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Tuesday, July 19, 2005
A WalMart Crock
Continuing the scatological thread: WalMart's announced they're building a "Green Supercenter" with "Environmental Sustainability" in the Dallas suburbs. B*******.
The building will have windmills, sidewalks made from recycled tires, and "waste cooking oil" from the fried chicken restaurant "recycled by mixing it with used automotive oil from the Tire and Lube Express to serve as fuel to heat the building." But even if it's the greenest building in the world, the store will still waste enormous amounts of energy, for two reasons.
First, 70% of what they sell is made in China, so it has to travel 8,000 miles just to get to the store. Will it come on sailing ships and airplanes with windmills?
Second, "supercenters" are what WalMart calls the giant regional stores they build after their smaller stores have destroyed local retail. With less local competition, WalMart builds larger stores farther apart. The customers have to drive long distances to get to the WalMarts, in effect becoming part of the store's transportation system. The fact that we consider that a good thing shows why we use 27% of the world's energy, even though we have only 4% of the world's population.
Scatological Update: Jim Kunstler says the purpose of the windmill is to blow smoke up the public's a**.
July 19, 2005 in Architecture, New Urbanism | Permalink
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I'm having a lively discussion over at Veritas et Venustas; my insistence that it's not possible for 70% of Wal-Mart's merchandise to be made in China has not received a warm welcome. The 70% figure was only tangential to the... [Read More]
Tracked on Jul 26, 2005 10:35:57 AM
» New Wal-Mart Model From Mississippi Charrette? from Veritas et Venustas
NEW URBANISTS are idealists who have been strong critics of Wal-Mart. New Urbanists are also pragmatists, who try to improve existing conditions. Pragmatic Idealism: trying to leave the world better than you found it. Wal-Mart is the largest employer i... [Read More]
Tracked on Nov 8, 2005 3:42:03 PM
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That 70% figure is just nowhere near reality.
WM says last year it spent about $18 billion on goods produced in China, and although it doesn't present a comparable figure for the US, I'd say it is around $100 billion. So, 70% is off by a considerable amount...
Also, is there a study that shows how much further WM supercenters are spaced from regular Wal-Mart stores? I hadn't really noticed this effect...
Posted by: Kevin Brancato at Jul 25, 2005 4:28:56 PM
The 70% figure comes from the PBS documentary on WalMart. We'll assume their research was a little more thorough than your seat of the pants guesses.
But we don't need a "study" for the Supercenters. They started when WalMart did exactly what I said: waited until they had driven the town centers out of business, then closed and consolidated stores into Supercenters that required more travel.
Of course that's in the boonies. If you're in a Sprawltropolis like Dallas you can find Supercenters relatively close together.
Posted by: john massengale at Jul 25, 2005 8:25:48 PM
Here's a different fact from the PBS Frontline site (the 70% figure is probably there somewhere, I know it was on the show):
Of Wal-Mart's 6,000 global suppliers, experts estimate that as many as 80 percent are based in China.
Interesting that you estimate 80% of their products are made here, while others say 80% of their suppliers are in China. What's the basis for your supposition?
It seems your "nowhere near reality" was nowhere near reality.
Posted by: john massengale at Jul 25, 2005 9:14:47 PM
Did you read the link I gave you? Wal-Mart has 61,000 suppliers (again, even cutting that by half to account for US services), so listing 8,000 "global" suppliers means only proves my point.
70% is nowhere near reality.
Posted by: Kevin Brancato at Jul 25, 2005 11:11:30 PM
When WalMart's "facts" conflict with other people's, I'll go with the other people's until proven wrong.
What's the point of http://www.alwayslowprices.net/?
Posted by: john massengale at Jul 26, 2005 12:14:18 AM
Look, you can believe what you want, for whatever reason. but the 70% figure just doesn't make sense, and it WAS made by a consultant with no outside fact-checking.
I'd argue simply that WM does not buy enough from China to support 70% of $288billion in sales. In 2004, the US imported a total of $196 billion in goods from China. Wal-Mart's cost of goods sold in 2004 was $ 198 billion (from page 12 of the 2005 annual report). So unless Wal-Mart buys 70% of all Chinese exports to the US, which is just plain ridiculous, the 70% figure is just nonsense.
Let's look at this another way. While many things are clearly made in China, like many toys and bicycles and clothes, think of all the things sold in Wal-Mart that aren't made in China: nearly all the food, most camers and camcorders, DVDs and video games (although the XBox is made in China), all the drugs in the pharmacy, all the glasses in the vision center, most of the real jewelry. How about automotive? Furniture? School supplies? Go to Wal-Mart and take a look for yourself; you'll find a lot more than 30% non-Chinese goods.
