to do," Mariotti says. "They didn't have to." The retailer, he adds, "is tough as nails. But they give you a chance to compete. If you can't compete, that's your problem."

In the years since Mariotti left Huffy, the bike maker's relationship with Wal-Mart has been vital (though Huffy Corp. has lost money in three out of the last five years). It is the number-three seller of bikes in the United States. And Wal-Mart is the number-one retailer of bikes. But here's one last statistic about bicycles: Roughly 98% are now imported from places such as China, Mexico, and Taiwan. Huffy made its last bike in the United States in 1999.

The Destruction of Levi Strauss

The Wal-Mart You Don't Know
Fast Company magazine (www.fastcompany.com)
By: Charles Fishman Wed Dec 19, 2007 at 12:44 AM

Levi's launch into Wal-Mart came the same summer the clothes maker celebrated its 150th birthday. For a century and a half, one of the most recognizable names in American commerce had survived without Wal-Mart. But in October 2002, when Levi Strauss and Wal-Mart announced their engagement, Levi was shrinking rapidly. The pressure on Levi goes back 25 years--well before Wal-Mart was an influence. Between 1981 and 1990, Levi closed 58 U.S. manufacturing plants, sending 25% of its sewing overseas.

Sales for Levi peaked in 1996 at $7.1 billion. By last year, they had spiraled down six years in a row, to $4.1 billion; through the first six months of 2003, sales dropped another 3%. This one account--selling jeans to Wal-Mart--could almost instantly revive Levi.

Last year, Wal-Mart sold more clothing than any other retailer in the country. It also sold more pairs of jeans than any other store. Wal-Mart's own inexpensive house brand of jeans, Faded Glory, is estimated to do $3 billion in sales a year, a house brand nearly the size of Levi Strauss. Perhaps most revealing in terms of Levi's strategic blunders: In 2002, half the jeans sold in the United States cost less than $20 a pair. That same year, Levi didn't offer jeans for less than $30.

For much of the last decade, Levi couldn't have qualified to sell to Wal-Mart. Its computer systems were antiquated, and it was notorious for delivering clothes late to retailers. Levi admitted its on-time delivery rate was 65%. When it announced the deal with Wal-Mart last year, one fashion-industry analyst bluntly predicted Levi would simply fail to deliver the jeans.

But Levi Strauss has taken to the Wal-Mart Way with the intensity of a near-death religious conversion--and Levi's executives were happy to talk about their experience getting ready to sell at Wal-Mart. One hundred people at Levi's headquarters are devoted to the new business; another 12 have set up in an office in Bentonville, near Wal-Mart's headquarters, where the company has hired a respected veteran Wal-Mart sales account manager.

Getting ready for Wal-Mart has been like putting Levi on the Atkins diet. It has helped everything--customer focus, inventory management, speed to market. It has even helped other retailers that buy Levis, because Wal-Mart has forced the company to replenish stores within two days instead of Levi's previous five-day cycle.

And so, Wal-Mart might rescue Levi Strauss. Except for one thing.

Levi didn't actually have any clothes it could sell at Wal-Mart. Everything was too expensive. It had to develop a fresh line for mass retailers: the Levi Strauss Signature brand, featuring Levi Strauss's name on the back of the jeans.

Two months after the launch, Levi basked in the honeymoon glow. Overall sales, after falling for the first six months of 2003, rose 6% in the third quarter; profits in the summer quarter nearly doubled. All, Levi's CEO said, because of Signature.

"They are all very rational people. And they had a good point. Everyone was willing to pay more for a Master Lock. But how much more can they justify?"

But the low-end business isn't a business Levi is known for, or one it had been particularly interested in. It's also a business in which Levi will find itself competing with lean, experienced players such as VF and Faded Glory. Levi's makeover might so improve its performance with its non-Wal-Mart suppliers that its established business will thrive, too. It is just as likely that any gains will be offset by the competitive pressures already dissolving Levi's premium brands, and by the cannibalization of its own sales. "It's hard to see how this relationship will boost Levi's higher-end business," says Paul Farris, a professor at the University of Virginia's Darden Graduate School of Business Administration. "It's easy to see how this will hurt the higher-end business."

