6.12. SR 10-18-1999 - Laserfiche WebLink

Home Browse Search

Chapter 10 Page 11 of25 much needed capital, but put Super Kmart at a substantial disadvantage in fulfilling the Supercenters' low price positioning. . Furthermore, this author indicated in Chapter II that he did not accept the premise that Wal-Mart would have similar problems to Kmart's in executing the supercenter program. Wal-Mart's national management and store management appears quite strong. Wal-Mart, unlike several major supermarket chains, is unconstrained by corporate problems and appears to be going with 100% self- distribution. Most supermarket chains self-procure and self-distribute. Apparently, when Kmart opened new Super Kmarts, utilization of outside food wholesalers strained Kmart's staff resources in opening new locations with the intense travel required as well as essential staff training requirements. A major advantage for Wal-Mart's Supercenter, generally, is its lower labor costs as compared to both the unionized and non-unionized supermarkets. Wal-Mart is presently non-union. Kroger, the dominant supermarket chain, is unionized; nevertheless, it, unlike many supermarkets, continues to be strongly managed, effective and highly profitable. Wal-Mart's low labor costs, high productivity and control of its managerial and inventory processes have weakened not only Kmart, but many regional discount chains as well as supermarkets. Both investors and Standard & Poors, which lowered its ratings on Kmart's $3.7 billion in debt, point out that Kmart is in a defensive position against competitors like industry leader Wal-Mart Stores, Inc. For example, Kmart plans to pare its 1995 capital spending by an as-yet undetermined amount from a previously projected $1 billion, while \Val-Mart plans to boost its spending ~o $4.5 billion . from $4 billiolJ. Up to nov.' the small retailer has been threatened by the power of the mega-retail chain -- now it appears that the same thing will be true of national as well as regional, and in some cases, mature supermarket chains. What will this mean for joblessness and the U.S. retail employment picture in the next five yead:' . The New Emphasis Upon the Food Industry in Supercenters Being Opened by Mega-Retail Discount Chains The American food industry is the finest in the world. Its distribution of goods, and quality of service are the shining example world wide. Its products, from produce to paper towels, are available night and day for everyone's convenience. Primary locations make shopping easily accessible for all concerned customers. Different types of stores service all the needs of customers culturally, aesthetically, and most importantly, economically. And now, this industry is in jeopardy. For example, in Southern California, 90% of the market share in the food industry is under a collective bargaining agreement. Labor contracts between the United Food and Commercial Workers and food employers such as Ralphs, Food-4-Less, Hughes, Vons, Albertsons and Luckys have been negotiated through collective bargaining over the past several decades. The end result ofthese deliberations, as one might expect, has been a livable wage plus important benefits. Here the community is truly the beneficiary with healthy, independent tax paying residents who contribute to the tax base rather than drain it. A full-time wage earner working at Ralphs, paid at top scale, will . earn a more than livable salary with health costs and dental coverage paid additionally. http://www.shilsreport.orgl chap 10 .html 10/6/99