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  1. #1

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    Default Walmart and my town...

    I saw this on another BB and can see it happening right here in my little town. It's a shame - but I can't see how small business can survive this onslaught...

    The post is very long so please endure...

    DrDan

    WHERE IT ALL STARTED
    Bentonville, Arkansas has, according to its Chamber of Commerce, two claims to fame. It was the sight of the Battle of Pea Ridge - "The battle that saved Missouri for the Union" - during the US civil war. But right on the heels of Pea Ridge is Sam Walton's variety store in downtown Bentonville. This is where the Wal-Mart juggernaut began.
    The store that would become the largest retail chain in the world opened its doors in 1953. In less than fifty years, Wal-Mart has opened almost 4000 stores in the US and seven other countries including the People's Republic of China. Wal-Mart has 144 stores in Canada, 12 of them in BC.

    Wal-Mart came to Canada through a buy-out of Woolco stores across the country. But Wal-Mart did not buy the whole Woolco chain. Those Woolco stores that were under UFCW contracts were not purchased. Instead, they were closed, throwing hundreds well paid union members out of work. Wal-Mart's notorious anti-union philosophy would not allow the retail giant to keep people employed at fair wages in communities where the jobs were desperately needed. But ignoring the needs and prosperity of the community is a hallmark of Wal-Mart.

    A SIMPLE FORMULA

    There is nothing complex or mysterious about how Wal-Mart has become the largest retailer in the world. Here is how it generally works:

    Wal-Mart looks for large parcels of land on the outskirts of a community. They look for land zoned for industrial development because it is the cheapest land to buy.

    Most often a community does not even know that Wal-Mart is interested in their community. The company hires developers to act as a front for it, buying the land under the developer's name.

    After the land is either purchased, or an option to buy, for industrial prices, the developer shows up at the local municipal council applying for a zoning change for the land from industrial to commercial. If such an application is successful, two things happen: first, the value of the land Wal-Mart just purchased automatically increases (Wal-Mart has made money before they build a "big box"); even if the community does not want a Wal-Mart, they have one.

    Wal-Mart then builds two things on the land, a big box structure (some as large as 220,000 square feet and more), and a mega-parking lot. Wal-Mart thinks landscaping is kerbs and white lines on blacktop. It is big and it is ugly. Once it has the four walls and the roof up it is ready for business! Sometimes Wal-Mart will scatter a few trees and shrubs around to satisfy city councils, and on occasion they have been forced to change the facade of the big box in order to secure the rezoning.

    When the store opens for business it will provide the broadest range of products at the absolute cheapest prices anywhere in the immediate market. Consumers living in communities from up to fifty miles away will travel to shop at Wal-Mart just based upon price alone. And they will travel by car, doubling, even tripling, the traffic experienced by the community before Wal-Mart came along.

    What Wal-Mart has built is a huge economic and social vacuum cleaner that will such the socio-economic lifeblood out of communities in a matter of a few short years. The whole economy and social structure of the community is all but destroyed. Virtually nothing goes untouched!

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    HOW DOES WAL-MART SELL SO CHEAP?

    Most retailers purchase the goods they sell from wholesale companies or distributors of specific lines of products. The wholesaler or distributor buys product directly from the manufacturer in much larger quantities than the retailer can so they get a better price form the manufacturer. The wholesaler/distributor then sells the product to the retailers in the smaller quantities they require at a marked up price. That mark-up is the wholesaler/distributor's profit. It is a system that has worked well since the industrial revolution. That is, until Wal-Mart came along.

    Wal-Mart is so huge that it buys direct from the manufacturer. In some cases, the retailing monster purchased all the product a manufacturer can produce. In most cases, Wal-Mart buys even more product than a large wholesaler/distributor can buy, allowing it to pay even less for the product than a manufacturer would charge a wholesaler/distributor. Now Wal-Mart can sell the product retail for even less than the wholesaler/distributor can buy the same product and sell it to other retailers.