If Levi clothing is a runaway hit at Wal-Mart, that may indeed rescue Levi as a business. But what will have been rescued? The Signature line--it includes clothing for girls, boys, men, and women--is an odd departure for a company whose brand has long been an American icon. Some of the jeans have the look, the fingertip feel, of pricier Levis. But much of the clothing has the look and feel it must have, given its price (around $23 for adult pants): cheap. Cheap and disappointing to find labeled with Levi Strauss's name. And just five days before the cheery profit news, Levi had another announcement: It is closing its last two U.S. factories, both in San Antonio, and laying off more than 2,500 workers, or 21% of its workforce. A company that 22 years ago had 60 clothing plants in the United States--and that was known as one of the most socially reponsible corporations on the planet--will, by 2004, not make any clothes at all. It will just import them.

The Destruction of Masterlock

The Wal-Mart You Don't Know
Fast Company magazine (www.fastcompany.com)
By: Charles Fishman Wed Dec 19, 2007 at 12:44 AM

Randall Larrimore, a former CEO of MasterBrand Industries, the parent company of Master Lock, understands that contradiction too well. For years, he says, as manufacturing costs in the United States rose, Master Lock was able to pass them along. But at some point in the 1990s, Asian manufacturers started producing locks for much less. "When the difference is $1, retailers like Wal-Mart would prefer to have the brand-name padlock or faucet or hammer," Larrimore says. "But as the spread becomes greater, when our padlock was $9, and the import was $6, then they can offer the consumer a real discount by carrying two lines. Ultimately, they may only carry one line."

In January 1997, Master Lock announced that, after 75 years making locks in Milwaukee, it would begin importing more products from Asia. Not too long after, Master Lock opened a factory of its own in Nogales, Mexico. Today, it makes just 10% to 15% of its locks in Milwaukee--its 300 employees there mostly make parts that are sent to Nogales, where there are now 800 factory workers.

Larrimore did the first manufacturing layoffs at Master Lock. He negotiated with Master Lock's unions himself. He went to Bentonville. "I loved dealing with Wal-Mart, with Home Depot," he says. "They are all very rational people. There wasn't a whole lot of room for negotiation. And they had a good point. Everyone was willing to pay more for a Master Lock. But how much more can they justify? If they can buy a lock that has arguably similar qual-ity, at a cheaper price, well, they can get their consumers a deal."

It's Wal-Mart in the role of Adam Smith's invisible hand. And the Milwaukee employees of Master Lock who shopped at Wal-Mart to save money helped that hand shove their own jobs right to Nogales. Not consciously, not directly, but inevitably. "Do we as consumers appreciate what we're doing?" Larrimore asks. "I don't think so. But even if we do, I think we say, Here's a Master Lock for $9, here's another lock for $6--let the other guy pay $9."

The Destruction of Hoover

Wal-Mart 'Eats' More US Manufacturers
Richard Freeman of the Executive Intelligence Review 11/25/03

Hoover has been a leading name in vacuum cleaners for nearly 100 years. During the third quarter of this year, Hoover's vacuum-cleaner sales declined by 20%, which the company blamed on competitors' models priced at $79-made in Asia to meet Wal-Mart's price demands-outselling Hoover's $100-plus vacuums produced in the United States. Hoover cannot withstand such drops in sales volumes. Hoover's parent company, Maytag, is demanding cuts in health insurance and other benefits, plus changes in job-security rules for production workers at its Hoover vacuum manufacturing plant in North Canton, Ohio. If the workers don't cave in, Maytag has stated that it will move Hoover vacuum production to cheap-wage sites in Texas, and to maquiladoras in Ciudad Juárez, Mexico.

The Destruction of Kids 'R' Us

Wal-Mart 'Eats' More US Manufacturers
Richard Freeman of the Executive Intelligence Review 11/25/03

On Nov. 17, the national retail chain Toys 'R' Us, announced that it would close 146 of the stores of its Kids 'R' Us subdivision, which sells clothing, as well as 36 of its Imaginarium stores (which sell "educational" toys and games). The shutdowns will be completed by Jan. 31, 2004, eliminating up to 3,800 jobs. Kids 'R' Us was unable to slash the prices of its children's clothing deeply enough to compete with Wal-Mart.

Moreover, Wal-Mart has launched an aggressive campaign, through cut-throat pricing, to destroy the parent company, Toys 'R' Us, the second-largest toy seller (after Wal-Mart) in America. As an example of how this strategy operates: The popular Hot Wheels T-Wreck Play Set toy sells for $42 wholesale. However, according to the Nov. 19 Wall Street Journal, Wal-Mart is now selling that very toy at $29.74, a loss of more than $10 per unit. Wal-Mart sells 21% of all toys sold in America, and if it knocks out its leading competitor, its share could reach 30%.

