Exjackly

At my house, the last of the Thanksgiving leftovers have been consumed, the dishes washed, and the decorations have been turned over to Christmas.  It is a festive time when we host friends and family more often than the rest of the year and a challenging time to stay in budget – financial and caloric.

The challenge for me is in the outdoor decorations.  By nature, I am a competitive guy.  I see the YouTube videos of the homes with thousands of lights dancing to music.  The neighbors down the street have enough lights to read legal documents comfortably.   I heard the guy on the next street over just got an extra electric box put in to handle his lights.  There’s even a few neighborhoods that police handle directing traffic at night.

I want outdoor decorations.  Lots of them, in all sorts of colors.   I like positive attention.  News reporters broadcasting from my front lawn because I have the best decorated house in the city is appealing.

But I won’t.

Christmas decorations are fun.  But they are not worth it.

I can buy enough lights to warm up the neighborhood.  But I cannot afford them.  I would have to buy that many lights on credit – which is simply not an option.  Just looking at prices for the LED light sets, which are more expensive but more energy efficient, I seethe price ranges from $.15 per light to $1 per light.  To get 10,000 lights to put up, it wouldcost at least $1,500, not counting extension cords, junction boxes, and controllers.
The scary part is that is small for a mega-display.

The other part of the cost that I do not want to pay, is the electric bill.  For example, look at LauderdaleChristmas.com.  The switched to energy efficient LED lighting, and their bill was still $384!  I’ve heard of others whose electric bill for December runs into the thousands of dollars.

So, I’ll stick with my existing 10 strands of lights, on a timer, and just spend some money on gas to drive around and look at the displays that other people have put together.  And count the savings all the way to the bank.

Ahhh.  Black Friday.  Such a powerful kickoff to the holiday buying season.

And one of the hardest times to be a frugal shopper.  It isn’t because of the holiday deals directly.  If there is something that you have been wanting and saving for, that fits in your budget, and it happens to be on sale now may be the best time to buy it.

Stores are not looking for that kind of shopper however.  What they love to see is the person that comes in with the circular ad, running too late to get the doorbusters but still looking to load up for the holidays.  This is the person that buys the deals because they are deals.  Not because they have somebody specific in mind to gift the item to.  Not because they have a need for that product. They are buying it just because of the savings and a vague idea of what they may do with it.

From me to you today, I hope that you found some great deals at the stores this morning and find more throughout the holidays.  More importantly though, I hope that those deals are for what you need, chose, and budgeted for in advance so that the good times will continue past the holidays and into the years ahead.

I have to admit that I am set in my ways when it comes to certain things.  One of them is sports.  I not only love to play sports but for a few select sports, being a spectator is also a lot of fun.

Growing up and traveling have enabled me to enjoy watching top level professional sports.  NHL, NFL, MLB, even soccer (pre-MLS) have given me a lot of enjoyment.  However, the top leagues share one thing – the tickets are expensive.

Minor league sports on the other hand are much less expensive.   That is where my enjoyment of sports hits the budget.  With the cost being so much lower, I always want to be at the games.  This means that I am – and have been – a season ticket holder in one form or another for a combined 10 seasons or more.  Different sports, different cities, different situations.

At $1400 a year for 2 seats to the local hockey team (Go Idaho Steelheads), plus downtown parking and playoffs it does add up.  So it is definitely not on my list of most frugal decisions ever.   It has been worth it.  I’ve enjoyed the time spent, met a few new people, and it regularly forces me to change my routine and get out and have fun.

All of that was happening before they won any league championships too.  Now that they’ve won 2, the excitement and fun of those playoffs was even better.

The funny part is that I cannot  explain why it is so much fun.  Boiled down, I am rooting for men I do not know, playing a sport I have not played, to accomplish things I cannot do and paying for the experience.  What an odd world.

Las Vegas

Las Vegas is quite the city.  Even ignoring the Strip, it stretches for miles in an arid landscape.  At night, the lights spread across the valley.  Tile roofs and highways interconnect on this stop between Arizona and California.

