Re: Asda price? : Thu Nov 21, 2013 4:10 pm  

DaveO wrote:

And the suggestion is, given the level of profit, the shareholders should bare that cost.

I don't think are dealing with reality. There no suggestion Wall Mart is going to replace low skilled labour with higher skilled or could if it wanted to. This is not an industrial revolution scenario. It's about a equitable distribution of the profits.

Winston Churchill had it right whe he made the case for a minimum wage in 1909:

"It is a national evil that any class of Her Majesty’s subjects should receive less than a living wage in return for their utmost exertions… where you have what we call sweated trades, you have no organisation, no parity of bargaining, the good employer is undercut by the bad and the bad by the worst; the worker, whose whole livelihood depends upon the industry, is undersold by the worker who only takes up the trade as a second string… where these conditions prevail you have not a condition of progress, but a condition of progressive degeneration."

But this still doesn't answer the moral question (which has nothing to do with if you personally shop at Asda or not BTW).

What you are suggesting is $15bn profit is possibly (you don't know for sure) an acceptable return on investment in comparison to investing this money elsewhere. Right?

Well if that is true one of the effects of achieving this level of ROI is poverty wages at Wall Mart and also, I would suggest, exactly what WC was arguing against.

Do you find a system that gives us this perverse result of $15bn profit and poverty wages a morally acceptable system?

What needs to be looked at, and I believe Kelvin is alluding to, is Walmart's return on capital employed versus its cost of capital. Without that information the $15 billion figure is meaningless.

I do not know anything about Walmart's situation but it could be that $15 billion represents a marginal effective return and by increasing wages the company would be starved of capital for expansion / reinvestment. If that were the case the company would rapidly contract and employees lose their jobs anyhow.

[DaveO]

Re: Asda price? : Thu Nov 21, 2013 4:12 pm  

Mintball wrote: You can be a profitable boss – and a decent one. Sounds like he's got a moral compass – which brings us back to Dave's question. That is quite an inspiring article, full of some very pertenant facts and not a little irony given the current discussion. This is very interesting. "It was no surprise to hear Richer, 54, who still holds 100 per cent of the company he started 35 years ago, explain this week how he has formed a trust for when he dies so that the business becomes a mutual, similar to John Lewis, under which every staff member receives an equal share, with the IT director, Julie Abraham, stepping up to managing director." Not only is the idea of a trust fantastic the fact he owns 100% of the business is what allows him to do this. It's the same as John Caldwell and Phones 4 U when he used to run that. It was not listed on the stock exchange and as a result it made him rich but it also allowed him to pay his employees very well without the constant pressure to drive down costs (wages!) to improve profit.. The irony comes from this: "Others have taken note. Richer is in huge demand as a consultant (Asda, BAA and Halifax are just three, much bigger firms to benefit from his wisdom) and motivational speaker." Has anyone told the Walton family the UK arm of its business is trying to learn of Julian Richer? The other irony is this: "Richer grew up in Bristol, the son of parents who worked for Marks & Spencer (it was from their tales of M&S, which also famously treated its staff well with perks such as a good canteen and hairdresser, that he developed the notion of the Richer Way). " This is long gone. I have a relative and a neighbour who work for them and I can assure you The Richer Way has long left the M&S building. And funnily enough they aren't considered that brilliant a retailer any more. Certainly not compared to John Lewis.