    For example, a small book store located in the downtown shopping area of a community or in a mall may buy two or three dozen copies of the best selling book. Wal-Mart will buy tens of thousands of copies of that same best seller and sell them in their stores for less than what the small bookseller can even purchase them for from the publishing house. Consumers can buy the same book for less than the cost to the local bookstore so they stop shopping there. Slowly the small bookseller goes out of business leaving only Wal-Mart to sell the books. Then Wal-Mart raises the price on the books it sells.

    There are variations on this scenario, but the bottom line remains that whatever Wal-Mart sells is cheaper than any other retailer in the immediate market.

    There is no doubt that what Wal-Mart does is good for most consumers. But the value the consumer gets is only superficial. What consumers save on their purchases they will pay for later in many different ways!

    But at the end of the day, is Wal-Mart really cheaper than other retailers in a community? Studies of Wal-Mart pricing show that initially when a new Wal-Mart opens their prices are lower, but after competition is reduced prices rise to the levels they were at before Wal-Mart opened.

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    PREDATORY PRICING AND TIME TAKES CARE OF THE COMPETITION

    The truth of the matter is that Wal-Mart has no competition. Not even those retailers considered to be large by other standards can compete with Wal-Mart. Not even Safeway, Inc. has been able to successfully compete against Wal-Mart Food Centers in US. How then would Canada Safeway, Overwaitea Food Group, Westfair, IGA, or Coopers compete against Wal-Mart here? The reality is they would probably do no better than their American cousins. The number of retail outlets in a given community is based upon the number of consumers and the amount of disposable consumer income that exists in that community. As the population of a community grows, the number of retailing opportunities increases and new stores and businesses open to supply the needs of the increased population.

    In some cases a retailer will find a niche in a market that is not being satisfied by existing retailers and will open a store directed to that niche market.

    Wal-Mart operates from a completely different set of rules. Rather than determining whether or not the population of a community, or the projected growth of the population, can sustain another retail operation, Wal-Mart determines how successful it can be pulling the existing consumer bases away from other retailers in the community and driving those retailers out of business by selling products at lower prices.

    Studies in the United States show that it takes about three years for Wal-Mart to kill off any retail competition in a given community. The large retailers like Safeway, Inc. and Kroegers are usually the first to go along with the smaller regional chain stores. They have experienced Wal-Mart in other parts of the US and know that competing against the monster retailer is impossible. They've learned the hard way that they are further ahead cutting their losses right at the beginning. They close their store and sell off the land and buildings. When they leave, so do the people they employ and the good wages they earn.

    The traditional Mall is usually the second to go. Malls are based upon having a so-called anchor store, like an Overwaitea, that draws consumers to the location. While the consumers are at the Mall doing their grocery shopping, they might as well drop off the dry cleaning, get the shoes repaired, buy that new pair of jeans at the clothing store, and so on. When the anchor store goes, so do the customers, and one by one smaller stores in the Mall close until the Mall is empty. Meanwhile, the stores on Main Street struggle to stay in business. They use different marketing strategies, but they can't market if the consumers are driving to the edge of town to Wal-Mart. When Wal-Mart can sell a bicycle cheaper than the Ye Olde Bike Shop can buy it from the wholesaler, it doesn't take much time before Ye Olde Bike Shop is just a memory. And so goes the clothing store and the hardware store and the department store, slowly turning Main Street, Downtown, or whatever you call it in your community into an urban wasteland.

    But who cares? Consumers will get the cheapest underwear they've ever seen at Wal-Mart!

    The question is, do you want your community to be a healthy economically vibrant place that offer variety and social settings where people meet, stop and talk to one another? Do you want a community with small businesses that provide a livelihood for people who live in the community? Do you want to have jobs that pay a fair wage, provides benefits and offers a future? Or do you want cheap underwear.

    [return to top]


    EMPLOYMENT

    One of the first arguements you will hear, normally from municipal politicians and others in the community, in favour of Wal-Mart opening one of its big boxes in your community is that the opening of a Wal-Mart will create jobs.

    Not true!

    In fact, studies show that for every minimum wage part-time job Wal-Mart creates, the community will permanently lose 1.5 full-time jobs over a three year period. These lost jobs are normally ones that pay above minimum wage and provide benefits such as medical coverage for employees.

