Wal-Mart, the world's largest retailer, is poised to enter the Indian market. Campaigner Wade Rathke warns against the predatory practices of Wal-Mart, whose business model, he says, is notorious for driving out competition and slashing labour costs
Wal-Mart is the world's largest corporation, with an annual turnover of $ 345 billion. It surpasses oil giant Exxon Mobile and Coca-Cola. Two years ago, the company set its eyes on the Indian market, and met with Prime Minister Manmohan Singh in this context.
US CSOs warn that the Wal-Mart business model is notorious for driving out competition and slashing labour costs. To counter its impact, the US public has come together to form an organisation called the Association of Community Organisations for Employment Reform (ACORN). Its founder and chief organiser is Wade Rathke, who visited the capital recently to attend the India Social Forum, where he made an impassioned plea against allowing Wal-Mart easy access into India. An interview.
How old is Wal-Mart?
Wal-Mart started as a dollar store set up by Sam Walton some 45 years ago, in the state of Arkansas. From the start, these stores have been located in rural areas from where they moved to suburbia as opposed to the larger American cities. Even today, 70% of American cities, including New York and Chicago, do not have Wal-Mart stores.
Sam Walton's basic strategy was to announce the lowest prices possible on a daily basis. He did so by buying in bulk and then selling cheap. Initially he used to say: "Buy America, buy cheap". But of course today the company is outsourcing stuff from across the globe. They sell everything from tools, textiles and jewellery to toys and grocery. China is their single largest trading partner and last year they bought $ 19 billion worth of goods from that country alone.
Wal-Mart has set up major sourcing operations in 60 countries including China, India, Bangladesh, Pakistan, Indonesia, Sri Lanka, the Philippines and Thailand. They were responsible for bringing the wages of Chinese workers down from 31 cents an hour to 13 cents an hour.
How strong is their presence in India?
They have set up supply chains in Bangalore, from where they are sourcing textiles and jewellery. Ultimately, of course, they plan to source several items out of India.
They started as a departmental store but today they are the largest grocery store in the US. What that means is that they get products at the cheapest rates possible from around the globe. Earlier, in the US, we used to get oranges from California and pineapples from Hawaii. Today we get our pineapples from Malaysia and the Philippines because labour costs there are much cheaper. In the same way, once they enter the Indian market, if they find Vietnamese tea is cheaper they will flood the Indian market with tea from that country. If in the process the Indian tea market is destroyed, not much can be done about it.
It is because of their predatory practices that the Philippines has imposed 'sourcing' and reciprocity requirements on foreign retailers. In less than 10 years of entering Mexico, Wal-Mart had gained control of 50% of the market. No wonder eight countries including Mexico, Brazil, Argentina, Uruguay, Chile and Costa Rica got together and brought in new legislation to prevent Wal-Mart from opening too many stores in their countries. In fact, in some parts of Argentina, lawmakers have legislated that no business will be allowed to control more than 30% of the market in a single sector.
How did ACORN come into existence?
ACORN was founded 36 years ago. Most of its members belong to working families. They pay dues to support the organisation. We are working in the field of affordable housing, minimum wages and the removal of racial discrimination.
What led the American public to campaign against Wal-Mart?
The ACORN campaign started in earnest only three years ago, although the public has, in the past, expressed apprehensions about Wal-Mart's style of operation.
What approach did ACORN adopt to stop Wal-Mart's expansionist drive?
We found that wherever a Wal-Mart store comes up, crime in that area goes up. Studies conducted on this business model brought several disturbing trends to light. For one, since the stores are located far from residential areas, people need to drive there in order to shop. The police chief of the city of Orlando, in Florida, has testified in court how difficult it is to manage the huge volumes of traffic that come to these areas. The highways cannot carry so many cars. This is an issue that should concern India because you already are facing gridlock with too many cars on the roads.
Wal-Mart's parking lots have also been found to be dangerous. We believe that there has to be some restriction on size. These 'big box' operations, where a store is between 70,000-90,000 square metres in size, raise issues of sprawl and its impact on the environment. The entire building of a suburban infrastructure around these stores is done at the taxpayer's expense. It is not as though Wal-Mart's spending money to develop the area.
In the US, environmental studies show Wal-Mart up in a poor light. We are insisting that if a community is already being serviced by a retail model, another should not be allowed to replace it.
What kind of business model does ACORN support?
The business model we support is not very exploitative. Take the case of Costco that began as a membership store where one had to be a member in order to avail of its discounts. Workers employed there received better wages and could also avail of several benefits.
How do you put pressure on Wal-Mart?
Wal-Mart is presently known to be opening a store a day. We have developed a predictive piece of software that indicates their growth areas. We target communities in these areas to make sure that they come together to prevent the stores from coming up. We have found that if we get Wal-Mart to obey the rules, they prefer not to build. No organisation is invincible. In the US, many of their workers were not getting paid. So they joined hands across 30 states and sued them, and then went on to win.
Wal-Mart is also being forced to leave countries where they had entered. They have recently moved out of Germany and South Korea. In Germany, local MNCs were offering better discounts and Wal-Mart could not cope.
How do you see the situation developing in India?
India needs to learn from our mistakes. Retail is the world's largest industry and is presently being controlled by a handful of powerful corporations. India has over 12 million small kirana stores where traders, hawkers, street-sellers all earn a livelihood. The government must not amend the FDI laws, otherwise millions of people will be rendered jobless.
I have been talking to the BJP and Left leaders. They agree that India is the last giant market left in the world. All the more reason for you to come together to protect it.
InfoChange News & Features, November 2006