0 comments

---

Here are what the voices on the Internet are saying about Wal-Mart’s support of employer-mandated health care...not surprisingly, it hasn’t taken long for most to deduce that Wal-Mart is hardly acting in an altruistic way.

Number one on Wal-Mart’s hit list? Easy. Target. Because small businesses would either be exempt from the mandate or face a less-strenuous requirement, it would be Wal-Mart’s large competitors (and more specifically those who have to this point been better at managing health care costs than Wal-Mart) that would feel the brunt of the hurt.

Jonathan Cohn at The New Republic:

I don’t want to make too much of this: Wal-Mart may chicken out once the specifics of an employer mandate end up on the table. Even if they don’t, they may not lift a finger to help. And, make no mistake, Wal-Mart is acting--as it always does--out of pure self-interest.

My undestanding is that, after all of these years, Wal-Mart has suddenly found itself in the same situation its competitors once did: Dealing with unpredictable health costs and facing new competition from businesses that have found ways to spend even less on employee health benefits. Is there some justice there? You bet.

Reihan Salam with the National Review:

There is another way of looking at this. As a large, powerful, deep-pocketed firm, Wal-Mart can sustain regulatory burdens that mom-and-pops and new entrants can’t. And so burdensome regulations are invariably Wal-Mart’s ally. Jonathan Rauch explained this dynamic brilliantly in his book Government’s End. It makes perfect sense for Wal-Mart to back a regulatory initiative that hurts its bottom line as long as it hurts its competitors more.

Megan McArdle for The Atlantic:

Wal-Mart is always going to have a seat at the table when employer mandates are discussed, because Wal-Mart is the nation’s largest private employer.  Target and Macy’s probably won’t have a seat at the table.  So Wal-Mart can influence the rules in ways that benefit Wal-Mart at the expense of the competition.

Jeffrey Young in The Atlantic:

Based on the axiom that nobody in business or politics acts strictly out of altruism, it’s safe to assume that Duke and Wal-Mart’s board of directors concluded that backing the employer mandate would provide the company with some kind of competitive advantage. When I originally reported the story, it wasn’t immediately clear to me what that might be, though I suspected it must have had something to do with Wal-Mart’s calculation of how much money the mandate would cost them relative to other retailers.

Michael Cannon, for the Cato Institute:

A couple of years ago, I shared a cab to the airport with a Wal-Mart lobbyist, who told me that Wal-Mart supports an “employer mandate.” An employer mandate is a legal requirement that employers provide a government-defined package of health benefits to their workers...But it all became clear when the lobbyist explained the reason for Wal-Mart’s position: “Target’s health-benefits costs are lower.”

I have no idea what Target’s or Wal-Mart’s health-benefits costs are.  Let’s say that Target spends $5,000 per worker on health benefits and Wal-Mart spends $10,000.  An employer mandate that requires both retail giants to spend $9,000 per worker would have no effect on Wal-Mart.  But it would cripple one of Wal-Mart’s chief competitors.

U.S. Chamber of Commerce, quoted nearly everywhere (here courtesy again, of Mr. Jeffrey Young):

The U.S. Chamber of Commerce took a pretty nasty swipe at Wal-Mart when I emailed them for a comment. Here’s the statement the Chamber’s press office sent me, attributed to James Gelfand, its senior manager for health policy: “Some businesses make the decision to use the government as a weapon against their competition. We do not agree with this method.” Ouch.

0 comments

---

The U.S. International Trade Commission has made an announcement, and that announcement is one we shouldn’t be surprised by at this point. The ITC has ruled that U.S. tire companies are being harmed by cheap products from China, and as a result President Obama will have to decide whether to impose tariffs or quotas on the country that, thanks to Wal-Mart, is now America’s largest source of imports.

Of course, Wal-Mart’s tire business isn’t the only factor behind the ruling, but it certainly is one of the biggest. China sent 21 million tires to the U.S. in 2005, and that more than doubled to 46 million by last year. For its part, Modern Tire Dealer reports that Wal-Mart Stores Inc. has close to 3,200 outlets selling tires, although most of those sales are concentrated in its approximately 2,435-store Tire & Lube Service Centers nationwide.

The (United Steelworkers) union said China has more than tripled its tire exports to the U.S. between 2004 and 2008, ending jobs for 5,100 American workers. The union said another 3,000 workers would lose their jobs by the end of the year.

The next move for the ITC will be to come up with come up with recommendations on what the President should do to help U.S. companies, including a couple familiar names based in Ohio - Akron-based Goodyear Tire & Rubber Co. and Findlay-based Cooper Tire.

