Welcome to the 55th installment of The Wal-Mart Weekly, a column dedicated to bringing you insight, wit, facts, results, opinions, and just a bit of everything else when it comes down to a very hot topic these days: Wal-Mart.
In this week's Wal-Mart Weekly, I'll be looking at what seems to be second nature to many Americans in this day and age -- hating Wal-Mart Stores Inc. (NYSE: WMT). Like many divisive issues these days (think Democratic candidates), many Americans I have met either love or hate Wal-Mart. There seems to be little to no middle ground. I can very much understand the love many customers have over Wal-Mart. But the hatred?
Who is to blame for all the hatred towards Wal-Mart? The retailer itself? How about the customers who keep it at the top? These are questions that constantly see emotion overtaking logic when the questions arise. Let's take a look at them a little more closely today.
Why Wal-Mart exists
Wal-Mart, like many retailers, started small and over the course of many decades grew and grew to become the world's largest retailer -- mostly on the back of its operations in the U.S. By offering "everyday low prices" to consumers, it was able to build a following that eventually pushed it further in sales than any of its competitors.
As most of the world knows by now, Americans love bargains (or the perception of bargains). We like our cell phones to be "free" (along with that hefty two-year contract), we like our food to be cheap (hence, double coupons and tasty but nutritionally worthless processed foods), and we certainly like our gas free. In the case of gas, there's not much we can do to make it cheaper. This isn't an article on the collusion of energy companies, so I'll move on.
When it comes to retail goods, though, we can make things cheaper -- using competitive advantage to our advantage. Wal-Mart recognized this and I'll posit that it invented the supercheap mentality by using the "big box, low overhead" type of store and merchandising format while actually lowering prices to almost always beat the competition. In smaller markets with many smaller stores (the ubiquitous "mom and pop" contingent), Wal-Mart has been accused of putting many of these locations out of business. Hence, we have the central question: just whose fault is that?
Getting the customer addicted to low prices
In the 1980s, there were many discount retailers to be found: TG&Y, Venture, Target, K-Mart and Wal-Mart. Which one survived? We now know -- and it was because of Sam Walton's unwavering pledge to give the American consumer the best (lowest) price on anything carried on its shelves. That may sound like some marketing spin from Wal-Mart, but in researching this thought, many people believe it's true. Fast forward to the early 1990s -- Walton passes away and his children take control of the retailer. All of a sudden, pricing becomes even more prevalent than ever and the push to enter new markets -- and completely conquer them -- becomes paramount.
Wal-Mart begins making more business deals in China and in low-cost producing nations and is able to kill just about every large national discount retailer -- except Target Corp. (NYSE: TGT). All of the previously mentioned competitors fizzle out, and even K-Mart is folded into Sears Roebuck to form a combined company called Sears Holdings (NASDAQ: SHLD), which really isn't doing a thing, retailwise, since its merger.
Once the year 2000 gets here, Wal-Mart's ruthless attitude has already planted the seeds in many American minds -- many of whom cannot stand the retailer now. It gains a reputation of killing small business, drying up the smaller downtown shops of small-town America and recruiting as many customers as possible with "everyday low prices" and huge, big-box store locations. Want even more savings? Wal-Mart begins pushing Sam's Club wholesale stores to small businesses and heavy bargain-seeking customers who would like to buy in bulk to save even more. Think pricing has everything to do with retail merchandising? It does. At least, for the vast majority of those who shop in America.
And, the hatred grows
Here we are in 2008, and the hate that fills the minds of many Wal-Mart watchers continues to grow. Take Charles Smith's case -- he's a 50-year-old computer store owner in Georgia. He also hates Wal-Mart with a passion, and runs two websites to prove it: Wal-Quaeda and Walocaust. It's no secret what Smith is comparing Wal-Mart to in the names of those two websites. But, why would someone compare the world's largest retailer to a terrorist organization as well as Adolf Hitler's regime?
It comes down to the thinking that Wal-Mart's unstoppable fixation on pricing and store growth make it the largest target. Like Microsoft Corp. (NASDAQ: MSFT), Wal-Mart is the biggest kid in the sandbox and subsequently draws more arrows in its back than anyone. But, who made it that way? In a country that was built on personal freedoms and personal responsibility, Wal-Mart has become the social retailer. That is, is supplies a certain market demographic who otherwise would find it difficult to survive due to "normal" retailer prices. This is the picture: a family of five who live on a combined annual income of $35,000 per year. Take the situation and duplicate it by the millions. Have a nearby retailer who offers anything and everything, all at bargain basement prices. And we wonder how Wal-Mart became as large as it has.