    The jobs offered by the small businesses in your community are normally jobs that pay above minimum wage and offer some level of benefits to employees.

    But more than that, they provide entry level jobs for young people in the community. They teach young people how to work. They teach them about small business. Wal-Mart will eliminate this critically important economic benefit from the community.

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    THE TAX BASE WILL INCREASE

    Another arguement from the municipal politicians, and another one that is not true!

    First, the community has to pay to service the land Wal-Mart will occupy. Roads, traffic signals, water, sewer, policing costs and fire fighting services all have to be paid for by the taxpayers.

    Wal-Mart will pay taxes, but they won't pay enough taxes to offset the tax losses as business after business closes in the community. Empty stores and Malls don't pay taxes.

    The tax burden must then shift to homeowners to maintain the services the community needs, or those services have to be reduced.

    Wal-Mart wins again!

    A relatively new phenomena in land re-zoning and development is the Amenities Package.

    The power held by a Municipal Council over the zoning of land within a community can be looked at like an asset in a business. Land zoned industrial is not worth as much as land that is zoned commercial. For sake of argument assume that a piece of land zoned for industrial use is worth $1.00 a square foot; the minute the Municipal Council rezones the land to commercial use the value rises to $3.00 a square foot. Before any buildings go on the land or any other improvements are done to the land its value has increased by $2.00 per square foot. The community receives no revenue at all from this increase, but the purchaser of the property makes a $2.00 per square foot profit based entirely on the rezoning.

    A growing number of municipalities believe that the community should receive some benefit from the windfall profit a developer realizes from the rezoning of land. To realize this benefit communities have instituted a policy of receiving from the developer what has come to be called an Amenities Package. The Amenities Package is a sum of money voluntarily given to the community in return for rezoning of land. Some municipalities, like Vancouver, have developed a formal range of value for Amenities Packages based upon a number of criteria. The range is from a low of $3.00 a square foot to a high of $6.50 a square foot with the norm being around $5.50. Other municipalities set Amenities Packages based upon individual cases. For example, Courtenay on Vancouver Island required one developer to pay $700,000 in amenities for property where a Real Canadian Superstore was built, yet, accepted a $50,000 Amenities Package on a much larger piece of land where the developer wants to build a Wal-Mart big box. Courtenay City Council gave no reason for the huge disparity in the two packages. But it would seem that a corporation like Wal-Mart, earning billions of dollars in profit each year would be in a position to pay more than $50,000.

    But Wal-Mart sees no point in paying amenities to a community where it may end up closing the store in eight to ten years.

    [return to top]


    TRAFFIC

    Wal-Mart doesn't build a big box store to serve just one community. Part of the plan is to draw customers from other communities within a twenty five to fifty mile radius around the store.

    Located on a main highway, the only way for consumers to get to Wal-Mart is to drive. That means the vehicle traffic in the community where the store is actually located can double or even triple overnight.

    Traffic moving through a community that was never planned or developed to handle a massive increase in vehicle traffic will create a nightmare for local residents.

    To cope with the increased traffic, the community must expend huge amounts of tax dollars to widen and build new roads to ease the pressure the increased traffic will create.

    Recently Wal-Mart applied for re-zoning for land located in a residential neighbourhood in Surrey B.C. The traffic study required by City Council showed that traffic would increase in the neighbourhood by an estimated 7000 vehicles each day, seven days a week. Many believe this study was inaccurate and that the increase in traffic would exceed 7000 vehicles a day. Surrey City Council refused to rezone the land and thus protected the neighbourhood.

    [return to top]


    THE ENVIRONMENT

    Internal combustion engines pollute! Even with the major strides made in pollution reduction technology, the family vehicle spews pollutants into the air and leaves a trail of pollution on roads and parking lots wherever it goes.

    Motor vehicle pollution hurts the environment and health of people. Gasoline, oil and lubricant that leaks from engines gets washed into the sewers, finds its way into creeks, streams, rivers and oceans.

    Doubling the motor vehicle traffic of any community virtually overnight will have a harmful impact on the local environment. In addition to motor vehicle pollution there are other environmental concerns that should be addressed. Large tracts of vacant land on the edge of a community often are home to all kinds plants and creatures.