The Destruction of Carolina Mills

Wal-Mart 'Eats' More US Manufacturers
Richard Freeman of the Executive Intelligence Review 11/25/03

Carolina Mills is a 75-year-old company that supplies thread, yarn, and textile finishing to apparel-makers-half of which supply Wal-Mart. But since 2000, Carolina Mills' customers have begun to find imported clothing sold so cheaply at Wal-Mart, that Carolina Mills could not compete even if they paid their workers nothing! Since 2000, Carolina Mills has shrunk from 17 factories to 7, and from 2,600 employees to 1,200. Steve Dobbins, the CEO of Carolina Mills, told the December issue of Fast-Company magazine: "People ask, 'How can it be bad for things to come into the U.S. cheaply? How can it be bad to have a bargain at Wal-Mart?' But you can't buy anything if you're not employed. We are shopping ourselves out of jobs"

The Destruction of Lovable Garments

Lovable Garments, which was founded in 1926, had, by the 1990s, become the sixth-largest producer of women's lingerie in the United States, employing 700 workers. Wal-Mart became the biggest purchaser of Lovable's goods; in 1995, Wal-Mart demanded that Lovable slash its prices to compete with cheap imports. When Lovable indicated it could not do that, Wal-Mart illegally reneged on its contract, and outsourced the lingerie production to Ibero-America, Asia, and China. Without the Wal-Mart market, in 1998 Lovable had to close its American manufacturing facilities and fire the workers. Stated Frank Garson, who was then Lovable's president, "Their actions to pulverize people are unnecessary. Wal-Mart chewed us up and spit us out."

The Destruction of Mr. Coffee

Advises Mr. Coffee to Move Overseas
The Commercial Appeal 6/8/01

Mr. Coffee -- which won awards for moving manufacturing operations back to the United States -- faced pressure to shift production to China even at the height of Wal-Mart's 'Buy American' program. After Wal-Mart demanded a $1 reduction in the wholesale price of a brisk-selling four-cup coffeemaker in 1985, Mr. Coffee executives scouted for factory sites in China -- and executives say Wal-Mart encouraged offshore production even as it promoted its 'Made in the USA' campaign."

The Salvation of Snapper

The Man Who Said No to Wal-Mart
Fast Company magazine (www.fastcompany.com)
By: Charles Fishman Wed Dec 19, 2007

What struck Jim Wier first, as he entered the Wal-Mart vice president's office, was the seating area for visitors. "It was just some lawn chairs that some other peddler had left behind as samples." The vice president's office was furnished with a folding lawn chair and a chaise lounge.
And so Wier, the CEO of lawn-equipment maker Simplicity, dressed in a suit, took a seat on the chaise lounge. "I sat forward, of course, with my legs off to the side. If you've ever sat in a lawn chair, well, they are lower than regular chairs. And I was on the chaise. It was a bit intimidating. It was uncomfortable, and it was going to be an uncomfortable meeting."

It was a Wal-Mart moment that couldn't be scripted, or perhaps even imagined. A vice president responsible for billions of dollars' worth of business in the largest company in history has his visitors sit in mismatched, cast-off lawn chairs that Wal-Mart quite likely never had to pay for.
The vice president had a bigger surprise for Wier, though. Wal-Mart not only wanted to keep selling his lawn mowers, it wanted to sell lots more of them. Wal-Mart wanted to sell mowers nose-to-nose against Home Depot and Lowe's.

"Usually," says Wier, "I don't perspire easily." But perched on the edge of his chaise, "I felt my arms getting drippy."

Wier took a breath and said, "Let me tell you why it doesn't work."

Tens of thousands of executives make the pilgrimage to northwest Arkansas every year to woo Wal-Mart, marshaling whatever arguments, data, samples, and pure persuasive power they have in the hope of an order for their products, or an increase in their current order. Almost no matter what you're selling, the gravitational force of Wal-Mart's 3,811 U.S. "doorways" is irresistible. Very few people fly into Northwest Arkansas Regional Airport thinking about telling Wal-Mart no, or no more.

