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October 17, 2003

Wrench in the Wal-Mart Theory

Reader Frank had this to say about the supermarket strike:

However, what we've found through our discussions with industry experts, and by examining the data of countless chains, is that customers traditionally won't travel much more than a three mile radius to get their mainstream groceries. This is the traditional geographic market division for supermarkets. Sometimes freeways, rivers and railroads make the geographic boundaries.

This presents a serious challenge for Wal-Mart. Indeed Frank went on to inform me that it's a standing challenge for Target Greatland as well. These big box format stores need lots of real-estate. So geographically in Southern California, there aren't a lot of locations amenable to the format, especially in Los Angeles. I can attest to this fact as we are Costco shoppers; it requires a bit of discipline when we go for those items once a month several miles out of the way.

In strike news there are no talks or negotiations underway. Safeway (Vons) is taking the hardline and saying there will never be a better offer on the table. City Councilmen are taking sides. The LATimes comments on the benefit package:

The strike was called over employer proposals to cut health care and pension benefits and create a substantially lower tier of wages and benefits for new hires. The proposed contract rejected by 97% of voting union members also would allow stores to shift union work to outside vendors and to open nonunion stores.

Top wages for store employees range from $7.40 for baggers to $18.19 for meat cutters. Union officials say the average is about $12 an hour and that most workers are part time.

All employees receive fully paid family health benefits. The grocery chains say workers must start shouldering some of these costs, citing escalating health insurance expenses and competition from nonunion stores. Under the proposal, workers would among other things have to contribute to premiums, paying at least $780 a year for family coverage.

That's a very reasonable figure, but I suspect it may not characterize the median expense.

Other stores are doubling their reciepts, especially the upscale stores like Bristol Farms and Whole Foods. On the discount end, Costco saw a 10% jump in sales Monday. As for our family, we've been learning about the discounts for quite some time now. There's a surprising lot of shopping that can be done at the 99 Cent store. Everyone is talking about Trader Joe's as a first among alternatives, and there is always 7-11 for staples.

Sister mentioned that when the Detroit Free-Press went on strike, customers seeking alternatives didn't return and the paper has never been the same. Likewise speculation as to where customer loyalties will go is in the air. Most people I talk to expect that prices will be higher at the affected stores (almost 800) when this mess is all over.

Right now there is no end in sight, and so now this weekend more and more people are going to be personally affected. Decisions are being made. We're relying more on our alternatives, but as I said, we're in a tight money situation and haven't been going to Von's (our regular) for quite a while. It's tough all over.

Posted by mbowen at October 17, 2003 07:53 AM

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