Following its growth, the animosity towards the retailer has grown right along with it. Charles Smith goes on to day on his Walocaust website that "I worry that by even implying that anything could compare to the horror of the Holocaust, the worst tragedy in history, I cheapen the term." But Smith saw a report "on the TV about how many goods Wal-Mart was importing from China and how many jobs this cost America." This is true and is baked up by fact after fact. Hence, the basis for hatred has grown by those in America who have seen manufacturers in this country become extinct as Wal-Mart constantly moves business overseas. Although we live in a global village, there are many who believe protecting America at all costs is the answer. It's standard national protectionism instead of progressive global thinking. After all, many of us have those large mortgage payments, right?
But, this is a free country, with everyone free to make their own decisions. Customers choose to shop at Wal-Mart to save a wad of cash. Wal-Mart, in turn, is reacting to demand with supply. It's standard economics, and by that account Wal-Mart is a champion. Instead of paying a 100% markup at a mom-and-pop store, Wal-Mart supplies the same product for a 22% markup. As a result, customers flock to Wal-Mart and not the smaller store. Result: the smaller stores become extinct due to lack in innovation in competitive practice. Whose fault is that? Can you blame the bargain-seeking consumer? If that logic holds, then every Wal-Mart hater actually hates the "price is everything" American consumer -- not Wal-Mart itself. Right or wrong? Tell me what you think below in comments.
Stay tuned next week for another edition of The Wal-Mart Weekly. Until then, have a great week.
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Reader Comments (Page 1 of 2)
3-29-2008 @ 12:12PM
Galls said...
Well Wal-Mart if the definition of the clash between the desires of the consumer and the citizen. Wal-Mart and other big box stores kill main street, the former gathering place of the community. Now main street is on private property, away from the offices of government and devoid of the rights granted through the constitution.
That is the principle citizen argument against wal-mart.
I can say I lack bias against Wal-Mart, I got to the Walton School of Business.
3-29-2008 @ 12:18PM
L. Wendling said...
If you come to Gillette, WY where I live you have no place else to shop besides a Walmart and a K mart. They reside next door to each other and we're worried that the K Mart may not survive?!
Gillette has 30000 people in it and no place to shop. Nearest Mall is Casper, WY at close to 100 miles away. We're thankful to at least have a Walmart.
3-29-2008 @ 12:38PM
gary said...
WAL-MART save you money so we can live better!
how much money did k-mart,sears,jcpenny,charles smith give to the one in need when they needed it who was first to send all kinds of stuff to N.Y.on 9/11 -maybe you could look at what good they do for a change,maybe if mom & pop store as well as the big ger retailers did a better job of taking care of there customer they would keep them
3-29-2008 @ 1:33PM
Petkov said...
If your "supply and demand" theory you capitalists pushers LOVE so much is true, then the 1-dollar stores should be beating Wal-Mart senseless. Yet no such thing is happening. Therefore...
USA and the world is FILLED with examples disproving most of what passes for dogma in capitalism. One needs to be be a total moron or a shill to believe in fairy tales.
3-29-2008 @ 1:35PM
Brenda said...
We were the typical family of 5 mentioned in this article, and Wal-Mart definitely helped us get by. We buy most food & supplies at a Wal-Mart & a Sam's Club 35 miles away; we take a family shopping trip there every 2-3 weeks. Wal-Mart does far more for the communities they're located in -- such as help for needy families, scholarships, community grants -- than any other retailer. Our oldest daughter received a Wal-Mart scholarship to college. Yet we also compete with Wal-Mart: we're a family fruit farm, and our customers drive 30-60 miles to us to get tree-ripened fruit that tastes much better and has much more anti-oxidants than any fruit at Wal-Mart. Small retailers can compete with Wal-Mart if they offer unique products or services.
3-29-2008 @ 4:01PM
moonie said...
It's called American enterprise folks every living being in the US has the same rights as Walmart, Mr Walton started a great idea with one thing in mind,. sell as much merchandise as cheap as possible to make a small profit in grand capacity to the American consumer. Simple really. So to all that are haters are just jealous, is it really Walmarts fault when the consumer makes this all come true? duh!GO FIGGURE. It costs so much to live folks and why not buy a bargain, hey it's the American way> bottom line if anybody is at fault at all its the Consumer folks, and that's not rocket science !
3-29-2008 @ 5:12PM
geeniusatwrok said...
well, I hate Wal-Mart because they've single-handedly destroyed most American manufacturing by grinding suppliers ever-harder for lower prices, and not just once; when those deals come up for renewal WM demands another cut. WM competitors have little choice but to do the same thing.
and most Americans are fine with that, even when the little factory in town shuts down and leaves them jobless, because they saved ten cents on a box of laundry soap.
3-29-2008 @ 5:16PM
geeniusatwrok said...
