Should states let retailers keep such a hefty slice of the sales tax pie?
According to Good Jobs First and The Wall Street Journal, a large chunk of sales tax revenue gets redirected to retailers like Wal-Mart, a company that pockets an estimated $70 million a year in sales tax revenues.
At least that is the finding of a report released today by Good Jobs First, a nonprofit research group here in Washington:
Most of us don’t realize that in a majority of states with a sales tax, a portion of the money actually goes into the pocket of the retailer under programs set up by state and local governments. In this first-ever comprehensive national analysis of the subject, Good Jobs First finds that the public sector is losing more than $1 billion a year through these sales-tax diversions. A large share of revenue gets redirected to giant retailers such as Wal-Mart, a company we estimate pockets more than $70 million a year in sales tax revenues.
The state laws discussed in the report allow retailers to keep a portion of sales-tax revenue to offset the cost of collecting the funds in the first place, a reasonable enough excuse (especially since state governments are so flush with cash at the present). But does anyone really, and I mean REALLY, believe that Wal-Mart spends $60 million a year collecting sales tax? In this age of computer everything and electronic money transfers, I have a hard time believing it costs more than a fraction of that.
As it stands, many states have calculated a vendor compensation rate, which can be applied to a percentage of sales tax revenue to determine how much a retailer gets to keep for its trouble. As the WSJ reports, Good Jobs First has identified 13 states that impose no ceiling on the total amount retailers can keep. In states such as Illinois, Texas, Pennsylvania and Colorado that vendor compensation rate can be applied to the full amount of sales tax a company collects, resulting in substantial returns for companies like Wal-Mart. Good Jobs First has estimated the givebacks in these states - Illinois ($126 million), Texas ($90 million), Pennsylvania ($72 million), and Colorado ($69 million). Jesse Drucker at the WSJ kindly puts some perspective on those numbers - for example, the $90 million Texas gives away by not capping vendor compensation would cover the $82 million price-tag needed to fund that state’s primary pre-kindergarten program.
For what its worth, the Illinois Revenue Department was quoted as saying the state has tried to cap the compensation program, but relentless lobbying by the retail industry has so far kept legislators from making changes.
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Posted by Corey Himrod on Tuesday, November 18 | 6 comments | Permalink
Good News: Wal-Mart Slowing Down
Lee Scott and Eduardo Castro-Wright have spent the past two days in New York City, detailing Wal-Mart’s business plan to financial analysts. There’s a lot to run down here, but the big (and good) news: less new Wal-Marts. The company is continuing to cut down on capital expenditures and build less stores, focusing instead on remodeling and driving up sales at its current stores.
As a result, capital expenditures will come in at $5.8 billion to $6.4 billion for fiscal 2009 and $6.3 billion to $6.8 billion in fiscal 2010. That’s down from the $9.1 billion the company had in capital expenditures in its last fiscal year.
The Wall Street Journal tells us what that means in terms of store numbers.
Mr. Castro-Wright also said the discount retailer plans to open 142 to 157 new U.S. stores in the fiscal year ending January 2010, down from an earlier projection of 165.
150 stores is still a heck of a lot, but any decrease is a good thing. Remember that growth in 2008 had dropped from 2007, and that only several years ago Wal-Mart was opening 300+ new stores a year.
Some other tidbits from the analyst meeting below the jump-
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Posted by Eric Bull on Tuesday, October 28 | 21 comments | Permalink
Wal-Mart China is very like successful, Wal-Mart says
According to Wal-Mart, Wal-Mart China’s sales growth is “very like 25, 30 plus percent a year”. What Wal-Mart refuses to reveal, however, is how much 25 or 30 plus percent a year equals, in ‘like’ money or ‘like’ profit. Wal-Mart also refuses to reveal “what portion of global sales come from its more than 100 stores in [China],” Reuters reports.
The truth of Wal-Mart’s circumstances may be more accurately summarized by reports out of China which note that within its 12 years in China, Wal-Mart has failed to become profitable. And even according to data from China’s Department of Trade, Wal-Mart’s rank within the retail sector has plummeted from 17th in 2003 to an astonishingly low 30th in 2005.
