Is Wal-Mart Right for Socorro?

posted by Editor on 08-02-2003 20:11

Socorro, New Mexico is a place with a rich sense of history and tradition.  It is a simple uncomplicated town with a distinctly western flavor.  If you love rodeo, country fairs, small town swap meets, adobes, strawhats and western wear and , of course fajitas and dynamite chile - you'll find a way to love Socorro. 

All that mystique will vanish if we bring the Big Box Bandido into our neighborhood - lots of folks just don't want Wal-Mart in their communities. 

Libertysteward.com is proud to introduce our guest writer Donald L. Wolberg from Socorro and to reprint his incisive and provocative article on our site.

WAL-MART MAY ARRIVE: LIFE OR DEATH OF A TOWN’S LIFESTYLE

Donald L. Wolberg

Wal-Mart is a monster. Wal-Mart is a monster barreling toward Socorro and there will be changes if in fact Wal-Mart does show up in Socorro. Wal-Mart has gross annual revenues of about $250 billion each year and has passed Exxon/Mobil as the world’s largest corporation. At the Annual Meeting of Wal-Mart shareholders in Fayetteville, Arkansas June 6, shareholders were pleased that the company has $56.7 billion in sales for the first quarter of 2003.  Wal-Mart is very profitable and nets something like $7 billion each year and, of the 10 richest people in the world, 5 are members of the Walton family. 

I don’t hate Wal-Mart, I don’t hate big corporations just because they are big.  I regularly shop Wal-Mart, just as I shop Penny’s, Borders or Smith’s.  But Wal-Mart is a monster when it descends on a small community. With about 3,500 stores and about 1,600,000 employees (three times the number of employees that General Motors has), Wal-Mart is far and away the premiere retail supplier in the U.S. if not the world. But there are some things I just don’t understand about the Wal-Mart move this way down the highway.

NEARBY SUPERCENTERS AND WHAT IT COSTS

Firstly, Wal-Mart has recently opened a new Supercenter store in Los Lunas, all nice and tidy, and near a band new Home Depot. Wal-Mart has a Superstore in Belen, not so new, but fairly new. Wal-Mart Superstores seem to be pretty cookie cutter, all about 100,000 to 200,000 square feet in area, all well lit with big parking lots and thousands of things to buy. There is no building 100,000 square feet in Socorro proper (the Tech campus doesn’t count), but that’s more than two acres in area. Wal-Mart must be spending a fair amount to construct the building.  At about $100 per square foot to build and fit out with concrete pad, plumbing, lights, insulation, interior walls, plumbing, parking lot, permits, and everything else needed, not an unreasonable dollar amount, Wal-Mart must be spending $10 million on the project, just to build the shell.  Throw in another $1,000,000 or so for the land, fees, miscellaneous costs (a bit inflated perhaps given the fact that its Socorro), Wal-Mart will have $11 million dollars into the project before any merchandise has even arrived and before a single customer passes through those sliding doors and air blowers, hot in the Winter and cool in the Summer.  Wal-Mart will have to fill all that space with merchandise and 100,000 sq. ft. perhaps 25 ft. in height can hold lots of merchandise.  Conservatively, your average Wal-Mart Superstore should have an inventory of perhaps $7,500,000 on opening day.  All those light bulbs, mops, clothes, paint cans, bicycles, television sets, oil, tires, lawn furniture, lawn mowers, milk, tortillas, meats, etc., add up in value.  Of course, the inventory will be sold and new stocks purchased, so this inventory dollar number is a bit more complex and is a “rolling number.” When the doors open, the Socorro Wal-Mart will have cost at about $18 million, not counting employees. 

The average Wal-Mart Superstore may have some 200 employees.  At an average salary of $15,000 including benefits (Wal-Mart is not noted as a generous employer—cashiers seem to start at $6.25 per hour), 200 employees will add another $3 million each year to the cost of the store and our total has risen to $21 million. 

BUY AMERICAN?

All of us recall Wal-Mart’s “We Buy American” advertising campaign despite the obvious “Made in China” label on store products.  Today, Wal-Mart imports more than $10 billion in Chinese products each year.  Wal-Mart offers no explanation why it purchases from a country where workers earn 31 cents an hour, work 16 hour days and at peaks, work seven days a week. Wal-Mart has apparently relocated its purchasing headquarters to an address in China and not Arkansas or Cleveland or elsewhere in the U.S. Additionally, Wal-Mart continues to encounter many labor-related difficulties.  These difficulties span the range of hourly-wage disputes, not paying women the same salaries paid men in the same positions, and resistance to allowing workers to unionize.  It is reported that workers in 27 states are suing Wal-Mart for violating wage and hour laws. Employees in more than 100 stores are trying to unionize against company resistance. 