-----
ALP was my response to what I see is the prostitution of economics to the demands of WM and its opponents; both pretend to know what the economic impacts of Wal-Mart are, when in fact the issue hasn't been seriously studied by more than a handful of people, and those results are extremely limited. I realized that I could blog about Wal-Mart all day and not be done with it, so I created a Wal-Mart blog to track the controversy.
Posted by: Kevin Brancato at Jul 26, 2005 8:04:18 AM
If you go to the Frontline sight, you'll find that the "consultant" you're referring to was not a consultant, and that he didn't just make the number up.
I haven't put my finger on it, but there is something VERY weird about your WalMart blog. Your "prostitution" comment is probably part of it: your axe to grind is that you are determined to prove people wrong. It's like a smart ass in the ivory tower, smarter than everyone else.
The question is, whom do you think is listening? And why don't YOU do more research, since that is what you say you do. Your comment about Supercenters makes it clear that you really aren't very familiar with WalMart. The New York Times has had more than one story on the issue -- you can probably find them at Lexis Nexis.
If you were really interested in the truth, you would ask more questions. You'd ask the person who gave the figure in the first place, for example. Through the net, one could get his address, phone number and e-mail address quite quickly. Instead, you shoot from the hip, pretending to be the objective one, grounded in the facts. But you don't bother to check the facts.
Posted by: john massengale at Jul 26, 2005 8:33:29 AM
I think the problem here is one of language. "From China" and "Made in China" are not the same thing. if you watched the Frontline report you would have seen that Wal-Mart pressures its suppliers to move to China to meet its cost demands. When Wal-Mart gives a figure for goods purchased "from China" I seriously doubt they are including products bought from American companies made in China.
Posted by: JR Monsterfodder at Jul 26, 2005 4:25:34 PM
I read in The Fountain of Wealth by Paul Pilzer that 15% of the costs of goods today(like those at Walmart) are due to manufacturing. 85% is distribution, etc.
This might have a lot to do with why the numbers seem so odd.
Posted by: Drew at Jul 26, 2005 7:58:06 PM
JR, I agree that it's nearly impossible to get a straight figure out WM. However, given that the total amount of exports from China to the US is nearly identical to WM's cost of sales, this would imply a tiny fraction of Chinese exports to the US are purchased by non-WM retailers. Wal-Mart is only HREF="http://www.pbs.org/wsw/tvprogram/drbulreportwmt.pdf">7% (and I'd add, at most 10%) of the retail industry, yet you expect me to believe that it takes in 70% of total Chinese imports?
I cannot believe that 90% of the retail industry (and all non-retila industry) gets only 30% of Chinese exports to the US.
----------
John, You wrote, "70% of what they sell is made in China". Either that's close to the truth or it isn't. Getting to the truth doesn't mean I have an axe to grind. ALP isn't about politics; it's about understanding the actual impact that Wal-Mart is having. The first time I read that economists were writing dueling "economic impact statements", it was clear that the truth is not the concern of Wal-Mart or its opponents.
The 70% figure you used is from one analyst -- a consultant at Gladstone Capital who is quoted
HREF="http://walmartwatch.com/home/pages/that_was_then_this_is_now">as saying, "They have about 70 percent of their products coming from China, not including the food products." There has been little
explanation of how the analyst determined that figure, an no doublechecking of it. If, I'm wrong on that account, please link to the explanation of how it was
calculated, and I will admit that I am wrong. But why should I accept a figure when I have good reason not to?
Now, in addition to the 70% figure quoted above, WM Watch also quotes
Ted Fishman as saying that 70% of WM's goods have a Chinese component, which is plausible, if by component, he means at least 1 penny of value added in China. But elsewhere he says that
HREF="http://www.oregonpeaceworks.org/site/index.php?option=content&task=view&id=1636">70%
are made overseas. Well, which one is it? Are 70% of WM's goods made in China, or do 70% have a Chinese component (whatever that means), or are 70% made overseas?
Can somebody please link to the frontline page where it discusses this 70% figure.
Posted by: Kevin Brancato at Jul 26, 2005 9:20:16 PM
Back to the original post, there is something very interesting in that Wal-Mart's Supercenters have the ability to constitute an infrastructural web that fits seamlessly with its transportation / distribution system.
What if you eliminated everything else that lies in between? Could that Wal-Mart infrastructure constitute a city?
Posted by: Geoff DeOld at Jul 26, 2005 11:35:47 PM
Sounds remarkably similar to the "sustainable" Sainsbury's store built on the Greenwich Peninsula in London to me.
Details here.
Posted by: Adam at Jul 27, 2005 9:03:47 AM
Geoff,
I don't understand what you're saying.
If I understand part of it, you're saying that getting the customers to drive long distances in their SUVs and VANS to buy in bulk and store it in their garages is urban? How?
Kevin,
I said I hadn't found the 70% figure online. Frontline doesn't have the complete transcript online.