As one of the fastest growing urban areas in the country over the past few years, Las Vegas has sprawled far and wide.  Its citizens cover the gamut of rich and poor, with ethnic representation from around the world.  Their dwelling range from trailers in the desert to mansions and condominiums in the heart of town.  All of them brought in for glamour and wealth that gambling has brought to this otherwise plan city.

Well, not quite.  A lot of the residents of Las Vegas are not there for the gambling.  Nevada is a very attractive state for companies to locate in due to their pro-corporate laws.  Many of the residents of the area do not make their living from the gaming and hotel industries.  Still, without the glitz, Las Vegas would not be anywhere near the town it is today.

The Allure

Just narrowing the focus to the many hotels, resorts, and casinos on Las Vegas Boulevard, it is difficult to resist the allure.  Those companies have done their homework well.  They know what attracts our attention.  They do not waste our attention either.

Everything is oriented towards helping you decide to spend or gamble your money away.  Slot machines make lots of noise, especially when they are paying out money.  Alcohol flows freely on the floor to help lower inhibitions and cloud judgement.  A lack of clocks and windows make it possible to gamble for hours without realizing how much time has passed.  Scents and oxygen levels can also be manipulated to help subconsciously encourage you to continue to wager.

Even when you get off the gambling floor, the presentation is still geared towards getting you to think rich.  Marble and intricate mosaic floorings, rich carpets, large fountains and artwork, lavish shows, expensive boutique shops, and calorie-busting buffets and restaurants all combine to present a facade of wealth that is open to anybody with money in their pocket to participate in.

The Responsibility

The hardest part of visiting Las Vegas is to be able to enjoy the opulence without succumbing to the many temptations and  spending what you should not.  There is a lot of money in Vegas after all.  Those casinos did not build themselves.  The reason for all of thos slot machines and table games is to bring in the money to pay for those multi-billion dollar buildings and the large service staffs that keep them operating.

I am not going to condemn gambling however.  It is a vice, and needs to be treated with caution.  However, it is possible gamble and not damage your financial well being.  That is where the responsibility comes in.

I just had a fun trip to Las Vegas myself.  It was a return to Sin City for me, and my wife’s first trip ever.  We both enjoyed roaming the Strip and seeing the many casinos.  Taking it as a mid-week trip instead of a weekend one made it a lot easier to get around and helped keep the cost of the trip down.  The airfare and the hotel rooms were a lot cheaper, plus it was easy to get into the restaurants we wanted to visit when we wanted to go.

The funniest part was that we did not gamble anything for the first 2 days that we were there.  It wasn’t that we do not gamble.  We were just busy enough seeing everything else and roaming around that the urge to splurge did not cause us to stop and wager anything.  All told, we lost a little bit of money, but it was less than $100 between the two of us.  Well within what we had budgeted for the trip.

From experience, I can point out that it is entirely possible to do the ‘wrong’ thing – such as take a trip to Las Vegas – and enjoy it responsibly.  Focus on setting a budget, staying within that budget, and like any other activity you undertake, you can enjoy yourself and still meet your financial goals.

This is part 2 discussing how Wal-Mart has impacted the US economy. Part 1, which briefly discusses some positives can be found at Walmart is Good For US(A). There will eventually be a follow-up post with my own stance on this subject, and if there are enough quality comments between these two posts, there will probably by a summary post highlighting the best comments.

Wal-Mart is a strenuous competitor that continually pushes their own employees and their suppliers to find ways to sell the same product for less money each year while still making Wal-Mart money. The sheer size of the retailer has placed it in the unique position of being able to dictate to vendors what they will buy, how much they will buy, when and where it will be delivered, and what price they will pay. In addition, vendors must be tied in to Wal-Mart’s supply system which imposes its own set of costs and conditions.

This size and emphasis on cutting costs has led to significant effects. Unfortunately, a lot of them are negative. Frontline, on PBS, looked into the issue and came up with the documentary Is Wal-Mart Good For America?

For a couple of sites devoted to problems Wal-Mart causes, head on over to Wal-mart Watch and Wake Up Wal-Mart.

Manufacturing Pressure

One of the biggest competitive advantages that Wal-Mart had was on its relentless pursuit of cost savings. The business model is to drive margins down and make the profit on the volumes. As a business model, it promises much to the consumer, while at the same time squeezing the vendors tightly.