WHAT HAPPENS TO LOCAL BUSINESS 

The question of what happens when “Wal-Mart comes to town” has been looked at in some detail for both large metropolitan areas and smaller towns. The State of Maine offers many interesting parallels to New Mexico: economically depressed, population losses in smaller towns, most towns under 10,000 in population have deteriorating central districts and increasing vacancies.  But Maine also experienced declines in modern shopping centers and strip malls. Wal-Mart has had a long history in Maine and 20 communities were selected for a study to evaluate the impact of Wal-Mart on the economic life of those communities.  10 of these communities have populations less than 10,000; the majority with household incomes less than the State average. The conclusions of the Maine study were telling.  For communities of less than 10,000 population, the study showed that when Wal-Mart arrives, it does not bring retail prosperity to smaller communities.  Competing businesses suffer a loss in sales and find it difficult to compete. The areas that all suffered decline included consumer retail, building supply, food store retail, general merchandise, automotive products and even restaurant sales. 

NEW MEXICO COMMUNITIES

A useful tool for identifying retail trends is the “pull factor,” an index arrived at by dividing the community’s per capita sales by the state average per capita sales. If this ratio is more than “1” it indicates that retail sales are “pulled” into a community.  If it is less than 1, sales leave the community. For example, U.S. census data indicates that for 2002, per capita retail sales for New Mexico was $8,697. Per capita retail sales in Socorro County was $4,339 for a “pull factor” of 0.499.  This number strongly indicates that $2 in retail sales are leave Socorro County for every dollar spent here now.  A similar situation is seen in Valencia County (home of 2 Wal-Mart operations) where per capita sales of $5,411 can be contrasted against the State number of $8,697 for a pull factor of 0.622.  This again shows that local sales on the whole are spent elsewhere than in Valencia County.  By comparison the per capita retail sales expenditure for Bernalillo County is $12,372 for a pull factor of 1.42. thus, Bernalillo county is a powerful retail market as compared to other New Mexico counties.  It is likely that the gap in low “pull” for Socorro County and Valencia counties is because lots of folks from these counties like to shop in Albuquerque. 

Another equally significant fact emerges from this analysis. Valencia County has Wal-Mart. Yet, Valencia folks like to shop, go to movies or concerts (or gambling casinos) in Albuquerque, just as do Socorro folks.  Of course they still shop at the Belen or Los Lunas Wal-Mart Supercenters, but that seems to be quite independent of trips to Albuquerque.  They must be buying things at the local Wal-Mart Supercenters that they would have purchased at other local retail stores if the Wal-Mart Supercenters had not been there.  Groceries would have been purchased at local supermarkets, gasoline at local gas stations, prescription drugs at local drug stores, video rentals at local video outlets, toys at local toy stores, pet supplies at local pet stores, tires at local tires shops, paint and hardware at local hardware stores and gardening supplies at local gardening shops.  But those “other” stores are mostly gone or non-competitive with Wal-Mart and, as elsewhere, significant portions of these purchases have been gobbled up by Wal-Mart, largely to the detriment of competing outlets.  The total dollars available for necessary local expenditures has not increased locally, they are just being reallocated to Wal-Mart and not supporting local enterprises.  The major dollar magnet remains the Albuquerque metro market.  It is likely that the same situation will prevail in Socorro County. 

But what about larger, more affluent regions?  In June, the San Francisco Chronicle reported that nearly 200 communities have refused to allow Supercenter stores into their areas.  With a focus on the Contra Costa County area, where Wal-Mart Supercenter’s had recently opened, the results of the Chronicle story are devastating: 

“…Wal-Mart’s nonunion, big-box stores drag down other worker’s salaries, destroy downtown businesses, prevent smart-growth development and increase traffic congestion..” 

So major were the negative impacts of Supercenters on the region, that the County Board of Supervisors prevented an expansion of “small” Wal-Mart stores into Supercenters and placed a ban on new Supercenter construction in unincorporated parts of the county.  The San Diego County Taxpayers Association (SDCTA) completed a study that showed that when Supercenters came in, annual wages and benefits in the County declined between $105 million and $221 million, and public health costs increased $9 million.  The study further discovered that the region would have a decline in pension and retirement benefits of between $89 million and $170 million per year.  Even if sales and property tax revenues increased, the added costs of public services would never be realized. 

WHO PROFITS 

Who will profit by bringing Wal-Mart to Socorro. Certainly it won’t be the average Wal-Mart employee. The average Wal-Mart employee earns only about $15,000 a year and “Full-Time” at Wal-Mart seems to really mean 28 hours a week.  The Idaho Observer found that only 38% of Wal-Mart employees have health care benefits. Mother Jones recently reported how one Wal-Mart worker in a Paris, Texas Superstore earned only $16,800 a year ($550 each biweekly paycheck for take-home) after three years with the company.  She could not afford the health care benefits the company offered her ($85 each paycheck).  The Wal-Mart medical plan can cost $2,844 a year according to the Mother Jones report and is beyond the reach of many of the store’s employees.  It has been reported that a Wal-Mart Supercenter cashier in Salina, Kansas earns $6.25 and would take home $1,016 after deductions per month for 176 hours (most Wal-Mart employees work 32 hours or less a week), hardly a living wage for a family of 4. 

