It seems that when it comes to Wal-Mart, everyone is an expert. Everyone I know has shopped there and has regretted doing so. We all have our opinions on Wal-Mart, and if you can’t tell, mine are negative. However, I will try my hardest to stay as objective as possible during my analyses on why people dislike Wal-Mart.

Wal-Mart (WMT) has performed several cost-saving operations, enabling them to sell a variety of products at their “Everyday Low Prices.” With more than $287 billion in sales in 2004, WMT is the world’s largest retailer and has more than 1.5 million part-time and full-time employees worldwide, according to a Frontline PBS report. Thus, WMT has significant leverage with suppliers and employees and uses this leverage to drive down the cost of sales.

One large cost in the United States that WMT has avoided is labor unions. In 2004, laborers at the Quebec WMT decided to unionize, but a few months later WMT closed the store, deciding that they would not be able to profit when dealing with unions. The profit margin (net income divided by revenue) at WMT in 2004 is only 3.5 percent, whereas Target’s profit margin is 6.8 percent.

To drive this margin higher, WMT does everything it can to force costs down. According to the Frontline PBS report, in 2003, Wal-Mart imported $15 billion worth of products from China, where labor costs are significantly lower. Another interesting statistic is that WMT’s imports from China account for 12.5 percent of the entire United State’s trade deficit with China.

One reason I found many people dislike WMT is because their prices are so low that they force small business owners into bankruptcy. But WMT isn’t always bad for small business. It’s true that if small retailers try to compete with WMT, they will eventually lose. However, small manufacturers and consumer good companies dream for the day they can get their products into WMT.

Some argue that many WMT customers live paycheck-to-paycheck, and the counter argument is if they treated their employees better (higher pay or increased benefits for example), the quality of life for everyone would be better. A 2003 report by the AFL-CIO stated that only 46 percent of WMT employees are covered by their health insurance plans, 20 percent less than the average at-large firms. Also, WMT employees pay 16 to 26 percent more for health plan coverage than the typical worker at large companies.

I have a few reasons why I don’t like to shop there. The first being that I have never had a good experience at WMT. Secondly, I dislike their labor practices inside and outside of the United States. I am not against outsourcing, as long whoever is doing the outsourcing abides by labor laws and good moral judgment. Because WMT gives inadequate benefits to employees, I dislike Wal-Mart even more. I still go back there time and time again, but not because I want to.

Stock Pick of the Week

This week I am choosing France Telecom (FTE), an overseas company that offers many services in the telecommunications industry including telephones, Internet and cable. Down almost 20 percent since August and currently trading at a 52-week low, FTE has an excellent 2.8 percent dividend yield that will increase as the price continues to go down. Price: 24.64.

Jeffrey Lipsey is a senior in Business. His column appears on Thursdays. He can be reached at [email protected].