In 2002, Jim Wier's company, Simplicity, was buying Snapper, a complementary company with a 50-year heritage of making high-quality residential and commercial lawn equipment. Wier had studied his new acquisition enough to conclude that continuing to sell Snapper mowers through Wal-Mart stores was, as he put it, "incompatible with our strategy. And I felt I owed them a visit to tell them why we weren't going to continue to sell to them."

Selling Snapper lawn mowers at Wal-Mart wasn't just incompatible with Snapper's future--Wier thought it was hazardous to Snapper's health. Snapper is known in the outdoor-equipment business not for huge volume but for quality, reliability, durability. A well-maintained Snapper lawn mower will last decades; many customers buy the mowers as adults because their fathers used them when they were kids. But Snapper lawn mowers are not cheap, any more than a Viking range is cheap. The value isn't in the price, it's in the performance and the longevity.

You can buy a lawn mower at Wal-Mart for $99.96, and depending on the size and location of the store, there are slightly better models for every additional $20 bill you're willing to put down--priced at $122, $138, $154, $163, and $188. That's six models of lawn mowers below $200. Mind you, in some Wal-Marts you literally cannot see what you are buying; there are no display models, just lawn mowers in huge cardboard boxes.

The least expensive Snapper lawn mower--a 19-inch push mower with a 5.5-horsepower engine--sells for $349.99 at full list price. Even finding it discounted to $299, you can buy two or three lawn mowers at Wal-Mart for the cost of a single Snapper.

If you know nothing about maintaining a mower, Wal-Mart has helped make that ignorance irrelevant: At even $138, the lawn mowers at Wal-Mart are cheap enough to be disposable. Use one for a season, and if you can't start it the next spring (Wal-Mart won't help you out with that), put it at the curb and buy another one. That kind of pricing changes not just the economics at the low end of the lawn-mower market, it changes expectations of customers throughout the market. Why would you buy a walk-behind mower from Snapper that costs $519? What could it possibly have to justify spending $300 or $400 more?

That's the question that motivated Jim Wier to stop doing business with Wal-Mart. Wier is too judicious to describe it this way, but he looked into a future of supplying lawn mowers and snow blowers to Wal-Mart and saw a whirlpool of lower prices, collapsing profitability, offshore manufacturing, and the gradual but irresistible corrosion of the very qualities for which Snapper was known. Jim Wier looked into the future and saw a death spiral.

Wier had two things going for him: First, he had another way to get his lawn mowers to customers--a well-established network of independent lawn-equipment dealers that accounted for 80% of Snapper's sales. And Wier had the courage, the foresight, to take an unblinking view of where his Wal-Mart business was heading--not in year 3, or year 4, but year 10.

Wier traveled to Bentonville with a firm grasp of the values of Snapper, the dynamics of the lawn-mower business, the needs of the dealers, the needs of the Snapper customer, and the needs of the Wal-Mart customer. He was not dazzled by the tens of millions of dollars' worth of lawn mowers Wal-Mart was already selling for Snapper; he was not deluded about his ability to beat Wal-Mart at its own game, to somehow resist the price pressure. He was not imagining that he could take the sales now and figure out the profits later.

Jim Wier believed that Snapper's health--indeed, its very long-term survival--required that it not do business with Wal-Mart.

Every Snapper lawn mower sold anywhere in the world comes from a factory in McDonough, Georgia, a small town 30 minutes southeast of Atlanta. Coils of raw steel arrive on flatbed trucks every day at the old, nondescript building; brand-new fire-engine-red lawn mowers leave every day, loaded in 18-wheelers. The facility looks undistinguished, but it is energetically trying to defy the conventional wisdom about manufacturing in the global economy.

The Snapper factory has had an invigorating decade. Ten years ago, it produced about 40 models of mowers, leaf blowers, and snow blowers; now it makes 145. Today, robots do the welding, lasers cut parts, and computers control the steel-stamping presses. Productivity is three times what it was 10 years ago, and the number of people working here, 650, is half what it was.