Immediately and locally, the land owners doing the “deal” with Wal-Mart will profit from the sale of their property. None of this money will benefit Socorro directly, unless those with new found silver in their pockets shop the local stores that will certainly soon be gone once Wal-Mart opens its doors.  The lawyers managing the deal to bring Wal-Mart to Socorro will also profit with no doubt generous retainers and fees.  Most likely the lawyers will be from other communities, however, and not local, so there’s not much chance the money they earn will be spent here.  The contractors pouring the concrete and paving the parking lot for the sire will also profit. Most likely, however, except for any concrete poured, all this money will be shipped elsewhere for spending.  The merchandise brought in to stock the new store will not be locally purchased, obviously, nor will the trucks that haul it all in. matter of fact, much or most of that stuff is manufactured outside of the U.S., so our balance of payments will not be helped.  Most of the management staff of the store will be brought in from elsewhere, and it is not likely that will they live here, although some eventually will purchase local homes to the benefit of the home sellers, real estate agents and the lawyers again.  The usual Wal-Mart Superstore has perhaps as many as 200 employees and perhaps 150 of these will be local folks. Unfortunately, it is likely that most of these “jobs” will be low wage. Wal-Mart has a terrible retention record for employees and some reports indicate a 100% turnover in some stores in a matter of a few years.  It is likely that most if not all of these local hires will not be newly created jobs but instead will largely replace jobs lost from businesses impacted or closed down by the presence of Wal-Mart. 

IMPACT TO LOCAL BUSINESS

What Socorro businesses will or will not be impacted by the new store is easy to determine. Most likely, government jobs (federal, state, city, county, education) will not be directly impacted. Superstores have the following sections or departments: everything found in a well stocked and large supermarket; a video sales and rental department; an eyewear department; a toy department; a hardware department; a clothing department, a paint and electrical department, a hardware department, a sporting goods department, a house wares department; a sewing department, an electronics department, a book and magazine department, an auto department, a gasoline island, a gardening department, a pet department, a prescription drug department, a school supply or stationary and office supply department; sometimes a dry cleaning department, and a snack bar.  The impact of the proposed Wal-Mart on local Socorro businesses will be widespread and significant.  It might be easier to list the businesses that will not be impacted. For example, Wal-Mart has no medical clinics or dental clinics; no bars with alcohol served although Wal-Marts Supercenters sell packaged liquors, and no lawyers, but there may be tax preparers.

Lets get back to the economics of the Wal-Mart Supercenter.  Somehow, Wal-Mart has to get back $21 million to cover its first year investment in the proposed new Superstore. There is a Supercenter in Los Lunas, so it is not likely that those folks will drive to Socorro.  Rumors have it that the Belen Supercenter is superfluous because of the opening of the Los Lunas Supercenter and will be converted to a Sam’s Club.  In order to pay back the $21 million invested in the Supercenter, 10,000 visitors to the store would have to spend $2100 each or 100,000 visitors would spend $210 each. Of course the mathematics of all this is much more complicated.  The $18 million open the door cost could be spread out over 10 years, perhaps.  But added to this would still be a $3 million salary cost each year ($30 million over 10 years). Merchandise costs of even $5 million per year for the store would add up to $50 million over 10 years. Utility and other overhead costs per year, $1 million, or $10 per ft. sq. per year, would add another $10 million over 10 years.  Taxes and other miscellaneous or contingency expenses, including advertising, etc., of about $1 million per year would not be unusual and would add another $1 million per year or $10 million over 10 years.  If accurate, Wal-Mart must retrieve about $100 million over 10 years to reach breakeven with this proposed Socorro Supercenter, or $10 million per year. How can Wal-Mart get $10 million per year. 10,000 people can each spend $1,000 over a year or 20,000 people can each spend $500. 

How many customers will the Wal-Mart Supercenter have? Most likely the bulk of the population shopping at the Supercenter will be from Socorro County.  The county has a population of about 18,000. Interestingly, almost 40% of this number consists of people under 18 years of age or over 65 years of age.  Census data indicates that the county has just 7,800 households.  Soccoroans are poor; per capita income is only $12,826 and household income is just $23,439.  More than 30% of Socorroans live below the poverty level.  Census data provides interesting information.  Total retail sales per person is about $4, 339 but Chamber of Commerce figures (also indicated by the “pull factor”) indicate about 50% of this is spent away from Socorro, leaving about $2,250 per capita for retail sales spent in Socorro.  One can assume that it is this $2,250 per capita that supports all of the existing Socorro County businesses.  This is the dollar pool that Wal-Mart will need to tap to make its proposed Supercenter work.  No new money will be spent and it indicates that the money spent at Wal-Mart (that $1000-$2100 needed by Wal-Mart to pay for its investment), will be lost by other retail businesses in Socorro. 

COMMUNITY ISSUE?

It is apparent that the arrival of Wal-Mart will have a major impact on the Socorro community and surrounding areas. The impacts will be economic but also will have sociological and environmental impacts. Increased traffic flow, impacts to land and water, air quality, public safety all impact the community as a whole. Because of this, it is likely that there may be voice raised to ask for community input into the decision making process. Lacking for public view are data are needed from economic studies, environmental studies, sociological and other studies that should be put before the citizens of Socorro so that they may have a voice in the issues impacting their community.