    In addition development of one piece of land can have a serious environmental impact upon adjacent land.

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    WAL-MART DOESN'T SELL GROCERIES

    The fact of the matter is that Wal-Mart does sell groceries! Wal-Mart is the largest grocery retailer in the United States. Eight years ago, Wal-Mart was not in the grocery business, now the corporation captures fifty percent of the growth in grocery retailing every month. From no market share at all eight years ago to the largest grocery retailer in the country says Wal-Mart does sell groceries.

    But Wal-Mart Canada says it is not going into the grocery business. Just like it told the people of Kamloops the company was not interested in building a big box in that community. And, the people in Cranbrook, who asked Wal-Mart to build in their community, that they were not interested in building a store there either! The Wal-Mart in Kamloops is nearing construction and the one in Cranbrook is on the drawing board.

    Wal-Mart rarely allows something as simple as the truth to stand in the way of its expansion plans.

    Wal-Mart will sell groceries! The stores they propose all have 30,000 to 40,000 square feet of, "future expansion", space noted on the site plans. Just enough space to expand their existing dry grocery sales into full grocery sales. And when they do expand into grocery sales thousands of people across the province will lose their jobs as their employers close, unable to compete with Wal-Mart.

    [return to top]


    SMALL BUSINESS CAN ADAPT

    It's a nice thought. Very entrepreneurial. But it's been tried and it just doesn't work!

    Virtually the only way a small retail business can adapt to compete with Wal-Mart is to make sure that it is not selling anything that Wal-Mart sells. The problem is, Wal-Mart sells virtually everything!

    Some small businesses manage to hang on for a while. Those that have been is business for ten years or longer can normally survive for up to three years after a Wal-Mart opens.

    There are a number of cases in the US where a local family owned retailer has survived two world wars, a couple of major depressions, and a handful of recessions only to collapse under the juggernaut call Wal-Mart!

    The myth Wal-Mart tries to sell to small business that it draws more traffic to a community and therefore increases business for small business is just not true! It draws increased consumer traffic all right, but it locates its Big Box so that traffic comes directly to its store and is kept as far away from Malls and Downtown stores as possible. Small business people simply cannot survive against Wal-Mart!




  2. #2
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    Default Re: Walmart and my town...

    I'll be honest, I didn't read thru the entire post, but I scanned it and I have heard most if not all these arguements before. The best I could say is that they are one-sided. There is of course the other side of the arguement where experts that are not anti-walmart could argue quite convincingly that each and every critiscm is bogus and have reams of facts to "prove" their side as well.

    Everyone would be best to listen to both sides of the arguement and be skeptical of the "facts" from both sides because in all likelihood, the truth is in the middle somewhere and the "truth" may vary according to which walmart store you are talking about (i.e. the effect of the small retailers in one area may or may not be the same as the effect on the small retailers in another area).

    I personally come down on the side of walmarts as providing more benefit than drawbacks. The biggest arguement against walmart always seems to be that they charge less money and therefore the surrounding retailers can't compete...that is pobably true. BUT, as a consumer, I WANT the lowest prices, and I WANT the convenience of getting most of what I need at a single store. When I go to Walmart (my wife actually) we KNOW she doesn't even need to do any price comparisons anymore...they have the LOWEST prices. No need to see if the CVS across the street has a better price, just buy it at walmart and you know you saved money. (Again, this could vary by area, I supopose, but it is defintely true in my area).

    I do of course feel sorry for some of the small business that get hurt financially when a walmart moves in, but I just don't understand how anyone can argue that a reason to keep walmart out is so that smaller business can charge MORE for the same products. In other words, promote the financial well being of the small business owners over the financial well being of the the thousands or tens of thousands of retail consumers. A lot of people that shop at walmarts are poor to middle class; why shouldn't those people have access to the least expensive products available if someone is willing to provide them? Why should consumers support another business that charges 10%, 20% or 50% more for the same product?

    Bottomline, if consumers didn't like what they were getting at walmart, they wouldn't shop there, and if they didn't shop there, than walmart wouldn't continue to be so sucessful. The consumers have spoken and at least for now.

