The Wal-Mart You Don't Know

Fast Company magazine ^ | november 2003 | charles fishman

[breakem]

I remember in Demolition Man when Sandra Bullock is driving the newly defrosted Stallone around town to introduce him to the future. He asks why all the restaurants are Taco Bell. Her reply, "because they won."

[mamaduck]

Today, our living standards are as high as they have every been.

You know what is really sad is that our "standard of living" is now determined by how many cheap goods we can buy . . .

[atlaw]

"Walmart's tough to do business with. Too bad, so sad. Don't do business with them. If you're losing your *ss selling product to them, quit selling the product to them. If they actually are forcing you to sell below what you can sell the product for, don't sell the product to them."

I think you missed the point of the article.

[sausageseller]

The "everything for a dollar" stores.

Nothing in them from the US!

[Ford Fairlane]

Walmart's tough to do business with. Too bad, so sad. Don't do business with them.

Some of Kraft's execs are threatening to do just that.

I wonder what would happen to walmart's grocery sales if the worlds largest food company refuses to play ball with the worlds largest retailer?

[GatekeeperBookman]

I think the term or phrase has just ben 'miss-defined'. I should think the millions of poor illiterate children who can't speak English are defining our 'standard'-DOWN. So too their criminal parents who also pay no taxes.

Calling W-are you listening? Can you hear us down here in Whoville??

[1L]

I think you missed the point of the article.

What point did he miss?

[spodefly]

I have some incredible video of me and some friends shooting gallon pickle jars (filled with pickles) with high-powered rifles.

Not that that has anything to do with the story, but I thought I would mention it.

[kcvl]

Wal-Mart wields its power for just one purpose: to bring the lowest possible prices to its customers. At Wal-Mart, that goal is never reached. The retailer has a clear policy for suppliers: On basic products that don't change, the price Wal-Mart will pay, and will charge shoppers, must drop year after year. But what almost no one outside the world of Wal-Mart and its 21,000 suppliers knows is the high cost of those low prices. Wal-Mart has the power to squeeze profit-killing concessions from vendors. To survive in the face of its pricing demands, makers of everything from bras to bicycles to blue jeans have had to lay off employees and close U.S. plants in favor of outsourcing products from overseas.

Of course, U.S. companies have been moving jobs offshore for decades, long before Wal-Mart was a retailing power. But there is no question that the chain is helping accelerate the loss of American jobs to low-wage countries such as China. Wal-Mart, which in the late 1980s and early 1990s trumpeted its claim to "Buy American," has doubled its imports from China in the past five years alone, buying some $12 billion in merchandise in 2002. That's nearly 10% of all Chinese exports to the United States.

[aculeus]

Item: GE sold its small appliance business to Black & Decker several (10? 12?) years ago. A couple of years ago GE small appliances reappeared in Wal-Mart. But if you look at the bottom of the carton it says they are made exclusively for Wal-Mart under license from GE.

Item: Alcott Ridge wines are available only at Wal-Mart. They're a Gallo product priced near Gallo's Turning Leaf and Redwood Creek brands. Neither Wal-Mart or Gallo's names appear on the label. I buy them, figuring Gallo passes quality to Wal-Mart since it doesn't spend a dime on advertising this brand unlike the millions it spends on television for its other brands.

Item: The local Wal-Mart sells four decent-looking steak knives (China) for $2.98. You can buy a dozen for under ten bucks! If you owned a diner or a low-price restaurant you couldn't beat that price with a wholesaler.

[Richard Kimball]

Some of Kraft's execs are threatening to do just that.

It makes sense to me. My father was an appliance repairman (small independent) in the sixties when Sears was moving into the appliance repair business. Sears approached him about doing contract work for them. He said, to quote John Connally, "Not just no, but h*ll no."