Indeed, the productivity of every factory worker is measured "every hour, every day, every month, every year," says Snapper president Shane Sumners, who walks the 10.5-acre factory floor with comfort and familiarity. "And everybody's performance is posted, publicly, every day for everyone to see." It's a lot like Wal-Mart--which measures the number of items every checkout clerk scans every hour. Some of Snapper's dramatic productivity improvements, in fact, seem to come almost directly from the Wal-Mart playbook. These days, the Snapper factory operates in Wal-Mart time. It must, because it operates in Wal-Mart's ecosystem.
Ten years ago, at about the time Sumners came on board, Snapper had 52 regional distributors. It uses no distributors now--the company runs four regional warehouses of its own and sells directly to 10,000 independent dealerships. Ten years ago, in part because of the complexity of the middleman distribution system, Snapper carried a huge quantity of inventory. It paid to manufacture and ship thousands of lawn mowers--worth tens of millions of dollars--without quite knowing when they would be sold. Now planners come up with an ideal level of inventory for every model, for every region of the country, based on things like historic demand and the weather. The goal is to make sure every customer can get the mower he wants--while making absolutely the smallest number of lawn mowers.

Production at the Snapper factory is rescheduled every week, according to the pace at which mowers sell. A computer juggles work assignments and balances the various parts of the assembly line. The main manufacturing line for Snapper's entry-level walk-behind mowers--with 28 people--was recently charged with producing 265 lawn mowers in an eight-hour shift. The group hit the mark exactly. That's a new lawn mower, from loose parts to sealed box, every 109 seconds. "It's all a matter of seconds," says Sumners.

It's not hard to make a cheap lawn mower. A cheap lawn mower feels flimsy, sounds louder than it has to, and even when new, requires a mysterious, frustrating combination of choke, priming, and pulling to start. The cutting deck of a cheap mower is stamped from thin sheet metal. Making a high-quality lawn mower--even in 109 seconds--requires attention to detail and constant improvement, which seems surprising for a machine that doesn't evolve that much.
All Snapper machines, from the simplest walk-behind to the most elaborate riding mower, are painted one color: what Shane Sumners calls "Snapper red." In the factory, the finished chassis of riding mowers coast along slowly, dangling from an overhead conveyor as they approach a 20-foot-long pool of red paint. The conveyor track dips low, and the mowers glide down into the pool and completely disappear beneath the surface, then rise back up, gleaming red, before heading for a pass through a curing oven.

It's not quite as simple as dip and bake, however. Each mower is electrically grounded as it hangs from the overhead conveyor, and a slight positive electrical charge runs through the 16,000-gallon trench of paint. "So the paint is attracted to the metal and builds up on the parts and sticks very effectively and evenly," says Sumners. The process is monitored every hour--from the speed of the conveyor and the temperature of the ovens to the pH of the paint--along 115 parameters. "If you control the process," says Sumners, "you will get a good paint job."
Snapper technicians start every riding mower before it leaves the McDonough plant. At the "hot start" station, a man wearing ear protectors squirts gas into the fuel tank and oil into the crankcase, pulls the starter cord, and brings the machine to life. He runs through all the gears, checks speed, engine performance, the mounting of the seat. The engine is given just enough fuel for the "run in." If the mower passes all the tests, the man sucks the oil back out and sends the mower on to be boxed.

As Sumners watches, one of the riding mowers takes two pulls to start, then comes to life with a rough growl. In the blink of an eye, the technician shuts it down. "Did you hear how that sounded?" asks Sumners. "It's not right. That's a bad one." The mower is shunted off to be inspected and properly tuned if possible. "If we didn't," says Sumners, "that mower would have gone to a customer."

The Snapper factory started making riding mowers in 1951. It is unadorned and old, but it is old in the sense of solidity and use. There is nothing tired about it. More significant, there is nothing sentimental about it. This factory isn't here out of some misplaced sense of economic loyalty to U.S. manufacturing. It's here because it makes Snapper-quality lawn mowers at a competitive price.

Snapper's factory hums with discipline and focus and urgency. Even with no products at Wal-Mart, a company like Snapper has to compete psychologically, has to keep the price gap between the big-box lawn mowers and its lawn mowers rational. If it did not, its potential slice of the market would get smaller and smaller.

Sumners has to spur his factory on with the same tirelessness as if it were supplying Wal-Mart--the efficiency of every factory worker measured every hour of every day--because Wal-Mart sets the pace, even if you're not working for them.

Jim Wier is 62 years old, with a youthful twinkle despite a thatch of white hair. He is a solidly built man who dresses casually. He is comfortable with himself. Wier, who until the summer of 2005 ran a group of lawn-equipment businesses that approach half a billion dollars a year in sales, is confident, direct, and unprepossessing. He mows his own lawn. "I don't want to hire a service," he says. "I still love to cut my grass."