The case is the first test for Obama on trade with China, after he vowed during his presidential campaign last year to help unions or domestic industries seeking relief from foreign competition. Since the election, he also has pledged to avoid protectionism so as not to exacerbate the global recession.

U.S. agency rules for tire producers in China case [Bloomberg News]

Read the rest of this story ...

0 comments

---

When is a loss really a win? In Colorado, it’s when a piece of legislation fails and the result is a victory for the little guys.

The Colorado General Assembly has been debating HB 1192, a bill that would have allowed large grocery chains and drug stores to sell liquor, wine and full strength beer (grocery stores can already sell beer with an alcohol content at or below 3.2% - Bud, Miller Lt., Coors Light, etc). The reasons for the bill being introduced are many, but basically for a long time in Colorado, grocery stores were the only place that you could purchase beer on Sundays. When laws were changed in mid-2008 and liquor stores were allowed to remain open 7 days a week, grocery stores saw their revenue dip ever so slightly, and they were not happy. So the grocery industry began pushing HB 1192.

The consequence of allowing grocery chains to move into the wine and premium beer market, of course, is that perhaps you risk putting local liquor stores out of business. One can argue all they want that the increased competition will be a good thing, but it really won’t. Why? First, as Colorado resident Denise Washington explains, the liquor store industry in Colorado really is a local industry:

Many liquor stores and wine shops in Colorado are family owned. They build relationships with their customers and learn their tastes. There is added value of a knowledgeable staff who wants to work with you to make your experience with a new wine or beer memorable. Who enjoy teaching you about how to choose a good Pinot Noir for your dinner party or a hearty stout for your big BBQ.

Beyond that, however, is the fact that local liquor stores and wine shops support other Colorado businesses - vineyards and microbreweries from across the state that Coloradoans wouldn’t be able to find in large grocery aisles regardless of whether HB 1192 passed.

With the bill failing, grocery stores (many owned by companies outside the state) aren’t really going to see much change - they aren’t going to close up or raise prices simply because they can’t sell craft beers or wine. For them, life will go on. But had the bill passed, 1,650 locally-owned liquor stores would have been devastated to the tune of 50% of its full-strength beer sales in the first year. It doesn’t take much to determine that a loss of business like that would eventually threaten not only the local liquor store industry, but the breweries and wineries they support.

You can get more information on the legislation, including a great video piece from BeerTap TV, after the jump.

Read the rest of this story ...

16 comments

---

Surrounded by the enemy, with a story vaguely reminiscent of Frodo’s trek into Mordor (that’s for you Lord of the Rings fans - you know who you are), Target is wading into Benton County, Arkansas, home of America’s retail behemoth. A new store is scheduled to open tomorrow right in Wal-Mart’s backyard, with seven Wal-Mart supercenters, five Neighborhood Market grocery stores and two Sam’s Club outlets located within a 25-mile radius.

Like Wal-Mart, Target has steadily slowed its store growth, a trend that may continue depending on economic conditions. Ironically enough, the demographics in Benton County appear to be a good match to the template of Target’s average customer:

“Those demographics there [in Benton County], people have slightly more income on average, discretionary, and will tend to trade up from pure discounters...” And Target “is known very well for their housewares and apparel.” The typical Target “guest,” as the company calls its customers, has a median age of 42 with a median household annual income of $60,000, said Katie Benscoter, a spokesman at Target headquarters. A third of them have children at home and just over half have a college degree.

The store could have an ace in the hole - its new manager, Chuck Simmons, started his retail career at Wal-Mart and is familiar with the area. Still, to put things in perspective, Wal-Mart currently has five supercenters and 12 discount stores within 25 miles of Target’s home office in Minneapolis. And despite prices that are within 1-2% of Wal-Mart’s markdowns, Target continues to battle the perception that it is the more expensive of the two discount retailers.

Target set to open store in Wal-Mart’s backyard [Arkansas Democrat Gazette]

Read the rest of this story ...

27 comments

---

We’ve covered and covered and covered the debate on this one, and finally the long wait is over! The law in question requires a pharmacist to have majority ownership of a pharmacy, so repealing it would have allowed large chains like Wal-Mart, Walgreens, and CVS the opportunity to move in.

Pharmacy bill fails, 57-35 [Bismarck Tribune]

After about an hour of emotional debate, the House voted against a bill today that would have repealed North Dakota’s pharmacy ownership law, 57-35. More updates to come.