The truth is that Wal-Mart is being crushed by ever increasing competition and much needed government regulation. And even with such great buying power, Wal-Mart is losing influence with supplier factories who are raising their prices.
Unfortunately for Wal-Mart, China may end up being another South Korea, or worse, Japan. Investors beware!
Posted by Michael Mignano on Tuesday, October 21 | 0 comments | Permalink
Wal-Mart to Fellow Toy Retailers: “Bring It.”
Just in time Three months before the holidays, Wal-Mart is challenging fellow toy retailers to try to match its prices on Christmas gifts. The retailer has a history of relentlessly undercutting its competitors, but rival retailers like Target and KB Toys aren’t taking Wal-Mart’s price cuts lying down. After announcing its price cuts last week, several other retailers countered with price cuts of their own. With any luck, the cuts will convince parents to spend big and spend soon on toys for Christmas.
The race to the bottom on toy prices shows how influential retailers can be in setting prices for the products sold in their stores. Wal-Mart might be losing money on its $10 Barbie dolls, but it’s dragging the entire toy industry down with it. One interesting quote, from an executive at Toys ‘R’ Us, highlighted how narrow-minded shoppers’ focus can be: “value is not just about cheapness,” he said, and he’s right. Wal-Mart’s toys might be cheap, but problems persist with almost every aspect of the manufacturing process. Are workers rights, American wages and children’s safety worth a $10 toy?
Wal-Mart Sparks War Among Big Toy Sellers [Wall Street Journal]
Retail price wars are starting early this year, and the latest weapon is the $10 toy—a signal that retailers are bracing for a rough-and-tumble Christmas shopping season.
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Posted by Alex Goldschmidt on Thursday, October 09 | 4 comments | Permalink
Wal-Mart’s Shoppers Less Loyal Than Other Retailers’, Study Says
A story out today from Advertising Age has an in-depth break down of Wal-Mart’s current business and marketing strategy. Most retailers are scrambling to stay afloat as the economy declines, but in the last month Wal-Mart has seen rises in both its stock price and profits.
Shoppers are trading down, and Wal-Mart is as low as they can go. A bad economy has always been good for Wal-Mart, and today’s recession-like atmosphere is no different. Wal-Mart’s execs claim the recent boost in sales is due to a “strategic three-year plan,” but most analysts agree: when the going gets tough, the tough go to Wal-Mart.
“But,” says one analyst quoted in the article, “there is a chink in the armor of Wal-Mart, which is these customers are not saying they necessarily feel loyalty.” Though more people are shopping at the low-price retailer, they’re not likely to stay. Wal-Mart’s only advantage is its prices: customer service, product quality and company ethics are all secondary objectives, and shoppers know that. Brand loyalty might not be a problem for Wal-Mart now, but once the economy improves the company could face the consequences for putting low prices above all else.
Wal-Mart Grinning Big Through the Tough Times [Advertising Age]
Looking for a silver lining in the economy? It’s shining brightly from Bentonville, Ark.
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Posted by Alex Goldschmidt on Monday, October 06 | 12 comments | Permalink
ACNeilson Looks At “Wal-Mart Moms”… and Everyone Else Who Shops at Wal-Mart
Wal-Mart stockpiles massive amounts of information about its customers. The retailer’s databases are enormous - bigger than the internet - and the information contained on its servers includes everything from which aisles shoppers choose to go down to the time of day chocolate milk sells quickest.
Now, the statistics firm ACNeilson (best known for its TV viewership ratings) is taking Wal-Mart’s data and helping the retailer understand its shoppers even better. At a recent conference of Wal-Mart suppliers, Neilson reps broke down how many cartons of eggs, car parts, and bags of dog food Wal-Mart customers buy each year. The study also revealed the average household incomes of Wal-Mart’s shoppers, the average number of trips each shopper makes and how much shoppers spent at the stores, on average. Ultimately, Wal-Mart hopes to use this information to customize store inventories and increase profits.
