Wal-Mart haters don't get it

By DAVID MOON, Moon Capital Management
June 8, 2008


When asked why he never visited a popular Minneapolis restaurant, former major league catcher and manager Yogi Berra responded, 'Nobody goes there anymore. It's too crowded.'

Sounds a lot like Wal-Mart.

If I didn't shop or read financial statements (I own Wal-Mart stock), I might be influenced by the negative press regularly received by the world's largest retailer. Someone is always protesting against the company. It seems that every time Wal-Mart wants to open a new store, the entire city is against it ' that is, until the store opens.

There is actually a website that aggregates negative news about the company and sells T-shirts with a 'Hel-Mart' logo and slogans like 'Deal with the Devil.'

I wonder if the Hel-Mart folks realize that the Wal-Mart folks have cut prices this year on hundreds of food items, albeit temporarily, by as much as 30 percent?

As fuel prices have increased over the last year, food middlemen have tried to maintain their profit margins by passing those costs on to the grocery stores. Twenty years ago, this would have worked.

Wal-Mart doesn't subscribe to the old model. "When our grocery suppliers bring price increases, we don't just accept them," says Pamela Kohn, Wal-Mart's general merchandise manager for perishables.

Sure, that makes the suppliers angry, and it might even cause some of them to lose money. But those fuel price increases are going to come out of someone's pocket; whose would you rather it be?

In many cases, Wal-Mart simply eliminates the middleman and buys directly from a producer. It buys coffee for its Sam's Choice brand directly from a cooperative of Brazilian growers, eliminating three or four steps from the typical process.

An article in The Nation magazine describing Wal-Mart's presumably unfair treatment of its employees was titled 'WWJD? Protest Wal-Mart!' The article described Wal-Mart protests held in churches around the country. Bishop R.W. Harris of Grace Cathedral on Long Island told a largely union crowd that 'if Jesus were here today, he'd be with you' sticking it to Wal-Mart.

Workers mostly don't see it that way. In 2006, when Wal-Mart opened a store in Chicago ' the heart of labor union country ' more than 25,000 people applied for 325 jobs.

Wal-Mart competes with small businesses in the only areas it can: price and availability. The Wal-Mart haters don't get it.

In the early 1900s, there were over 200 truck manufacturers in the U.S. Today there are two. Would the AFL-CIO argue that the American consumer and worker would be better served by the old model?

Ford and GM put the mom-and-pop auto makers out of business. And in so doing, they made the automobile affordable by every American.

David Moon is president of Moon Capital Management, a Knoxville-based investment management firm. This article originally appeared in the News Sentinel (Knoxville, TN).

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