11-23-2007, 01:23 PM
I think its time everyone take one step back and face some stark realities.
First and foremost, Wal-Mart decision to not build their Super Center had absolutely nothing to do with a negative business attitude towards businesses and everything to do with economics.
1. All the SuperCenters are able to maintain initial low prices because the cost of the development is partially paid for buy ALL taxpayers. Since Hawaii didn't grant any economic development subsidy, the cost of this development would be paid for by only those that shopped at the stores, not everyone on the island. If Wal-Mart can’t get massive infrastructure subsidies or outright government paying for a portion of the development, the shoppers will have to make up that cost in higher prices.
2. A SuperCenter is not a retail outlet only but also a grocery. Groceries require a larger percentage of full-time semi or skilled workers. The Big Island does not have the people. So they would need to bring in some and the cost of living makes it difficult to attract transfers on the low wages they pay. Additionally, part of their marketing for subsidies is that SuperCenters have a higher percentage of full-time workers. However those full-time workers will have to be provided health insurance. Since Hawaii is treating them like every other business, Wal-Mart can’t afford to give everyone health insurance as required because they traditionally pay just under the amount required to force the workers on government subsidized insurance.
3. Demographics play a big role. SuperCenters normally open in areas where a population of 200,000 is within grocery buying distance. The entire island is 150,000 and its unlikely someone will load up on frozen shrimp, TV dinners, cold milk, and eggs having to drive across the island to the other side. So they must realize the numbers never did add up. There are also a high percentage of people that they realized would rather buy certain local produced and fresher products. They also will need to stock products that may not be sold and with no alternative outlet, they may not be able to sell what people really want.
4. Wal-Marts SuperCenter distribution networks is the best in the world. It enables them to ship items efficiently from warehouse to store and from store to store. Think about this: When a product is approaching it’s expiration date, they could divert it from one store to another where lower prices may fool people into not checking expiration dates, thus making money on a product that might otherwise have to be discarded. But on he BI, what other grocery store do they have to play with and how long will it take to ship it from the BI back to Oahu? There distribution network requires dozen of store serviced from a short driving distance. That’s certainly not here. They also are having problems with their favored shipping process. Hawaii isn’t fast-tracking their shipments without inspection like they once did due to violations discovered. This adds cost to the shipments well as increasing the potential of shipment being rejected.
5. And the most important reason is Wal-Mart is running into problems with their business model. The days of arm twisting manufactures into selling at or below their cost are gone. With many other retailers starting to mimic their model, they are not as competitive as they once were. Manufactures are also finding that Wal-Mart is a bully and they are no longer bending over backwards. Wal-Mart’s low prices are actually higher for many products when you compare unit pricing, not just cost of what looks like two similar items. How many have discovered the slightly larger package but with a smaller net weight? If your were amazed at the bigger box and paid no attention to the actual unit price compared to other stores, you got taken like they wanted you to be taken.
Wal-Mart went outside their comfort zone with this center and was over their heads and they knew it. They rightful pulled the plug. But it had ZERO to do with how Hawaii treats businesses.
First and foremost, Wal-Mart decision to not build their Super Center had absolutely nothing to do with a negative business attitude towards businesses and everything to do with economics.
1. All the SuperCenters are able to maintain initial low prices because the cost of the development is partially paid for buy ALL taxpayers. Since Hawaii didn't grant any economic development subsidy, the cost of this development would be paid for by only those that shopped at the stores, not everyone on the island. If Wal-Mart can’t get massive infrastructure subsidies or outright government paying for a portion of the development, the shoppers will have to make up that cost in higher prices.
2. A SuperCenter is not a retail outlet only but also a grocery. Groceries require a larger percentage of full-time semi or skilled workers. The Big Island does not have the people. So they would need to bring in some and the cost of living makes it difficult to attract transfers on the low wages they pay. Additionally, part of their marketing for subsidies is that SuperCenters have a higher percentage of full-time workers. However those full-time workers will have to be provided health insurance. Since Hawaii is treating them like every other business, Wal-Mart can’t afford to give everyone health insurance as required because they traditionally pay just under the amount required to force the workers on government subsidized insurance.
3. Demographics play a big role. SuperCenters normally open in areas where a population of 200,000 is within grocery buying distance. The entire island is 150,000 and its unlikely someone will load up on frozen shrimp, TV dinners, cold milk, and eggs having to drive across the island to the other side. So they must realize the numbers never did add up. There are also a high percentage of people that they realized would rather buy certain local produced and fresher products. They also will need to stock products that may not be sold and with no alternative outlet, they may not be able to sell what people really want.
4. Wal-Marts SuperCenter distribution networks is the best in the world. It enables them to ship items efficiently from warehouse to store and from store to store. Think about this: When a product is approaching it’s expiration date, they could divert it from one store to another where lower prices may fool people into not checking expiration dates, thus making money on a product that might otherwise have to be discarded. But on he BI, what other grocery store do they have to play with and how long will it take to ship it from the BI back to Oahu? There distribution network requires dozen of store serviced from a short driving distance. That’s certainly not here. They also are having problems with their favored shipping process. Hawaii isn’t fast-tracking their shipments without inspection like they once did due to violations discovered. This adds cost to the shipments well as increasing the potential of shipment being rejected.
5. And the most important reason is Wal-Mart is running into problems with their business model. The days of arm twisting manufactures into selling at or below their cost are gone. With many other retailers starting to mimic their model, they are not as competitive as they once were. Manufactures are also finding that Wal-Mart is a bully and they are no longer bending over backwards. Wal-Mart’s low prices are actually higher for many products when you compare unit pricing, not just cost of what looks like two similar items. How many have discovered the slightly larger package but with a smaller net weight? If your were amazed at the bigger box and paid no attention to the actual unit price compared to other stores, you got taken like they wanted you to be taken.
Wal-Mart went outside their comfort zone with this center and was over their heads and they knew it. They rightful pulled the plug. But it had ZERO to do with how Hawaii treats businesses.