So there you go...we’ll let you know when more updates have indeed come.

***Update*** (3:23pm) More coverage - ND House votes to keep pharmacy ownership law [Associated Press]

Read the rest of this story ...

75 comments

---

The bill is H.B.1440, and if it passes the North Dakota legislature it will allow large chains like Wal-Mart and Walgreens to begin selling prescriptions. As it stands today, pharmacies are required to have pharmacists as their majority owners, eliminating the ability of large pharmacy chains to operate.

The debate, which drew public comments earlier today in a packed auditorium in Bismarck, appears to center on lowering costs and providing more choice. Proponents of the bill believe that changing the North Dakota law will allow large retailers to come in and help lower drug costs, partially due to the introduction of $4 prescriptions. Opponents, however, counter that North Dakota drug costs are already low.

Mike Schwab, a spokesman for the North Dakota Pharmacists Association, said every national study on prescription drugs shows that prices in North Dakota are “well below” the national average. Testimony that prices are high is “technically is not the truth,” he said.

So, if that’s true, the question is whether North Dakota wants to drop its prices even lower at the expense of independent stores. Will an influx of large chains spur competition, or will it simply drive smaller, locally owned stores out of business?

Rep. Arlo Schmidt, D-Maddock, said lawmakers should not be responsible for “pulling the plug” on small town drug stores.

Big drugstore operators take aim at N. Dakota law [Associated Press]

Read the rest of this story ...

6 comments

---

Another lawsuit, just like the first one that was filed. In fact, its so similar, I’m even recycling our blog graphic.

Led by plaintiff Marci Badgerow from Chicago, the suit attacks the 2005 agreement struck between the retailers, in which Wal-Mart agreed to exit the online rental business in exchange for Netflix stopping all DVD sales. In this way, the companies hoped to stop unnecessarily cannibalizing revenue between each other.

The suit believes this agreement is illegal and promotes unfair trade. As proof, the suit particularly cries foul over Netflix raising its monthly subscription price from $14.99 to $17.99, on the heels of calling its truce with Wal-Mart. Prior to aligning with Netflix, Wal-Mart was offering a significantly cheaper $12.97 a month subscription plan.

In fact, this lawsuit is so similar, you can just read our previous blog post, except while reading it imagine you’re in a court in snowy Chicago instead of sunny Los Angeles. In the meantime, we’ll see if we can get our hands on the complaint.

And with that, enjoy your weekend.

Netflix, Wal-Mart face second class-action lawsuit [Video Business, via Variety]

Read the rest of this story ...

4 comments

---

BUSTED!!!

Actually, as a recently joined member of Netflix, I have to admit I might not be impartial on this story. After all, they do deliver movies right to my door, allowing me to overcome my lifelong fear of video stores.

But that aside, the lawsuit appears to be some pretty serious stuff. From the Los Angeles Times:

The two companies agreed in 2005 that Wal-Mart, the world’s largest retailer, would close its online rental business and refer customers to Netflix, which would promote Wal-Mart’s DVD movie sales, according to the lawsuit filed in federal court in San Francisco.

Sounds like a case of a couple companies engaging in some “you scratch my back, I’ll scratch yours” behavior. The complaint suggests clandestine meetings, beginning with a dinner shared by Netflix CEO Reed Hastings and then-Wal-Mart.com CEO John Fleming in January 2005, in which discussions began as to how the two could reduce competition in the DVD sales and online DVD rental markets. You can check out the whole complaint here. Its like reading The Bourne Identity...if it was written by lawyers. Bland, legalese-loving lawyers. But seriously, it is pretty interesting, and at 24 pages its not tooooo long, so check it out.

Wal-Mart, Netflix sued over online video rentals [Reuters]

Wal-Mart, Netflix conspired to create monopoly, suit alleges [Bloomberg via Los Angeles Times]

Resnick v. Wal-Mart, Netflix (Complaint)

7 comments

---

Wal-Mart’s invasion of the Mexican banking sector continues. Last year, the Mexican government granted Wal-Mart the authority, making them only the second retailer in Mexico to do so, to set up banking operations at its stores. Wal-Mart Bank started fast, with 115,000 new clients its first year and opening service desks in 357 stores, according to an article in Mexico’s El Milenio. That growth may be under challenge, however as this December a law passed the country’s Senate that would potentially prevent Wal-Mart from banking at all.