The biggest problem is that Wal-Mart has no vendor loyalty. If a manufacturer cannot or will not meet their demands, they will find a competitor who will. As time goes by, the demands to produce the same product for Wal-Mart at a cheaper and cheaper price wears down on companies. The initial impact is to force companies to become more productive and efficient.

After this initial gain however, the continual downward pressure forces manufacturers to take drastic measures to continue to cut costs. These measures include outsourcing production to foreign countries to take advantage of lower wages and the corresponding elimination of jobs in America. Between 2001-2006, it is estimated that the impact of Wal-Mart’s imports from China alone cost nearly 200,000 US jobs (Naked Capitalism).

Remember the emphasis Wal-Mart used to put on ‘Made in America’? It isn’t true anymore. Wal-Mart is now the largest importer in the country, with estimates that they bring in as much as $30 Billion in products from China alone. 70% or more of the non-food items in the stores are manufactured in China. Korea, Japan, India, Taiwan and Mexico are among a host of other nations taking a share of the manufacturing jobs for Wal-Mart items.

Not much left in America except for the low-wage retail jobs.

Local Competitors Driven Out

Numerous studies have shown that when a big-box store moves into a community, there is a net increase in employment on Opening Day. Over the next several years there is a steady decline in retail jobs as local businesses have to adjust to the increased competition.

The opening of a single superstore is similar in impact to 100 small businesses opening at once. For local businesses without deep pockets, it can be too much to absorb. Those previously successful businesses close down and their employees have few options for employment that do not include moving to the discounter.

The best comparison I can come up with is losing blood. If it is taken out over time, through multiple blood donations, it is a net positive helping many people. It is possible to get 2, 3, even 5 gallons of blood that way. When it happens all at once, losing 2 or 3 gallons of blood is going to be fatal.

The habit of locating these giant stores in suburban and rural communities guarantees that there will be this negative fallout. Small communities do not have the experience or population to manage an opening of a retailer that big without these problems. Should Wal-Mart have chosen to locate in urban areas with higher populations and densities, the impact would be less serious as a superstore would be a significantly smaller increase compared to the total economic activity of the area.

This is not purely hearsay or rhetoric. Professor David Neumark, from UC-Davis, authored a paper title The Effects of Wal-Mart on Local Labor Markets. This paper goes into 58 pages of detail on these impacts and focuses specifically on the impact on jobs and wages.

Wage and Jobs Pressure

To go along with the manufacturing pressure that has driven a lot of production overseas, the same business pressures help to drive down wages at both the retail and manufacturing side of the economy. Those manufacturers who try to keep jobs in this country have to cut their wages. This requires either fewer workers or lower wages for the same number of employees, or both.

On the retail side, the decreased availability of better paying retail jobs results in the same impact – fewer jobs and lower wages for the jobs that are available. Wal-Mart has consistently been rated as one of the lower-paying big-box retailers, so the new jobs are not equivalent to the lost jobs. From Organic Consumers Association, Wal-Mart Trade Deficit Saves Newly Unemployed $2500 per Year.

Anti-Union

Unions have not always been the best thing for our country. History is full of many cases where unions have tolerated or encouraged behavior contrary to moral and ethical boundaries. History is also full of cases where workers uniting resulted in huge positive benefits for communities and employees.

Wal-Mart is one company today that is not only anti-union, but they actively fight against any group effort to negotiate with them. Due to its size, individual employees have no effective ability to negotiate fair wages, benefits, or policies with the company. With no unions allowed, it is not possible to produce groups with enough power to negotiate either.

Starton page 8 of this paper put out by American Rights at Work, titled Wal-Mart: Rolling Back Workers’ Wages, Rights, and the American Dream, details how Wal-Mart continues to remain union-free despite the working conditions and large number of employees.

Conclusion

Wal-Mart’s business practices do a great job at making the company large, powerful, and profitable. The net impact on everybody but Wal-Mart is definitely not as great. In our Capitalistic society, they are acting as one would predict – with self-interest at the forefront, particularly their own short-term self interest. Since their self-interest is not the interest of the country or individual cities and citizens, many people are severely negatively affected.

