Royal Velvet died this year. Most people have no idea what Royal Velvet was. It was a line of sheets and towels that was manufactured in the United States. It employed people in the South and put food on their tables, and a roof over their head. It died because it could not compete on price with the goods that are being manufactured abroad and sold in companies like Bed, Bath & Beyond, Wal-Mart, and Linens ‘N Things. It died because the big box retailers have two very demanding mistresses.
On the one hand, a company is beholden to its shareholders first and foremost. The main purpose of a company is not to provide jobs to its employees. The main purpose is to maximize the profit to its shareholders.
The other mistress that a big box retailer has is the customer. In order for a company to return the highest profit to its shareholders, it must have customers. It must steal those customers from its competition, however it can, in whatever legal way possible. What the customer wants is what the company must provide.
Sam Walton, founder of Wal-Mart, was great at this. He was a phenomenal leader of people. He laid the foundation for a company that today is the largest retailer in the world. Sam once promised his employees that if they gave him a certain profit margin by the end of the year he would do the hula in February on Wall Street. They did and he did. Today, Wal-Mart is a powerhouse of marketing might.
Wal-Mart it either the greatest retailing success story ever, or the most dangerous evil to beset the free market. It is simply a matter of which side of the street you are on. As a business observer, I find it to be an amazing organization that is steamrolling over its competition at a rate that is inspiring. As a lawyer, I see that they push the law to its limits to achieve their goals. As a consumer, I find their sales remarkable. As a thinking human being, I find them very dangerous to the American economy.
It is our desire to be able to go to Wal- Mart and buy a pack of socks, six for $5, that is the cause of the job loss for the American workforce. Americans want to have our cake and to eat it too.
Remember September 11? Right afterward, when patriotism was running so thick you needed a knife to cut it? How many people were waving their American flags that had been manufactured in China? Lots. We are a country that likes to live large and we don’t particularly want to pay for it.
We all want good schools, more police and “for god’s sake will someone please do something about the homeless, but don’t you dare raise my taxes.” We all want more jobs in America, but if the choice is between those Royal Velvet towels at $2.50 apiece or those others that are 20 cents cheaper, we buy the cheaper ones. We don’t consider that those cheaper ones are coming from China, Taiwan, Malaysia, or “one of them countries over there.” We don’t consider that we express our patriotism when we spend our money in a Wal-Mart, a Bed, Bath and Beyond or a Linens ‘N Things.
It’s a simple process. The consumer needs things, the retailer finds out what is needed and what people are willing to pay for it, and then he provides it, makes a profit and sending the money to the investors.
The CEOs make the big salaries because they are able to source the product for sale that the American consumers want. The little guy is the one dictating what is sold and for how much. And yes they make huge salaries, but who is paying those salaries? Not the consumers, but their investors —the ones who should receive more in their annual dividends. But whether or not the CEOs make a big salary is not what costs jobs in America.
The sad part of this is that so many of the consumers at Wal-Mart are the same people who are being phased out of their own jobs, and are not even aware that they are causing their own unemployment. I could be wrong, but I don’t think that the John Grassos, the Gary Winnicks and the Ken Lays of the world are really buying all that much at Wal-Mart.
There is much wailing these days and gnashing of teeth at the evils of the CEOs and their big paychecks, as well as at the loss of jobs and downsizing in America. People want to blame the CEOs and their endless greed as the source of the troubles in America. But it is the soccer moms who pull up to the Wal-Marts of the world and demand that they be able to buy 50 pounds of dog food for $25 (and throw in a stack of those cute seashell design towels fresh off the boat from China) who are the cause of the loss of jobs in America. It is the endless pursuit of having more that has put us in the position we are in.
Wal-Mart is one the largest importers of goods that are manufactured in China coming into the U.S. They are one of the largest outlets for the goods that are manufactured cheaper abroad and distributed to the hoards of Americans who pack their Chevy Suburbans full with Tupperware knockoffs, T-shirts from Jamaica and 15-pound containers of laundry detergent. They are the ones who are doing us in.
So long as we want to buy more and pay less, it will continue this way. And one day we’ll wake up and realize that our manufacturing has moved offshore, but at least we can buy a 100-pack of plastic cups for $2 in fashion forward colors, and that they come with color coordinated bath towels.
CNN interviewed customers out in front of a Wal-Mart last week discussing this issue. Most people said they did not like the way in which the company did business, but they continue to shop there because they like the bargains. This is a company that doesn’t pay union wages, doesn’t provide health insurance to its employees, is under federal investigation for using illegal immigrants through subcontractors and has begun a program of private labeling its own goods, which directly compete with the name brands that it used to sell, thus putting American manufacturers out of business.
As Americans, we want our gas below $2 a gallon, our milk at $3 a gallon, our employers to provide our health insurance, our government to provide our schooling and our property taxes to go down.
Stephen Burd, the CEO of Safeway, is playing hardball with the unions right now. He’s worried about the 40 Wal-Marts that are slated to come to the Southern California market. He says it’s a real danger for his company. Some people think that he is just union busting. I don’t know about that, but I do know that Royal Velvet died this year, and that the majority of the people who voted for our new governor are more likely to shop at Wal-Mart.
We have met the enemy, and he is us. (David Pisarra is a partner in the Santa Monica law firm of Pisarra & Grist, he welcomes questions, and can be e-mailed at).
Originally published in the Santa Monica Daily Press print edition on October 28, 2003. Read the original PDF.