Mintball wrote: You can be a profitable boss – and a decent one. Sounds like he's got a moral compass – which brings us back to Dave's question. That is quite an inspiring article, full of some very pertenant facts and not a little irony given the current discussion. This is very interesting. "It was no surprise to hear Richer, 54, who still holds 100 per cent of the company he started 35 years ago, explain this week how he has formed a trust for when he dies so that the business becomes a mutual, similar to John Lewis, under which every staff member receives an equal share, with the IT director, Julie Abraham, stepping up to managing director." Not only is the idea of a trust fantastic the fact he owns 100% of the business is what allows him to do this. It's the same as John Caldwell and Phones 4 U when he used to run that. It was not listed on the stock exchange and as a result it made him rich but it also allowed him to pay his employees very well without the constant pressure to drive down costs (wages!) to improve profit.. The irony comes from this: "Others have taken note. Richer is in huge demand as a consultant (Asda, BAA and Halifax are just three, much bigger firms to benefit from his wisdom) and motivational speaker." Has anyone told the Walton family the UK arm of its business is trying to learn of Julian Richer? The other irony is this: "Richer grew up in Bristol, the son of parents who worked for Marks & Spencer (it was from their tales of M&S, which also famously treated its staff well with perks such as a good canteen and hairdresser, that he developed the notion of the Richer Way). " This is long gone. I have a relative and a neighbour who work for them and I can assure you The Richer Way has long left the M&S building. And funnily enough they aren't considered that brilliant a retailer any more. Certainly not compared to John Lewis.

[DaveO]

Re: Asda price? : Thu Nov 21, 2013 4:24 pm  

Dally wrote:

What needs to be looked at, and I believe Kelvin is alluding to, is Walmart's return on capital employed versus its cost of capital. Without that information the $15 billion figure is meaningless.

I do not know anything about Walmart's situation but it could be that $15 billion represents a marginal effective return and by increasing wages the company would be starved of capital for expansion / reinvestment. If that were the case the company would rapidly contract and employees lose their jobs anyhow.

It's not meaningless because even with $15bn of profit we end up with poverty wages.

Whatever the return on capital is this, it is not delivering an equitable situation. And the fact that is the reality of the situation leads to the question is this morally acceptable?

They used $7.6bn to buy back shares. That says they are not running on any such tight margins such that they need to screw their employees to generate $15bn profit. They are screwing their employees in order to inflate what they saw as an under valued share price and the increased share price boosts the wealth of the Walton family who own over 50% of the shares.

Seems pure greed to me!

Re: Asda price? : Thu Nov 21, 2013 4:37 pm  

DaveO wrote:

It's not meaningless because even with $15bn of profit we end up with poverty wages.

Whatever the return on capital is this, it is not delivering an equitable situation. And the fact that is the reality of the situation leads to the question is this morally acceptable?

They used $7.6bn to buy back shares. That says they are not running on any such tight margins such that they need to screw their employees to generate $15bn profit. They are screwing their employees in order to inflate what they saw as an under valued share price and the increased share price boosts the wealth of the Walton family who own over 50% of the shares.

Seems pure greed to me!

How do you know they don't have low margins? They are a large enterprise, I hav no idea what $15 billion profit represents to them. Do you?

[DaveO]

Re: Asda price? : Thu Nov 21, 2013 4:58 pm  

Dally wrote:

How do you know they don't have low margins? They are a large enterprise, I hav no idea what $15 billion profit represents to them. Do you?

It represents the ability to spend $7.6bn on a share buy back to inflate the Walton family personal fortune by driving the share price up. What bit of this did you miss?

Re: Asda price? : Thu Nov 21, 2013 4:58 pm  

Seems Walmart made net profit of c. $17 billion on turnover of c. 469 billion in their latest reported year. So, about 3.6% of turnover. Couldn't readily see staff numbers and what % of revenue staff costs represent. But, it would seem liklely that a big hike in wages would wipe out profit.

So, is your argument that because Walmart pays low wages it should not exist at all, which is how I interpreted what you said? That being the case an awful lot of (largely) Americans would be unemployed and an awful lots of low-priced stores would close. Surely that would cause alot of suffering as there are few unskilled manufacturing jobs to take up the slack (indeed supermarkets have taken up the slack from de-indusrtrialisation).

So, you've identified a "problem", what is your solution?

Re: Asda price? : Thu Nov 21, 2013 5:02 pm  

DaveO wrote:

It represents the ability to spend $7.6bn on a share buy back to inflate the Walton family personal fortune by driving the share price up. What bit of this did you miss?

See my immediately following post, wriiten simultaneously.