Most of the other independents did sign on to do contract work for Sears. Sears methodically gave them more and more business until about 70% of their business was coming from Sears, and they let their other customers wither on the vine. Then Sears started hiring salaried people and cancelled all their contracts. The choice was to go to work for Sears for hourly wages (punch a clock and give up your business) or go bankrupt. My father never got affected because he wouldn't fall into that trap, and until the day he died, he had more service calls than he could make. Some people would wait three weeks for my father to work on their appliances.

Walmart is large enough now that if you do business with them, you functionally become a subdivision of Walmart, unless you are one heck of a big company. You don't HAVE to do business with Walmart.

[honeygrl]

So why don't some of these suppliers get together and do a publicized boycott of Walmart and tell the press exactly why. With the current job problems, I would bet it would take walmart down a peg and get a consumer boycott moving against walmart.

[traumer]

"But you can't buy anything if you're not employed. We are shopping ourselves out of jobs."

I couldn't put it better...

[ErnBatavia]

Today, our living standards are as high as they have every been.

Slightly off subject, but the "living standards", hygienically speaking are definitely Third World in any WalMart I've been to....filthy, sticky-floored pigstys.

They're opening one of the Super Wally's here next year, with grocery department - if they don't improve the cleanliness, the health authorities'll shut 'em down.

[atlaw]

While the article had certain aspects of the typical "big bad Walmart" screed, it was actually pretty even-handed in its assesment of Walmart's short term economic benefits.

But what the article pointed out rather effectively, I thought, was the liklihood that Walmart is engaged in what is, in the long run, an unsustainable process of product price devaluation. Walmart deals in mass necessity consumables (food, clothing, etc.) and mass appeal consumables (tv's, sporting goods, etc.) as opposed to specialty or niche consumables. Walmart's strategy of perpetual price devaluation on these consumables has garnered unprecedented market share (the A&P analogy is kind of misleading given the current dramatic differences in the consumables marketplace).

However, at a certain point, the basic price/cost ratio takes over. US producers and suppliers are increasingly unable to drive the Walmart engine, and it is only a matter of time before foreign suppliers will also find themselves in the position of saying why bother?

Brutal competition yes, but maybe too brutal to sustain.

[honeygrl]

If Kraft got together with a couple other major grocery suppliers, they could pretty much make supercenter walmarts useless because not many people are going to want the Sam's Choice version of the product.

[cashion]

I don't know the ratios for national chain stores. It is a hit-and-miss process of going to local stores and other chains with different stock.

You must have more time and money on your hands than you know what to do with. When I go shopping, I prefer to go to one place and get everything I need with one trip. Granted, I have to put a little bit of trust in Wal-Mart considering the fact that I don't check prices at other stores. I simply expect they are competitive or cheaper in most cases.

Just as a continuation, exactly what type of "stock" are you looking to buy? Most of my Wal-Mart shopping consists of groceries and hygiene related items.

[ThanhPhero]

I wonder what would happen to walmart's grocery sales if the worlds largest food company refuses to play ball with the worlds largest retailer

Easy. The world's largest retailer would become the world'd largest food company. No?

[xsrdx]

Walmart is engaged in what is, in the long run, an unsustainable process of product price devaluation.

Ding Ding Ding

Yup- increasingly, but steadily, Wal Mart has been moving downscale. Hardware, electronics, sporting goods - as suppliers cut corners and build crap to sell to Wal Mart.

A few years ago, the equivalent category electronics at Best Buy and Wal Mart were the same items.

Today, you'll often find that the specific models Wal Mart stocks simply aren't available anywhere else.

[cashion]

If Kraft got together with a couple other major grocery suppliers, they could pretty much make supercenter walmarts useless because not many people are going to want the Sam's Choice version of the product.

Wal-Mart wouldn't continue selling Sam's Choice if they weren't making money. Obviously there are people that are already choosing Wal-Mart's brand over Kraft. Secondly, if Kraft made such a flakey decision, there would be other companies more than willing to take their placed on the shelf.