I hate WM for a number of reasons: dirty, crap-filled stores, surly employees, and most of their merch is crap that wears out or breaks quickly. I also hate them for destroying American manufacturing, but most Americans don't seem to care as long as they can buy cheap Chinese crap.
3-29-2008 @ 5:46PM
acdinc1@aol.com said...
22% mark-up - my ass. We tried to sell our product line at Walmart and they wanted a mark-up of 100%. They use their mega customer base to influence the supplier to cut to the bone. I don't believe there is one product on WallMarts shelf with a 22% mark-up.
They have the nerve to ask for $400k back from that poor ex-Wallmart employee who collected $400K from a trucking firm who smashed her brain in. She was probably only making minimum wage to boot.
Its how they treat there own employees that have people hating WallMart.
3-29-2008 @ 8:31PM
Timothy Horrigan said...
Wal-Mart was harmless enough... helpful even... when it was just a small part of the economic ecosystem. It's grown way out of control... and the reason so many of us hate it is not because of its low prices, it's because of the collateral damage from the high prices. (And, yeah it's also secondarily because its stores are ugly... Target and KMart have similar prices, are probably just as predatory in their business practices, but they offer a superior shopping experience.)
3-29-2008 @ 8:56PM
Mike said...
Let us all remember that Wal-Mart is the ULTIMATE "Mom n' Pop" business. It is the Mom n' Pop of ALL Mom n' Pops. Sam Walton started this business as a little 5 and Dime in the middle of nowhere Arkansas and built it into the largest corporation on the planet with his own blood, sweat, and tears.
You can still visit that little 5 and Dime on the town square in Bentonville where it has been converted into a museum. Impressive.
So I don't buy the whole "Wal-Mart is killing small-town America" argument. BS. Smalltown America has failed to learn HOW to compete with Wal-Mart! (It's not that tough, offer products and/or services that Wal-Mart does not.)
well, I hate Wal-Mart because they've single-handedly destroyed most American manufacturing by grinding suppliers ever-harder for lower prices, and not just once; when those deals come up for renewal WM demands another cut. WM competitors have little choice but to do the same thing.
Geeniusatwrok (seriously?) said,
"I hate Wal-Mart because they've single-handedly destroyed most American manufacturing by grinding suppliers ever-harder for lower prices, and not just once; when those deals come up for renewal WM demands another cut."
As a consumer I have one thing to say. THANK YOU Wal-Mart. They are acting as the buyers agent and negotiating the best possible prices on the goods I want to purchase. It takes two parties to sign a contract. Nobody is holding a gun to the Rubbermade CEO's head and is forcing him to deal with Wal-Mart. Many national brands do just fine NOT selling their products at Wal-Mart.
Wal-Mart doesn't tell suppliers HOW to reduce their costs -- they just say "do it". There are a ton of ways to reduce cost. Increase efficiency, lower overhead, streamline logistics, control packaging... you name it! If those companies CHOOSE to outsource production overseas to meet that goal, how is that Wal-Mart's fault? And is Target any better?
And finally, Timothy Horrigan said, "Target and KMart have similar prices, are probably just as predatory in their business practices, but they offer a superior shopping experience."
Please tell me where this magnificent K-Mart is.
3-31-2008 @ 12:19AM
beth b said...
As a former employee of this company, and single mom I think the corporation is to blame. I worked there for a few years and was fired because of attendance issues, I have 2 children who at the time were 2 and 4 kids get sick daycare will not take a sick child so I would miss work because I had noone to keep them, I had dr's excuses for most of those days but to walmart that doesn't count the assistant over your area has the power to approve or unapprove your absences and since our front end mgr at the time had a philosophy of just because you have an excuse doesn't mean you or your child was sick just meant you went to a dr. The way our insurance is we couldn't afford to go sick or not because of the deductible we have to pay along with what is deducted from our paychecks. Also I have seen employees who had stolen from the company go on somehow to better jobs and so far I have still been unable to find a job. Weird huh?
3-31-2008 @ 12:51PM
roudy11z said...
Let me be very clear with this comment on WMT. My Dad ran a small grocery store from 1953-1976 during the time the Piggly Wiggly, Safeway, and Brookshire grocery chains came to our town of 11,000 people in East Texas. If my Dad had not allowed the majority his customers to do business on credit then he would have gone broke after the chain stores came to town since they could buy in larger quantities and cut prices. Now does that sound familiar today about WMT? I find no fault with WMY and I do not feel sorry for their competitors. They are getting just what they deserve. Go Wal-Mart.
3-31-2008 @ 5:23PM
Daniel McMurtrie said...
I don't hate Wal-Mart. Hate takes to much time and effort. I do not shop at Wal-Mart because I am a member of a union. I do not feel welcome because, in Wal-Marts eyes, unions are no good for people. Wal-Mart hates unions because as a member of a union, I pay dues to insure that I receive a fair days pay including pension and good health care benefits. Paying people a fair days wage cuts into high profits.
