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Wal-Mart: Think Outside The Big Box


Objections to number-one retailer just nuts.

Type "anti Wal-Mart" (WMT) into Google and, in 0.13 seconds, you've got 5.23 million hits.

This includes such to-the-barricades Web sites as Wal-MartWatch, WakeupWalMart, HelMart and Wal-Mart: The High Cost of Low Price.

This is nuts.

Wal-Mart is a good thing for low-income people because it sells good products at a good price and generates lots of jobs. It also competes successfully against Costco (COST) Target (TGT) and Kmart, now part of Sears (SHLD).

With about 7,250 stores, including 975 discount stores, 2,800 combination discount and grocery stores and 590 warehouse stores, Wal-Mart is the world's number-one retailer. You can even buy gasoline at Wal-Mart, often for less than Exxon-Mobil (XOM), Chevron (CVX) or Conoco (COP) is selling it. Wal-Mart's also the top retailer in Canada and Mexico and holds a 95% stake in Seiyu, a Japanese retailer. The Bentonville behemoth, Sam Walton's legacy, is bigger than Europe's Carrefour, Tesco and Metro combined.

At home, Wal-Mart is now the nation's largest grocer, outpacing such well-known companies as Kroger (KR), Supervalu (SVU) and Safeway (SWY). Some studies have found that grocery prices drop 10% to 15% in markets that include Wal-Mart.

One suspects that much of the criticism comes from unions protecting their turf. In heavily unionized New York City, the City Council has voted to keep Wal-Mart out of the five boroughs, sending many residents of Brooklyn and Queens (and their sales tax receipts) across the city line to suburban Long Island. Brilliant, eh?

The steady criticism from the mainstream press may stem from chronic ignorance of how markets work. After all, newspaper reporters aren't in on the money-making side of business; they only fret about the bottom line when hit by layoffs.

Criticism also may stem from the fact that Wal-Mart does little newspaper advertising. If this seems far-fetched, try this: When was the last time you saw a hard-hitting investigative story on auto dealers or supermarkets, major advertisers in just about any poopsheet?

People make rational choices. Just about every time a new Wal-Mart opens, thousands of people apply for a few hundred jobs. Wal-Mart employs about 1.3 million Americans, making it the nation's largest private employer. The jobs pay well above minimum wage and offer competitive benefits. About 66% of Wal-Mart's managers were once hourly workers.

Some people enjoy shopping and a few shop compulsively, stashing unopened packages in the back of the closet. But if you're like most, you just want to get in, get your stuff and get out because you have other things to do. Wal-Mart offers a wide range of household goods under one roof, making shopping quick and easy. It's hard to imagine anyone shopping exclusively at Wal-Mart - but when you do, you almost certainly save money. Some researchers have estimated that Wal-Mart shoppers save $1,000 to $2,300 a year.

"Big Box," or large scale stores, hardly existed before Wal-Mart. This allows for wireless barcode scanning, great logistical savings and economies of scale that benefit customers in product selection and price.

In September 2006, Wal-Mart began offering 300 generic drugs at as little as $4 each for a month's supply. Who would object to that, except a politician pushing national healthcare and in need of a continuing "crisis" only government can "solve"?

Some of the criticism of Wal-Mart reeks of the aggressive ignorance routinely offered as analysis by the anti-globalization gang. Think of those riots in Seattle during the World Trade Organization conference in 1999 - or of Jose Bove, a French farmer who pulled the roof off a McDonald's (MCD) with his tractor the same year. Down with McDomination!

A mom-and-pop operation can't compete against Wal-Mart - and shouldn't try. But small operations can compete if they offer something different and provide top notch service.

Finding a niche works just fine for Boston Beer Company (SAM), maker of Sam Adams beer, in its fight against Anheuser-Busch (BUD). Belgian brewer InBev recently bought Anheuser-Busch for $52 billion, extending its reach worldwide.

Starbucks (SBUX) deftly mass-markets the aura of an upscale coffeehouse, and few object on business grounds. The criticism is generally haughtily limited to aesthetic grounds - Starbucks isn't, you know, Left Bank enough.

The United Food and Commercial Workers and Service Employees International Union are free to toss bricks at Wal-Mart. (Yawn.) But for the rest of us trying to stretch a buck, Wal-Mart is just ducky.
No positions in stocks mentioned.
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