Wier is much like Snapper's customers. "When we do surveys of our customers, they like to cut their grass. And they want a good piece of equipment to do it. We're designed to give you the best quality of cut. We have full rollers on the riding mowers, to give that nice striped look on your grass, like on the baseball fields. It makes you feel proud of the home you own. Proud of your lawn. The neighbors walk by, they say, 'Look how good the yard looks.' "

"We're not obsessed with volume," says Wier. "We're obsessed with having differentiated, high-end, quality products."

Wier doesn't really think that a $99 lawn mower from Wal-Mart and Snapper's lawn mowers are the same product any more than a cup of 50-cent vending-machine coffee is the same as a Starbucks nonfat venti latte. "We're not obsessed with volume," says Wier. "We're obsessed with having differentiated, high-end, quality products." Wier wants them sold--he thinks they must be sold--at a store where the staff is eager to explain the virtues of various models, where they understand the equipment, can teach customers how to use a mower, can service it when something goes wrong. Wier wants customers who want that kind of help--customers who are unlikely to be happy buying a lawn mower at Wal-Mart, and who might connect a bum experience doing so not with Wal-Mart but with Snapper.

And so in October 2002, with a colleague, Wier kept an appointment with a merchandise vice president for Wal-Mart's outdoor-product category.

15 comments:

TC said...

OK, no way did I read all of those (I'd need an extra hour I don't have), but I must say I'm shocked by the volume of them. I knew it was a problem, but I was unaware it was such a publicized problem.

My one Uncle has pretty much forbidden anything from Wally World to enter his house, unless someone else owns it. But my Aunt has never been allowed to shop there. You and he should chat.

Ed Abbey said...

TC - I didn't figure too many people would read through them all but if you don't have the time, I do recommend you read the one on Snapper which is the very end. It sums up how Wal-Mart implements "the squeeze" used to destroy other businesses as well as going into all the reasons not to enter into a relationship with Wal-Mart.

I went nearly a decade without setting foot into a Wal-Mart and that was well before the Super Wal-Marts were even around. Unfortunately, I also care about gas costs and Wal-Mart is the only horse in town around here. Still, I manage to only set foot inside it a couple times a year for personal use and then it is with much regret.

The Real Mother Hen said...

Yes it is awful. It also reminds me of the cattle industry, like in the documentary, where cows in the States don't eat grass, but eat genetically modified corns, so the price of beef is cheap, making grocery bills account for only 30% of average household expense (even with plenty of red meat). The lower grocery bills give folks a chance to have more purchasing power over other things, like cars etc, and in turn creating a middle class which can spend. The trade off is cheap and lesser nutrition beef loaded with antibiotics and corns that farmers can't eat. Even if I tell 100,000 people not to eat beef, nah, the cattle industry and the corn industry will still thrive. Just like even if I carry a sign to boycott WalMart, well, I probably get arrested :)

Ed Abbey said...

Mother Hen - There is a huge difference between Wal-Mart and the cattle industry. Wal-Mart drives the market and the cattle industry is driven by the consumer. Thus they really aren't comparable.

Let me also address other parts of your argument. Grass fed beef is much cheaper than corn fed beef especially more recently with the ethanol fad that went on. The reason farmers feed corn to beef is because consumers demand it. Why? Grass fed beef is extremely tough and less flavorful compared to corn fed beef.

Antibiotics have nothing to do with corn or grass feeding and everything to do with keeping an animal healthy and thus more efficient at putting on weight instead of wasting energy healing themselves. Whether or not the antibiotics leave traces in the meat and is safe to consume is an entirely different argument.

Beau said...

Interesting. Well I read them, but I'm just not a Wal-Mart basher. I think change happens- if it wasn't Wal-Mart it would be another company. Our economy- and the American people supported that change and still do. Do I like the direction it has taken, and how small town mainstreet has struggled ever since? Absolutely not.. But I really think they've helped a whole lot of folks in so many ways too. I've got a Simplicity mower by the way- great machine... in 2004 they were bought out by Briggs and Stratton, who then closed a Simplicity factory and began cutting jobs. But think of what the malls and shopping centers have done to communities too- or other big box retailers. And to be honest, I think of Amazon- the place I go to for any purchase to compare prices. If Wal-Mart is damaging to so many communities- think of Amazon's impact in terms of low prices, even knowing they, like eBay, support and foster small online stores. At least Wal-Mart employs millions. I don't know- I just see it as change, and it's still going to be change going forward...

Charles Fishman said...

