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Study Shows Pros and Cons of Southern Califorina Wal-Mart Grocery Business

LOS ANGELES - An economic analysis by a Los Angeles think tank has found that Wal-Mart supercenters' entry into the Southern California grocery industry over the next five years, although it will result in changes and job losses, will increase overall employment in the region and save shoppers billions of dollars, the North County Times reports.

The Wal-Mart-funded study, conducted by the consulting practice of the independent Los Angeles County Economic Development Council, depended on data reported by government and industry sources in concluding that "the nature of the economic implications of Wal-Mart's entry into the local grocery market hinge almost entirely on the rate at which Wal-Mart gains market share and the willingness of its competitors to adapt to meet consumer demands." The market share the study assumes is 20 percent -- as opposed to the 65 percent it assumes would be kept by traditional supermarkets and the 15 percent by specialty stores -- and is the basis of its economic model and the foundation of its financial projections, according to the council's report on its study.

"Whether Wal-Mart will eventually reach the 20 percent threshold is open to debate,"the study says, "but the LAEDC believes it is at least plausible." In gathering the data it used for its study, the council borrowed substantially from a previous study by the Orange County Business Council (OCBC).

Wal-Mart already has announced plans to open as many as 40 supercenters in the state before 2010. "If Wal-Mart Supercenters are introduced -- food prices should fall," the report on the study contends.

In the seven-county Southern California region, if Wal-Mart is successful in snaring a 20 percent market share of the grocery business, the cost in jobs will most likely be somewhere between 3,000 and 5,000, according to the report.

Against that loss, however, consumer savings in grocery spending will likely top $3.76 billion yearly, and when that savings, which will average an estimated $524 per household, is spent on other goods and services in the region, it will create 36,400 new jobs, the study says. The net job gain, then, is anticipated to be at least 30,000.

Essentially, the study found that gradual change will lessen the negative impact on the economy by allowing Wal-Mart's rivals time to adjust to new marketplace realities.The study additionally concluded that a crucial benefits source for consumers will come from Wal-Mart's business strategy of minimizing business cost and passing along the savings along to the consumer.

The study acknowledges that most discussion of Wal-Mart's entry into the Southern California grocery business has been negative, concentrating mainly on lost jobs and the affect on smaller, less competitive businesses, but says that such massive economic upheaval, "is a normal occurrence in a free market economy."

As well as gauging the overall impact on jobs and consumer savings, the study deals with pay and benefits. The public perception, fueled by Wal-Mart competitors and by labor unions that have tried unsuccessfully to organize Wal-Mart workers, is that the company keeps prices down by a combination of low pay and nonexistent benefits.

The study, however, finds that "Wal-Mart's compensation, while lower than for the best paid unionized grocers, is better than most people realize, particularly in its food business." Among the Wal-Mart employee benefits are health insurance, paid sick leave, personal leave and vacation, stakeholders' bonuses (paid to employees at high-performance stores), profit sharing, company contributions to a 401(k) plan, a 15 percent discount on company stock, and a 10 percent discount on general merchandise, the study says.
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