The study comes at a time when political analysts everywhere are desperately trying to understand Wal-Mart’s core demographic. “Wal-Mart Moms” may be the key to November’s election, some pundits say. Political alignment might not have been on Neilson’s questionnaire, but the study does provide some insight. According to Neilson, the average Wal-Mart shopper is a “pet-loving, pasta-eating, car-driving, gadget-obsessed dieter who either doesn’t care for cheese or buys it elsewhere.” (That part about the cheese may or may not impact the election directly.)
The data in the study doesn’t provide a complete picture of Wal-Mart’s shoppers - and it certainly doesn’t encompass all of the middle-aged women being wooed by politicians - but Wal-Mart is trying harder than ever to win over “the core female head of household” i.e., the “Wal-Mart Mom.” The retailer isn’t alone in catering to this powerful group not alone, and who knows - maybe quality dog food actually is the secret to winning the presidency in November.
Marketing firm looks at Wal-Mart shopper, trends [NW Arkansas Morning News]
Posted by Alex Goldschmidt on Wednesday, September 24 | 59 comments | Permalink
Wal-Mart’s Latest Failure?
According to Chinese media, Wal-Mart’s latest international failure might be Wal-Mart China - which, within its 12 years in China, has failed to become profitable. One article notes that Wal-Mart’s “market share has retreated in defeat” and that Wal-Mart’s lofty sales goals are extremely “distant” figures.
Even according to data from China’s Department of Trade Wal-Mart’s rank within the retail sector has dropped from 17th in 2003 to 20th in 2004—and in 2005, Wal-Mart dropped again to an astonishingly low 30th.
To analysts, Wal-Mart China’s financial failures may be a significant factor in why Wal-Mart decided to abandon its Wal-Mart Asia headquarters in mainland China. However, Wal-Mart Asia chairman and CEO Vicente Trius makes clear that China remains important to Wal-Mart’s global purchasing. At the same time, though, Trius also states that locating the Asia headquarters in Hong Kong will preserve the “independent nature” of the Chinese operations—perhaps a hint that Wal-Mart wants to isolate the damage.
At any rate, it looks like Wal-Mart China has interesting times ahead of it. See both articles below for more details.
No Opportunity for a Wal-Mart Asia Headquarters in Shenzhen [Finance and Economics]
Wal-Mart, who entered China 12 years ago and still has not made a profit, announced on September 3 that it will establish its Asia headquarters in Hong Kong. Before this, it was widely spread that Shenzhen, Wal-Mart China’s headquarters and Wal-Mart Global Procurement Center, would be Wal-Mart Asia’s headquarters.
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Posted by Michael Mignano on Friday, September 05 | 31 comments | Permalink
Wal-Mart Ready To Release New Focus Grouped Ads
A few weeks ago - Wal-Mart Watch had an inside source in a Wal-Mart focus group who clued us in to some new ads the company was planning to release. Several stories over the weekend tell us how Wal-Mart is ready to roll out the new series of ads - just in time for the the Democratic and Republican Conventions.
It’s been clear that Wal-Mart is trying to take advantage of the political atmosphere and cast itself as a fixer of America’s economic problems and combat its reputational woes. The company has been pushing the “Wal-Mart as government” theme for a while, and these latest ads are the most direct effort yet. (Of course, Wal-Mart’s ad team probably didn’t intend to roll out the new campaign just a week after the store’s low wages led to the first North American union contract, and while embroiled in a massive electioneering scandal.)
We asked readers on our blog to vote on which one of the new ad themes were the most deceptive. The results were as following:
42% (319 votes) “Some believe that fixing the economy starts in DC, we believe it starts closer to home.”
32% (242 votes) “We started $4 prescription plan; now others are following our lead. We believe a healthier America is a better America”
24% (181 votes) “Most people live pay to paycheck, we help your paycheck go further.”
2% (16 votes) “Wal-Mart saves you money—that’s our economic stimulus plan.”
Wal-Mart to air economy-focused ads [NW Arkansas Morning News]:
Wal-Mart Stores Inc. said Friday it is launching a series of economy-focused TV ads during the Democratic and Republican national conventions.
The 15-second ads highlight some of the company’s top initiatives, including its $4 prescription drug program, and communicate how supercenter shopping saves on gas.
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Posted by Eric Bull on Monday, August 25 | 107 comments | Permalink
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