    PS: I run a very small business myself, and I compete directly with much larger companies every single day. If I went to one of my customers and told them I need to charge more than the other bigger vendors that provide the same services because I am a small business, they would laugh me out of the place. I either need to charge the same, provide a better service or both. I don't expect a customer to pay me more than someone else just cause I am a small vendor.


  3. #3
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    Default Re: Walmart and my town...

    I completely agree with you Dan and in a small market like the town that we live in Wal-mart has done to a t what you describe. Our local mall is down to Menards and a few other places. Strip malls are also nearly empty. Shopko, Kmart, etc. are all gone now. Just three years ago every retail space in town was full. Now all around Wal-Mart looks like a ghost town. Drive down the road anyway from Wal-Mart and there are four grocery chains that are out of business. We now have two to choose from. There are virtually no clothing stores left and very few stores that compete with Wal-mart in anyway at all. Farm & Fleet which has never closed a store is suffering from Wal-Mart. As far as prices go Dr. Dan is exaclty right. You go to the Wal-Mart in the big cities about 30 miles away and the prices are much lower than they are in our town. You can't buy alot of the same products for the same price there. The myth of Wal-Mart always having the lowest prices is just that. They don't even have the same prices from store to store. There have been numerous write-ups in the paper about the economic effects of Wal-Mart.

    EJB the problem that I see with Wal-Mart is that they don't play on a level playing field. When Wal-Mart has gotten to the point that they can control the buying and distribution of product they are no longer fairly doing business. Think about it for a minute. If the sole purpose of every company in the USA was doing what Wal-Mart does in little time at all there would be no competition. There would be one corporation for everything that we needed. It's already happening with many businesses. Yes you get the cheapest price but at what price? As far as mostly low income people shopping wal-mart that is simply not true. You can look at Wal-Mart's own figures and marketing analysis. They look to pull every category of people in. At least in our community they do just that. I'm sure if you had to compete on an unlevel playing field in your business you would have a different opinion.


  4. #4

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    Default Re: Walmart and my town...

    I agree with what you say but I rarely ever shop in Wal-Mart. I am very particular what I buy.

    They don't carry anything for the farm. Do they have tractors, balers or even a SMV emblem?
    They don't have good quality clothes. I can get better quality clothes for less money at the local outlet shops.
    The electronics are usually the lower quality stuff. When I buy something it's for the long haul. It's got to last many years. I've had the same Sony TV since 1986. Would a Wal-Mart brand TV last that long?
    Do they carry Amsoil?
    I eat vegetarian and prefer organic. Wal-Mart food stores have nothing at all for me. I'd rather eat dandelions from my lawn than food from Wal-Mart.

    The list goes on and on.
    Obviously Wal-Mart is geared to appeal to the majority of shoppers.

    So, then are you really saving money buying lower quality merchandise at Wal-Mart? Maybe in the short term.


  5. #5
    Epic Contributor Bird's Avatar
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    Default Re: Walmart and my town...

    OK, DrDan and Cowboydoc, I agree with everything you've both posted. I've seen it happen in my area, too. I've also seen at least one instance in which Wal-mart came into a small community, put all the little local stores out of business, and then closed down the Wal-mart store. That made the folks in that community have an extra 20-25 miles to drive to the next nearest Wal-mart.

    So . . ., since we agree that it's a bad situation . . ., what's the solution?

    Bird

  6. #6
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    Default Re: Walmart and my town...


    As a precursor - this post is not meant to intentionally fire people up!

    I disagree with the Wal-Mart post. All we are seeing with the economy of scale of WalMart is capitalism at its best. Why do you think that America's large companies such as Intel, GE, CitiCorp and others are so successful?

    The real message from my position is that we should be looking at how communities avoid relying on the classic low-wage jobs.

    If Wal-Mart encourages more people to go after that high-school diploma, or to train for a more skilled job by changing the economic landscape -- then I am all for it.

    Patrick


  7. #7
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    Default Re: Walmart and my town...

    Hmm. Wal-mart offers one-stop shopping, giving me more time to <font color=orange>enjoy my tractor!</font color=orange>[img]/w3tcompact/icons/smile.gif[/img] I guess I like that!


