Is Wal-Mart a good thing?
As Wal-Mart and other huge stores are sprouting up in communities throughout
the United States, more and more Americans are beginning to question the
benefits these mammoth stores are bringing to their lives.
This is the question that many Chinese people, especially those living in
major cities, may be asking in the not too distant future when their familiar
neighbourhood stores are driven to extinction by the likes of Wal-Mart and
Carrefour.
These "big-box" stores, as they are called in the United States, are the
symbol of globalization. They derive their strength from the successful
application of the global sourcing business model that is built on a highly
efficient communication and logistics system.
Such a system has enabled these retail behemoths to source their merchandise
from anywhere in the world that offers the best price. Wal-Mart, for instance,
accounted for more than 10 per cent of China's total exports to the United
States.
Cheap imports together with a tight-fisted management style have combined to
boost the competitiveness of the big-box stores, enabling them to steam-roll
small-scale retailers, including many mom-and-pop shops and neighbourhood
stores, that cannot hope to compete on economies of scale. Consumers are reaping
the benefits. They pay less, sometimes as much as 25 per cent for some goods, at
the big-box stores than the traditional retail outlets.
The big-box stores are so efficient that together they accounted for an
estimated 50 per cent of the consistently high productivity growth rate of the
United States in recent years. Such a productivity gain, in turn, has helped
keep inflation low despite rising consumer demand and a red-hot property boom.
"The US productivity miracle and the emergence of Wal-Mart-style retailing
are virtually synonymous," wrote Kenneth Rogoff, professor of economics and
public policy at Harvard University, and formerly chief economist at the
International Monetary Fund.
Chinese consumers seem to have welcomed the Wal-Mart-style of retailing with
open arms. Having saturated the market in big cities, some foreign retail giants
are moving to smaller cities in the relatively more prosperous coastal
provinces.
The success of these foreign retailers is serving as a model that has been
closely studied and emulated by some of the largest domestic retail enterprises.
This could help boost productivity in the service sector which has apparently
lagged far behind manufacturing.
Indeed, large retail enterprises can take the lead in promoting China's
service sector by adopting the operating models of Wal-Mart and other US big-box
stores. The built-in efficiency of these models can bring increased benefits to
consumers in the form of lower prices and greater convenience.
But as Professor Rogoff noted, the proliferation of big-box stores is not
entirely a benign phenomenon. What concerned Rogoff and others is the effect on
low-wage workers and smaller-scale retailers. "While completely legal, studies
suggest that Wal-Mart's labour policies exploit regulatory loopholes that, for
example, allow it to sidestep the burden of healthcare costs for many," Rogoff
wrote. "And the entry of big-box stores into a community crushes
long-established retailers," he noted.
Some people may wish to shrug off these concerns as a reasonable price to pay
for progress. But there are those who believe that balanced growth must be
preserved to ensure sustainability. It is a lot more desirable for Chinese
retail enterprises to modify the American model in order to benefit consumers
without having to sacrifice employees' welfare. The public will also have to
decide whether it is worth preserving a bit of tradition in their communities by
keeping small neighbourhood stores in business.
In some US cities, notably San Francisco, neighbourhood grocery stores are
protected by strict zoning laws that limit the number and size of supermarkets
within a certain area. This is not necessarily the best solution because such
laws are usually too inflexible and cumbersome.
It's a matter of lifestyle and only the people can decide what's best for
them.
Email: jamesleung@chinadaily.com.cn
(China Daily 05/26/2006 page4)