Yet, I still pay for Wal-Mart. When a Wal-Mart employee can't afford the health care provided by the company, management encourages the employee to sign up for public assistance. In my state 37 % of Wal-Mart employees qualify and receive welfare.
When Wal-Mart comes to town they demand huge tax breaks because they are bringing in "good" not
high paying jobs into town. When they open I pay again with increased police costs because of the increase in crimes that happen on their open 24 hour a day property.
After they have been in town for a while, they show up again with their lawyers seeking a reduction in the taxes collected on the property.
This cost me again as a taxpayer because we spend a ton of money fighting the worlds largest corporation for our fair share of the tax base. If we win we still lose because we still have to pay to fight them; however, most towns just roll over because it is cheeper to let them have their way.
They set up corporations to hide tax money from the local governments by renting the store locations form themselves. This a gray area that may be legal but not ethical.
Debbie Shank, need I say more. They could have settled for a smaller payback and still held on to company rights. So much for being a member of the community and taking care of the employees like family. If that is the way to treat family, I am glad I am not a part of the Wal-Mart family.
Hate no, I am tired of giving Wal-Mart corporate welfare. I do not shop there and I do not need or want one in my town. The largest corporation in the world should pay its taxes and be responsible and ethical. We all pay for "Always Low Prices" even if we don't shop there.
6-08-2008 @ 1:41PM
Bobby said...
The "hatred" of Walmart is nothing more than another catch phrase of the elite left. More of the systematic bickering condensed into shallow thinking. I've said it hundreds of times, how could anyone hate one of America's best success stories? You've got the hypocrites at CNN that came up with their crowning glory recently pressuring Walmart to return health care costs to a former employee who was injured & received a large settlement. Keith "bugeyes" Olberman & Dan Abrams who squawked over & over like they'd defeated Goliath never once fit into their scenario that Walmart legally, yes legally won these benefits back in a court of law based on contract stipulations. Dan Abrams is an atty who made his living doing the very same thing but he criticizes Walmart for protecting their LEGAL rights in a court of law. Like I said, it has no rhyme or reason to hate the company, it's just a sheepish cliche'ish non intellectual mindset produced by agenda driven status quo. Sam Walton & Walt Disney, the Walt brothers of american ingenuity..
4-07-2008 @ 1:25AM
PETER BARBARISI said...
You people do realize alot of times walmarts open in or near a small town(s). Then they cause most of the small businesses to go out of business, and then after two or three years they pack up and leave 1,000,000 square feet of UNUSABLE space for a small town. Watch the documentary on Walmart, and see if you still support it. What other company in the United States actually encourages its employees to get on welfare? So in the end we get a double whammy: First Corporate welfare, and next the workers are on welfare as well. Wonderful. Why don't we all just go apply for welfare? How would you feel if the company you bust your ass for told you to apply for welfare? Think about it...
4-14-2008 @ 9:08PM
Cam said...
We want for low prices while Wal Mart leaders make billions and we as tax payers pay billions for employees to get adequate health care. We pay billions for unemployment premiums. There is a high costs for global thinking and paying slave wages in China. And for those that think Wal Mart is charitable, less than 2% of profits go to charity while Target spends 5% of pre tax profits. If you watch the trend, Wal Marts calous disregard for their employees is catching up with them.
4-10-2008 @ 2:15AM
panskeptic said...
The author is deliberately overlooking the proven fact that Walmart treats their people shamefully. In a tight job market, many people have to take what jobs they can get, and if that means Walmart, heaven help them.
Walmart's spectacular abuse of their workforce is amply documented, and is neither left nor right, but factual.
Plus, instead of offering their own people reasonable benefits, many Walmarts teach their employees how to get health care from the state, which boils down to a taxpayer subsidy of Walmart's lousy pay, while the suits in Bentonville do quite well thank you.
Sam Walton believed in treating his people right. The folks now in charge have turned that upside down, abusing the weakest of their personnel in every way they can.
4-12-2008 @ 11:58AM
Paul said...
I do not buy anything from Wal-Mart that is made in China. I don't feel my my monies should be used to supply their Mil. Wake up people, or start learning their language.
4-11-2008 @ 1:46PM
PAUL said...
I do not buy anything at Wal-Mart that is made in China. I don't feel my money should be supplying their MIL. Wake up people or learn their language. 99 out of 100 items are made China and sold to wal-mart and all the other discount stores.
PLEASE DON'T BUY CHINA, I AM TO OLD TO LEARN A NEW LANGUAGE. I SPEAK 4 LANGUAGE, AND CARRY A WEAPON, JUST IN CASE THEY COME OVER HERE.