Ed Abbey / Riverbend Journal —

You've done a great job of assembling stories about Wal-Mart and its sometimes destructive power.

Two small corrective points. First, the work you attribute to me is mostly from Fast Company magazine (www.fastcompany.com) — and they supported and printed the stories, so they should both get credit in the byline, and it would be gracious to link back to the original stories.

Second, a reader could get the impression that I do nothing but find stories that criticize Wal-Mart. I've written a book about Wal-Mart called "The Wal-Mart Effect," and part of the point of that book was to give a balanced account of the damage Wal-Mart does, and also the benefits people (and the nation) derive from Wal-Mart.

It's not the purpose of this blog, obviously, to worry about balance; but as a journalist, I want to make sure readers understand that while I've done an aggressive job of enumerating the ways Wal-Mart does damage, I've also tried to account for the good a company like Wal-Mart does. That was the point of writing a book — to *understand* Wal-Mart's impact, not simply criticize it or praise it. You can't manage something as powerful as Wal-Mart if you don't see it clearly, even dispassionately. And as citizens, part of our job is in fact to manage Wal-Mart's impact on our economy.

Thanks for highlighting the work.

Charles Fishman
Author, "The Wal-Mart Effect"
http://www.walmarteffectbook.com

Sage said...

Congratulations Ed, for winning the award for the longest post in blogger history!

And thanks for collecting all of these into one place! That's a lot of work. I remember back in the early 90s, Walmart was doing a "buy american" thing--as they were expanding stores--then they started only selling stuff from overseas and much of it junk. I may go into Walmart 2x a year. It does help discoursage me that it's a pain to get in and out of our local Walmart, thanks to a local township who didn't want them to start with and made sure they didn't get good highway access!

Ron said...

I'm going to go back and read all of this, but wanted to say that I don't need any philosophical or deep reasons not to shop a Super-Center. Them stupid things require me to walk a mile to get what I want, wait in a huge line behind people buying groceries or use a self-checkout that is obnoxious, and then walk another mile to get to my car. Ask someone when they will be getting their seeds in, and they have no clue and are rude to boot.

On the other hand, the small local Walmart is much more human-sized, and I go there for some things that I can't get reasonably-priced elsewhere (i.e., sprinklers).

Often though, I find that the local hardware store, lumberyard, farm store, grocery stores, and others have better deals anyway. And, of course, even Walmart cannot complete with the price of used things, if they are available.

I figure it has it's place, but it certainly isn't a dominant force around here.

Ron

Ed Abbey said...

Beau - You make a good point with Amazon but I find it a little different. With Amazon, you always have to deal with shipping costs so that allows local stores to be conpetetive. I also haven't heard of them being a legendary squeezer like Wal-Mart but of course, that doesn't mean it hasn't happened.

Charles Fishman - I am humbled and honored that you stopped by and made a comment. I have always encouraged my readers to get other sides of the stories and I will encourage them to read your book. I am very interested in reading your book and will probably have a copy ordered before the day is out. I will make all the changes you have requested. Thank you sir.

Sage - Our small town fought the battle to keep a Super Wal-Mart out but they had lost before they started since Wal-Mart was willing to obey all by-laws and not one said we could prevent a business from starting here if they were willing to so. Fortunately the economy has put a halt on it but I'm sure it is only temporary.

Ron - If you are worried about price as your primary reason for shopping somewhere, then I have always encouraged people to shop at Wal-Mart. It is better to get what you need than to go bankrupt and end out on the street. However, I still feel that I could go out and buy a more expensive sprinkler at a different store and it will be a better quality one and last longer. Unfortunately I have no proof of that or I would post it.

Everyone - Thanks for reading all this if you have and I do encourage you to get a copy of The Wal-Mart Effect" by Charles Fishman to read a more balanced analysis of Wal-Mart. My copy is on my wish list.

Phil said...

Okay, I'm a believer; i get the point. Meijer's is okay though, right? That's where I go when I visit my mom in Michigan. I like the "superstores" where you can get everything you need in one place. I'll be sure to stay the heck out of any more Walmarts just because of your well made, voluminous examples.

R. Sherman said...

My comment access was buggered yesterday.

I personally avoid Wal-Mart unless it's something I absolutely must have, i.e. my prescriptions which are substantially less than other pharmacies. Yet, I'm ambivalent about the company because ultimately, the fault lies with the consumer who shops there. Human nature is such that we'll complain about something but if it saves us money, we do it anyway.