The Walton's set up the company to run a business and earn themselves (and others) a return. They did not establish a charity (or at least Walmart was not established as one). If someone wants to run a business for the benefit of their workers or some wider ideal then they can do and they will need to compete with Walmart et al should they wish to be retailers.

Re: Asda price? : Thu Nov 21, 2013 5:05 pm  

DaveO wrote:

... Not only is the idea of a trust fantastic the fact he owns 100% of the business is what allows him to do this. It's the same as John Caldwell and Phones 4 U when he used to run that. It was not listed on the stock exchange and as a result it made him rich but it also allowed him to pay his employees very well without the constant pressure to drive down costs (wages!) to improve profit...

Absolutely. I think you've hit a nail on the head about where at least part of the problem lies.

DaveO wrote:

... This is long gone. I have a relative and a neighbour who work for them and I can assure you The Richer Way has long left the M&S building. And funnily enough they aren't considered that brilliant a retailer any more. Certainly not compared to John Lewis.

Spot on again.

Over the years, the quality of service – which has cost me time and money – at a number of retailers that might appear to be cheaper than John Lewis (forgetting the 'never knowingly undersold' thing) has ensured that now, if I need household goods, say, I go straight to JL and, where I use a supermarket, it's Waitrose too. It seem that a number of retailers no longer care about customer service.

But there's also the related point that increasing numbers of businesses seem to see their employers simply as a cost – to be cut as much as possible – and not as an investment, which partly brings us back to the living wage, as mentioned earlier. Not only is it better for individual employees – it's better for business, if business is prepared to be slightly less short-sighted and short-term in thinking. I do wonder how much the pressures of the Stock Exchange/City exacerbate this.

There's also the wider point that, quite simply, the current situation is not sustainable. And why does anyone want to keep pushing an unsustainable approach?

Re: Asda price? : Thu Nov 21, 2013 5:27 pm  

Mintball wrote:

Absolutely. I think you've hit a nail on the head about where at least part of the problem lies.

Spot on again.

Over the years, the quality of service – which has cost me time and money – at a number of retailers that might appear to be cheaper than John Lewis (forgetting the 'never knowingly undersold' thing) has ensured that now, if I need household goods, say, I go straight to JL and, where I use a supermarket, it's Waitrose too. It seem that a number of retailers no longer care about customer service.

But there's also the related point that increasing numbers of businesses seem to see their employers simply as a cost – to be cut as much as possible – and not as an investment, which partly brings us back to the living wage, as mentioned earlier. Not only is it better for individual employees – it's better for business, if business is prepared to be slightly less short-sighted and short-term in thinking. I do wonder how much the pressures of the Stock Exchange/City exacerbate this.

There's also the wider point that, quite simply, the current situation is not sustainable. And why does anyone want to keep pushing an unsustainable approach?

If you think JL customer service is good try ordering carpet / flooring from them and see what happens when things go a bit wrong!

Re: Asda price? : Thu Nov 21, 2013 5:41 pm  

Kelvin's Ferret wrote:

Based on my experience of Richer Sounds (which are positive), I would strongly suspect he employs fewer but better paid and more productive employees than some of his competitors. There is actually a fairly long-standing business mantra that lots of companies pay lip-service to, but few actually genuinely follow, in that if you focus on quality rather than cutting costs your costs will drop as a result of quality. The problem is that it doesn't fit with modern "managerialist" style management popular in most large organisations where generic management lack expertise needed to bring real focus on quality whilst short-term pressure to cut costs undermines efforts to improve quality and drive down long-term costs.

Likewise I have also received good service from RS to the point where I may need a new main TV set before xmas and will be buying it from RS, have done the price comparisons and they are within £10 or so of the very cheapest retailer (Tesco), so the choice is, do I buy a TV set from Tescos or from a specialist retail outlet who only employ people who actually know what they are talking about ?

Hmmm



They are lucky in that they have a niche market where employing generic shop assistants isn't really an option, they need to employ experts to advise the (often) geeks who shop in there, AND they also take it beyond the selling boxed TV Sets to doing full home cinema installs, and commercial installs, so they do have to know their onions.