I'm an architect and urban designer. I'm not an economist. You are an economist who says you do the reseach and point out the truth about WalMart.
You're not doing the research. You're shooting from the hip. It's not convincing.
In light of the claims on your blog, "I can't believe this" and "I can't believe that" is just lazy. It obviously wouldn't be accepted at your real job.
Re the "consultant," you and I are talking about different people. You're not really focusing on this.
Re the China factor, it makes complete sense that if WalMart paid a US company that had its product 100% manufactured in China, WalMart would count that as a US payment. After all, they are writing the check in dollars to a company here that deposits the check here. But its products are made in China.
And we all know that WalMart pushes US companies to do its manufacturing in China.
Posted by: john massengale at Jul 27, 2005 9:41:03 AM
I have not just said "I can't believe this". I've provided data and evidence, but done so in an admittedly poor fashion (and with broken html).
I see no reason to exchange personal barbs with you, so I'll leave it at that.
Posted by: Kevin Brancato at Jul 27, 2005 10:45:41 AM
Instead of "personal barbs" think of it as bluntness in reaction to a flurry of rather aggressive assertions that claimed more than they delivered. Or as a challenge to provide the expert knowledge and study implied.
I didn't say you "just said," but you did use speculation on counter-arguments, rather than dealing with the argument itself, more than once.
I'd be very happy to see some posts with less rhetoric and more facts. I'd really like to know the truth about how much of what is sold in WalMart comes from China. I just thought we were generating heat instead of truth.
Posted by: john massengale at Jul 27, 2005 11:33:49 AM
I agree my rhetoric was too heated. However, since the Census Bureau doesn't deliver import data by company -- the most relevant fact underlying the 70% figure -- the only way to figure this out is by a roundabout method.
Posted by: Kevin Brancato at Jul 27, 2005 1:00:52 PM
"You'd ask the person who gave the figure in the first place, for example."
Well, I am the person who first pointed this out at ALP, I'm one of the posters there, that this number was bogus. To answer this question:
"You're not doing the research. You're shooting from the hip. It's not convincing."
I went and looked at Wal-Mart's balance sheet. Go and look, it's online at a lot of places. Second, I went and looked at trade numbers that are widely quoted. Now, as Kevin points out, maybe they are wrong, but he also points out that this would account for an absurd amount of the trade deficit. These numbers don't make any sense. Also, that Gladstone Capital place is completely bogus as a source. Frankly, this a joke.
Posted by: Bob at Jul 27, 2005 10:33:25 PM
"Frankly, this a joke."
What is this, tag-team obnoxiousness? Your colleague apologizes for being too heated and you come over to take his place and up the ante?
" "You'd ask the person who gave the figure in the first place, for example."
Well, I am the person who first pointed this out at ALP, I'm one of the posters there, that this number was bogus."
Because you responded at "ALP" it's not necessary to go to the source or consider other facts?
"that Gladstone Capital place is completely bogus"
Like, totally. Frankly, this is the way third graders talk.
You ignore what you don't like and make obnoxious comments. We expect better from "experts."
Posted by: john massengale at Jul 27, 2005 11:15:15 PM
First off, find me a Gladstone Capital where there is an equity analyst. The one I found loans to small companies. I would be more than happy to call the person to confirm his statement, it is what I do for a living(that is I work in finance). Also, I'm from CA and talk like that.
So, you question why I didn't go to the source? How much closer to the source do you need than the trade numbers and cost of goods sold? I even called somebody tonight who analyzes retail companies who said these numbers were a joke. Yes, cost of goods sold does include transport, but it a small amount. It certainly isn't the hundred plus billion dollars these numbers suggest.
Face it, these numbers are made up . Also, Kevin has a much better demeanor than me, I'm a nasty and cantankerous person(I'm serious about this). I'd be impressed if you could actually quote something other than NPR/PBS or some union. Neither Kevin nor I are interested in sugar coating anything Wal-Mart does, it is the fallacies surrounding the compamy we have a problem with.
Posted by: Bob at Jul 28, 2005 1:50:51 AM
Yes, you've got plenty of bluster. That's good for a macho pissing contest, but it doesn't do much for finding the truth, which is what "Always Low Prices" is supposed to be about.
You're the only one to mention Gladstone Capital, but that's not the be all and the end all. At the same time, you ignore what doesn't corroborate your preconceived answer.
Frontline is a well respected program. Hedrick Smith is a well respected journalist. Using a couple of points to shoot from the hip while ignoring what they say is not good enough.
I referred to someone in the show who had an interesting counter to what you said, Duke professor Gary Gereffi. On the program (and the website) he said,
I interviewed people in Wal-Mart's global procurement center in Shenzhen, and I asked them about the total number of Wal-Mart suppliers. And I was told that Wal-Mart has 6,000 global suppliers. Eighty percent of those suppliers are in China.