Cheers.

Sage said...

Ed, it's nice to get the author to stop by, I had not read his comments! You should feel honored and review the book and let us know if we should read it.

Ron said...

Well, I'd rather pay $2.57 for a sprinkler at Walmart than $9.87 for the same thing at a True Value. They are both made in China, so preferring one place over another doesn't change much. The local True Value just gouges me more and has more inconvenient hours of business. Not to mention crappier customer service.

Actually, I'd much rather buy a used one at a garage sale for $1. More of that dollar goes to my neighbors and locale than any of my China-made options.

I guess if I really wanted to promote protectionism and buy American at any cost, I could spend the $$ for that. I'm not convinced it would be better quality or that supporting an industry that cannot compete does anyone any good though. I believe in a free market, inasmuch as our politicians can level the playing field a bit. Maybe, in the end, a bit less wealth for Americans... but maybe we should get off our butts and start competing for a change.

I go to the local lumberyard often, and pay higher prices than at a Lowe's or Home Depot. Why? Because of their service and willingness to go far beyond the call of duty to help me. They've earned my business for a long, long time. That's not a factor in every purchase though.

Great discussion, lots of timely issues here.

Ron

Woody said...

Great post Ed.

madmilker said...

People in America need to realize jus what got America in this shape…”cheap” yes so-call cheap items from a foreign land.

quote*Wal-Mart firmly believes in local procurement. We recognize that by purchasing quality products, we can generate more job opportunities, support local manufacturing and boost economic development. Over 95% of the merchandise in our stores in China is sourced locally. We have established partnerships with nearly 20,000 suppliers in China. *end quote!

Now! if there be 182 country’s making items for the world to buy and they have only 5% of the pie in China…duh! This company makes the nice people of China support their currency(yuan) by keeping it in their country working for the people there…. but with the “yuan” going up in value and the US dollar going down…all the foreign items that the American consumer buys thinking it is cheap has went up in price.

People…its all about the currency and to keep a currency strong you got to keep it floating around the country you live in so it can work for you. For the past 12 years all them US dollars are being shipped overseas to a foreign bank and with the American worker not making anything for the foreigner to buy the “we the people” have to turn to the “second” largest employer in America(Uncle Sam) to sell “we the people” debt in order to get all them dollars back!

50 years ago a foreigner would had given their left nut for a US dollar or a Hershey’s chocolate bar and today the same foreigner has got Uncle Sam and the American consumer by both all the while Hershey is moving the chocolate factory to Mexico. Wake up! America and think “MADE IN AMERICA.”

quote*"Considering that there are over 30,000 ships at sea this morning," writes James Carlton, director of the Williams College-Mystic Seaport Maritime Studies Program, in an e-mail, "the total number of organisms and species in this global 'bioflow' on the morning your readers read your piece could be staggering - billions of individuals, and thousands of species."

Indeed, scientists have long considered ballast water the primary way invasive aquatic organisms are introduced. From the zebra mussel's arrival in the Great Lakes, to an American jellyfish severely disrupting Black Sea fisheries, the potential costs of accidental introduction of a species to new homes can be tremendous. Aquatic invasives cost the US $9 billion yearly, according to estimates by David Pimentel, professor emeritus of ecology and evolutionary biology at Cornell University in Ithaca, N.Y. Zebra and quagga mussels (a cousin to the zebra) alone cost the $1 billion annually.*end quote!

tat is $9 billion a year in hidden taxes to all Americans...
cheap ain't chic and it cost America............jobs!

quote*Now let us look at Wal-Mart again; you buy a product there, 6% goes to the employees, 10-18% is profit to the company, 25% goes to other costs and 50% goes to re-stock or the cost of goods sold. Of the 50% about 20-25% goes to China, a guess, but you get the point. Now then, how long will it take at 433 Billion dollars at year for China to have all of our money, leaving no money flow for us to circulate? At a 17 Trillion dollar economy less than 40-years minus the 1/6 they buy from us. Some say that if we keep putting money into our economy, it would take forever, but if we do not then eventually all the money flow will go. If China buys our debt then eventually they own us, no need to worry about a war, they are buying America, due in part to our own mismanaged trade, so whose fault is that? Not necessarily China, as they are doing what's in the best interests, and we should make sure that trade is not only free, but fair too.*end quote!
http://www.worldthinktank.net/pdfs/TheFlowofTrade.pdf