The bill, originally aimed at providing protections to Mexican consumers who use financial services by outlawing banks from sending pre-approved credit card and other offers by phone or mail, and increasing competitivity in the banking sector, was not satisfactory to Mexico’s major banking players, mostly multinationals like Citigroup and HSBC. Before the bill passed, the banking lobby demanded that the Senators include an Amendment limiting the amount of a bank’s total deposits taking place outside traditional “branch” locations to 25%. To get around the proposed law, the National Banking and Securities Commission, which according to one leading Mexican columnist is hell-bent on deregulating the financial sector, intends to use an administrative measure to authorize Wal-Mart to operate each one of its cash registers in its stores “as if it were a bank branch”.

Considering the disastrous effects financial deregulation and predatory lending practices have had on the U.S. economy, and considering Wal-Mart’s track record of offering exorbitant interest rates on its store-brand credit card, these latest maneuvers give serious cause for concern. Furthermore, in banking with Wal-Mart, Mexican consumers might not suffer only financial, but also physical harm; due to Mexico’s enormous problems with fraud and robberies, traditional branch banks in the country today are heavily guarded and the multinational banks use numerous electronic and physical security measures to protect their customers; these protections would be mostly absent at Wal-Mart’s nationwide cash registers.

The original article (translated) in Mexican newspaper La Jornada is printed below:

In spite of the fact that the [Mexican] Senate set limits on banks’ ability to offer financial services through third parties, such as retail stores now labeled so-called “bank branches”, the National Banking and Securities Commission (CNBV) put forth an administrative measure to give Wal-Mart authorization for each one of its cash registers to become a bank branch.

This kind of authorization has been denied the retailer by U.S. authorities, said analysts.

Read the rest of this story ...

77 comments

---

Following its recent trend to focus expansion internationally, Wal-Mart is pouring money into Brazil to compete with French giant Carrefour, and Brazil’s own Pão de Açúcar. An article in La Prensa, a major Nicaraguan newspaper, discusses competition among the three giants:

Wal-Mart [recently] revealed in mid-August that it will invest between $900 million and $1 billion dollars into expanding in Brazil in 2009. This will be the largest investment made thus far by the company in Brazil, sufficient to open between 80 and 90 stores. For this year, Wal-Mart’s growth plan foresees $650 million and the opening of 36 locations (in the last four years, the company has invested $1.6 billion).

Wal-Mart’s recent success as the number-three chain in Brazil contrasts markedly with its earlier misreading of Brazilian consumers’ needs:

When it arrived in Brazil, Wal-Mart wasn’t a source of worry for the country’s market readers. Its presence was so timid and its actions so poorly adapted to Brazilian culture, that the chain became the butt of jokes, offering deals on golf clubs in the land of soccer.

The Brazilian retail market, similar to others such as India, is highly fragmented with several major chains competing for business. In order to succeed in this environment Wal-Mart has had to do away with its “big box fits all” business plan and expand through acquisitions:

Today, the U.S. retail chain in Brazil consists of 318 locations divided among eight brands: BIG, Wal-Mart, Hiper Bom Preço are “big-box” stores; Nacional, Marcadorama, Bom Preço and Todo Dia are supermarkets. And Maxxi is a wholesaler, in addition to Sam’s Club. With sales close to $8.5 billion in 2007 and a market share of 11 percent, Wal-Mart ranked third in Abras’s [Brazilian supermarket association] measures.

Regarding growing through acquisitions and ownership of a wide range of store brands, however, Carrefour is the clear market leader in Brazil and well-ahead of Wal-Mart, due to its ability to offer a wider range of services Brazilian customers demand.

Read the rest of this story ...

34 comments

---

This video from the Financial Times takes a look at Wal-Mart’s new small-format Marketside stores, and their close competitor Tesco’s Fresh & Easy. The analysis of the two stores is interesting: Marketside looks more polished, whereas Fresh & Easy focuses on house-brand bargains. But the most interesting - and perhaps saddest - part of the video is hearing customers’ explanations of why they like the new small format stores:

“It’s kinda like a small grocery store,” one man says. “I kinda like the idea of the local markets instead of great big stores you’ve got eight million people in.”

That is, customers are attracted to these markets because they’re like the local grocery stores Wal-Mart so frequently puts out of business. After years of flocking to Supercenters, these consumers have realized the value of shopping close to home, though still seem unwilling to support real locally-owned businesses. Marketside has all the appeal of a local store with none of the benefits: money spent there doesn’t stay in the community and its owners have no incentive to treat employees well. Wal-Mart seems to be capitalizing on the very holes its own business model has left in the retail landscape.

Big box stores go small [Financial Times]