Knowing from the program that he's a Duke professor, it took me all of 2 minutes to find his e-mail address, and another minute to write to him (see below). Since Always Low Prices' purpose is to get to the facts, is there a reason why it can't take 3 minutes to go to the source?
Dear Prof. Gereffi:At a blog called “Always Low Prices” , some economists and economic students are questioning your Frontline quote, saying there are 61,000 WalMart suppliers (rather than 6,000 ), and that US suppliers were paid an estimated $100 billion last year, versus the $18 billion paid to Chinese suppliers.
They base their estimate on WalMart’s sales and Chinese sales to the US. They don’t comment on US companies paid for work done in China.
Do you have any comments on why the very large disparity between what they’re saying and what you’re saying?
Thanks,
John Massengale
Gereffi also said:
In 1995, 6 percent of Wal-Mart's total merchandise was imported. Today, in 2004, 60 percent of Wal-Mart's total merchandise is imported.[Yes, that's a different figure. There is some question here.]
But Wal-Mart also sources indirectly from China, because many of the brands that are sold in Wal-Mart, like Hasbro and Mattel and [others in] the toy business, those companies also have China factories. So in a sense, Wal-Mart's share of Chinese goods is multiplied. It's got the products it imports directly and the products that it sells through other, branded manufacturers who themselves buy their goods from China.
So what do you guess Wal-Mart's real imports from China are if you put direct and indirect together, $30, $40, $50 billion?
If we put direct and indirect imports together, Wal-Mart could have -- if Wal-Mart's direct imports from China are $15 billion last year, I think its direct and indirect, its total imports from China could be two or three times that number. ...
Someone else on the program makes the point that profit on many of the Chinese items is very high, sometimes as high as 80%. Add 80% to $45 billion and ...
There is more going on here than is allowed for in your simple equation of WalMart's payments to Chinese and American suppliers.
Posted by: john massengale at Jul 28, 2005 11:17:30 AM
So, you still don't get anywhere near the total amount of goods sold. That's the whole point of the discussion, the 70% percent number is still aggressive. WM would, as Kevin pointed out, account for the overwhehlming amount of imports from that country. The Duke Prof doesn't exactly support your claims, he just restate something that neither of us has denied, that the trade number is too low because of indirect imports. He doesn't state anything that would support the 70% number.
How does adding 80% to 45 billion get us anywhere we need to be to justify the number. You engage in a fallacious arguement by assuming that all products earn 80% net margins and the number that should be used is 45 billion. But that isn't added to the cost of goods sold. That additional money goes into gross profit and is irrelevent to the issue at hand. Do you have any idea how much WM makes in a given year. I'll give a hint in that the company's profit margins are in the low single digits.
Also, I notice you didn't ask him the direct question, which is the real issue at hand, does 70% of goods come from China. He offers a 60% number for all good at WM being imported. This closes the case doesn't it, even your source can't come to a 70% for all imports!!!!!!!!!!!!!
Posted by: Bob at Jul 29, 2005 12:03:34 AM
You've made it clear you're not interested in getting to the bottom of the situation, just asserting that you're right and others wrong.
The point is not to prove that 70% is wrong (something we still don't know), but what the real number is. To that you've contributed nothing.
You say,
The Duke Prof doesn't exactly support your claims, he just restate something that neither of us has denied, that the trade number is too low because of indirect imports. He doesn't state anything that would support the 70% number.
1) You haven't denied, OR until now acknowledged it. You've just doggedly stuck to your original point, regardless of what is said.
2) He says that 80% of the suppliers are in China. That doesn't support the idea that 70% of the goods might come from China?
One possibility is that "global suppliers" means "not American suppliers" (which would be a poor use of language, but we are dealing with WalMart). You make no effort to deal with any of this, but just keep on hammering your original point.
You make a mockery of Always Low Prices' claim to be the objective place that will search out the truth. If you turned in a paper like this, you'd get a D.
Posted by: john at Jul 29, 2005 9:28:44 AM
John, to clarify my point / observation; that Wal-Mart is able to distribute the Supercenter evenly across a city after eliminating other retailers in-between forcing the customers "to drive long distances to get to the WalMarts, in effect becoming part of the store's transportation system." The Supercenter becomes a large scale infrastructure, because they force the customer to drive the longer distances andthe customer can get more of what they need at the Supercenter because of the wide range of merchandise and services available. I don't think their is anything urban about it in the traditional sense, but i think it is VERY urban in the contemporary sense, given most people in most cities drive everywhere they go today.
Posted by: Geoff DeOld at Jul 30, 2005 8:20:44 PM
Sure, but "urban" doesn't mean "the way we live today," and sub-urban activities aren't urban. The only WalMart that's not sub-urban is the original.
Posted by: john massengale at Aug 1, 2005 12:24:03 AM