  8. #8

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    Default Re: Walmart and my town...

    Bird - That's ok. I wish ours would close down and move 25 miles up the road and trash another local economy. I'd rather drive 25 miles for the junk they sell and have a little more local economic stim than what we have now.

    Being a small animal veterinary hospital I see and believe in the trickle down theory. All the small businesses emply people - People that come and spend money at my small business - In turn I go to their business and spend money.

    Walmart actually eliminates these jobs and the money doesn't stay in the community.

    My point is this - communities need to know who is buying the land and in turn have the choice if they want a "Walmart" Box built in their area. I doubt it if our community would have allowed it if they had only been aware of what was going to happen.

    Dr Dan


  9. #9

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    Default Re: Walmart and my town...

    Dr. Dan,
    I also have a lot of issues with Wal Mart. I'm in the fast food business so I'm not too happy about Wal Mart putting a McDonalds into our local store. I also don't like the way they "heavy hand" the suppliers in their grocery stores. Part of the way Wal Mart keeps lower prices in their grocery unit is not by paying a lower wage, they simply don't hire people. Wal Mart doesn't provide employees to pull a lot of product up to the shelves. The dairy, bread, chip, soft drink, & etc. companies that service Wal Mart have to provide their own people to pull product up from Wal Mart's store room to the shelves. These companies usually have to hire extra people to fulfill this requirement. Wal Mart's position is "if you want your product out on the shelf where customers can buy it, you provide the people to put it there". Now, with that said, I also admit that I spend a lot of money at Wal Mart. Not so much because they have a cheaper price but,
    1. They have the products I need or want.
    2. They have a fair selection of the same type of product.
    3. They do a pretty good job of standing behind what they sell.
    4. And the biggest reason: They're open when I need them to be.
    Small business can compete with Wal Mart. Not in pricing, but in SERVICE. Ever try to find someone at Wal Mart who can answer a technical question about a product for you? If you want a new experience, try buying a gun from Wal Mart. Most of the people in their sporting goods sections don't know which end the bullet comes out of. Small business can compete by offering what Wal Mart can't. Service and personal attention. But mostly, small business needs to re-evaluate their hours of accessibility. The Wal Mart in our community is located in a town of about 20,000 people. I routinely hear small business owners griping about the damage Wal Mart has done to them. But what are their store hours? 8:00 am to 5:00 pm. Same hours most people work. If you're lucky, they open up on Saturday. Hardly any open on Sunday. I've suggested to some of these, that if they can't afford to pay employees for more than 8 hours a day, then start opening at 10:00 am and stay open until 7:00 pm, but at least make yourself accessible to the consumer. If I need to buy a new drill, I don't want to have to leave work during the day to go buy it. I want to be able to stop after work. By the time most people get off work, the only place still open is Wal Mart. (this one is open 24hrs a day) You can compete with the big guys. I'm a franchisee of a chain that has around 2000 total units. Compared to McDonalds, we're a bump on a log. You just have to offer the customer something that the big guy can't.

    Hoss


  10. #10
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    Default Re: Walmart and my town...

    My point wasn't that only low-income people shop at walmart, but plenty do, and my opinion is that nobody, especially low-income people, should be forced to pay more for a product if there is a company that is able and willing to sell it to them for less.

    We'll have to agree to disagree. I don't beleive walmart is playing on an unfair playing field. They started out as a small business many years ago and whatever formula they have been using for the last 10 or 20 (or more?) years apparently works. They couldn't always buy directly from manufacturers because they weren't always the 800lb gorilla they are now. They didn't just materialize as the biggest retailer in the country, they started out small and grew...a true American success story.

    And BTW, I do have to compete on an unfair playing field, for a lot of reasons. There isn't a level playing field for anybody, and never has been (and probably never will). The playing field is unfair, and once you realize that you do things to survive. I respect your opinion, lots of people share it including people in my own family; I just don't agree with it.

    And I stand by my orginal statment that if walmart wasn't doing right by their customers, they wouldn't be as sucessful as they have been. No company can grow forever if their customers are not happy.





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