From Walmart is Good For US(A), we know that they do a good job at providing low prices and jobs. That has a cost. I invite everybody to provide their civil feedback to both this post and the positive post. Share you thought on which side is better: the positives or the negatives and why. Things that I missed, positive and negative, are welcome.

After some time has passed to gather the best comments, I will follow-up with a summary post of what you have to say. Eventually, I will come out as well with my stance on if Wal-Mart is a net positive or negative for America.

Wal-Mart is not an uncontroversial company in America. In many ways, the story of Wal-Mart is the story of two companies. One is the ultra-competitive retail giant that is able to force suppliers to help them sell us lots of products at low prices. The other is a mega-corporation that is so obsessed over profits that it is contributing to the loss of thousands of American manufacturing jobs.

For the record, I have not been compensated to write either viewpoint. This is a corporation that is a part of many people’s attempts to be frugal. As such, it is a good topic for personal finance, and one that I hope can generate some quality discussion on both sides of the debate.  For comparison, here is The Simple Dollar’s post Wal-Mart is evil! Wal-Mart is good?

There will be a companion post to this one that discusses the down side. This one will touch lightly on the benefits of Wal-Mart. For a head start on both arguments, Slate has a dialogue called Is Wal-Mart Good For The American Working Class? Also for starters, the Wall Street Journal has conducted a poll asking Overall, has Wal-Mart been good or bad for the American economy?

Efficiency and Productivity

Over the decades and centuries of this unique American experiment, lightly regulated markets have long been appreciated, lauded, and encouraged. This remains true today. We celebrate and encourage businesses and individuals to make the most of themselves as possible. As consumers, we choose what companies will be successful through patronage.

Wal-Mart is arguably the most efficient company that has ever existed. Their efforts in the use of bar codes and RFID chips to tightly manage inventory is tops in the world. Their tight 1-2 day restock time on over 120,000 items is due to their powerful and well leveraged IT investments.

That efficiency does not end with Wal-Mart. Suppliers who want to do business with this behemoth find that they must become more efficient and productive as well. For some companies, it is their introduction to some of the most recent innovations in product manufacturing. Despite the cost to become a Wal-Mart vendor, the improved efficiency helps those companies improve productivity for all their customers and can lead to increased revenue and profits.

100 Million Customers a Week

Customer Loyalty

American consumers may behave like sheep in some ways – seeking out the same items in mass, being willing to put up with crowds and lines to get what they want, and having a certain inherent predictability for what they will want. I will hesitate to call American consumers idiots however. If they were not finding what they wanted at a price they were willing to pay, would so many of them keep coming back week after week?

100 million shoppers a week visit 3443 stores spending $226 Billion a year in the US. International sales count for another $77 Billion in sales a year. That is a lot of repeat customers and adds up to the largest corporation in the country.

If the prices are not a sufficient inducement, the wide variety of goods available draws people in. There are few places – even other big box stores included – that provide the wide gamut of products Wal-Mart does. The ability to visit one store for multiple needs certainly adds to the convenience factor for many people.

Employment

Wal-Mart employs a lot of people as well. Over 1.9 million Americans are paid by this mega-company. These employees cross the spectrum of diversity. Different races, religions, age, range of ability and career level are all represented. Plus, there is no shortage of people applying for employment – in some cases more than 100 applications per open position.

Their 2007 annual report indicates that they provide health care coverage to more than 90 percent of their US associates. That is more than 1 million employees covered. For some employees, this alone is a huge benefit over other opportunities at similar pay rates.

Summary

Wal-Mart has a positive impact on the US economy due to a number of factors. By fostering efficiency within its entire supply chain, there has been an increase in productivity that some economists credit with lifting the productivity of the country as a whole. Customers benefit by paying fair prices and being able to satisfy a wide range of wants at once. Many people are employed by this giant company as well.

Wal-Mart is not perfect, and some of the arguments for the company being bad for this country will be addressed in another post. I will divulge which side I am on later, after people have had a chance to comment on both posts. I invite everybody to weigh in on the discussion, but I do ask that you keep it civil and on topic.