Understanding the Wal-Mart Effect

"I'm writing this column in West Virginia, USA having just come back from shopping in Wal-Mart, the extraordinarily successful supermarket chain that makes our own look slow and tiny -- not to mention expensive! I had to keep blinking at the price labels. With my notion of prices tied to British expectations, Wal-Mart's just look as though the staff can't do their sums."

Wal-Mart is rarely the object of such praise. To be the best is usually to be the object of scorn. Wal-Mart knows this well. They are the best, and their critics would have you believe that the mammoth retail chain earned its laurels through unfair competition, civic destruction, even third world exploitation. The stories are familiar: In order to offer such low prices (always), Wal-Mart:

But it's time we looked a little deeper into what can only be called the "Wal-Mart effect."

Boone, North Carolina (named for the famous Dan'l) is a college town nestled in the rustic mountains of Appalachia. The population is divided roughly among groups of students, locals, and the academic elite. Such a microcosm of American diversity works in its own way. The locals realize how much money the university brings in. The students love the Smoky Mountain amenities and the bluegrass music. Academics find the local folkways charming and complementary to their status as, well, elites. But when Wal-Mart decided to come along in the 90s, locals, students, and academics also had a common purpose to bind them: to keep Wal-Mart out.

As it often does, Wal-Mart won. And since then, Boone has experienced the Wal-Mart effect. First, some Mom-n-Pop shops in Boone may have gone out of business due to the intense competition. But something interesting has happened: many new businesses have sprung up and they're cooler, more interesting, and more highly specialized than most of the old ones were. Mom-n-Pop have decided to move into more boutique-style businesses -- and not even Wal-Mart can compete with that.

For example, Hands Gallery -- formed c. 1998 -- is an interesting fixture for visitors to the downtown King Street area, offering indigenous art and sculpture for more refined tastes. While taking in the spring verdancy or autumn foliage of the high country, visitors can take jaunts through nearby Blowing Rock and Banner Elk for the utterly zoned and picturesque experience (and, of course, denizens of these planned towns take advantage of Boone's big boxes along highway 321).

But big boxes and all, downtown Boone offers its own home-grown order, complete with quirky restaurants and shops one might have found on the corner of Haight and Ashbury. An eclectic mix of businesses line the main thoroughfare. Earth Fare, an organic foods store, has come to King Street. Older fixtures such as the Appalachian Antique Mall and Mast General Store (retail) have enjoyed continued success and remain favorite establishments for shoppers. You'll even find "Josh," a vagrant everyone in Boone knows, selling poetry and beaded jewelry to passers by.

The question becomes: do we really need small, inefficient and expensive shops to supply us with our shaving cream and plastic laundry baskets? How vibrant is a downtown where such items are being hocked? Since Wal-Mart consolidates these kinds of goods into "big boxes," we, like John Blundell, can get them for dirt cheap all in one place. Charming downtown areas can then evolve into gorgeous window-shopping and restaurant-hopping districts for both locals and tourists. In the meantime, everyone knows where to go to get the bare necessities quickly and at a lower cost.

The Wal-Mart effect is happening all over the country, allowing many municipalities to renew their town centers. In fact, residents able to reduce their day-to-day shopping budgets at Wal-Mart have more money left to spend on the things that make life great and towns charming -- whether it's hand-blown glass or delicious roadside produce grown by local farmers. (Take it from me, no big box can do Silver Queen corn like North Carolina farmers on the side of the road.)

Wal-Mart has also made concerted efforts to work with communities to stylize their stores, especially in cases where such is desired by the locals. The result is that the big box look is not always battleship blue corrugated metal with plastic letters. Wal-Marts come in all manner of brick, stone and Mediterranean styles.

The Wal-Mart effect may be destructive from time to time, but it's also profoundly creative. Wal-Mart has inadvertently hastened the pace of specialization and municipal renewal. As consumers, of course, we only benefit from the presence of Wal-Mart and other big box retailers. People in developing countries and at home are being lifted from squalor because Wal-Mart seeks out the great, low-cost products they offer. Wal-Mart is also giving a lot of people opportunities to earn a living -- including retirees who want to stay active as well as immigrants prepared to accept the wages Wal-Mart offers. Don Boudreaux puts it succinctly here:

"And because Wal-Mart indisputably keeps prices to consumers low, by far the most plausible conclusion is that Wal-Mart promotes the economic prosperity of the places it which it operates -- it creates better jobs and increases the availability of goods and services. In short, Wal-Mart makes its workers and its customers (and, yes, its stockholders) wealthier."

As prices continue to fall and quality continues to improve, critics of Wal-Mart will have a tougher time resisting the temptation to shop there. In the meantime, I'll be enjoying shorter lines, lower prices, quality products, and smiley-face stickers.

"I don't know that I'd go so far as to say it's bad for the country OVERALL, once all factors are weighed, but to pretend that the rosy scenario painted in this article is an accurate portrayal of the whole is utter nonsense."

Actually, the scenario is probably quite accurate. It certainly fits what I directly observed go on when a Wal-Mart moved into New Roads, Louisiana some years back.

"People who claim otherwise, who try to convince everyone that Wal-Mart is nothing but positive, base their views on selective perception, ignorance, or a combination of the two.

No, what people are claiming is that the NET OVERALL EFFECT in communities is positive. That was overwhelmingly the case in the example I observed directly.

Sam Walton is dead.

Wal-Mart is now corporate as it has been for a while.

Find another innovator and we won't have to read as much "capitalism is the devil" articles.

or...

Shift the industry of products being made in Red China for products being made in South America. Why?

1) stops funding anti-American Communist Beijing;

2) strengthens the Western Hemisphere via business and relations;

3) keeps my Hispanic side of the family still living in Central and South America from sneaking into Estados Unidos for a yob and a life;

4) moves industries away from cocaine to real products that the world needs;

5) South America is physically closer than China so the transportation cost is much much less (marine grade bunker C and/or diesel is expensive to burn).

Try being one of those Moms or Pops who have been run out of business by Wal-Mart at age 50 or 60. My father-in-law was one of those. He had to close his small sporting goods store and is still in litigation with Nike over less than $20,000 in unsold inventory. It ruined his life and took what little savings he had. Now he has to work as a greeter at Wal-Mart because he needs a job to supplement his meager Social Security and small 401(k), and there is nobody in his small town that has a job for a senior citizen. He has years of valuable retail experience, but his Wal-Mart store manager is 32 years old and won't listen to any of his suggestions. His eldest son also had to give up on his plans to take over his dad's store and ended up in an unsatisfying career selling cars. His daughter worked in the store as a young teen and made all the signs, which led her into a successful career as a graphic artist. She would not have done this working as a cashier at Wal-Mart or McDonald's. Many of these Mom and Pop stores used to employ Sons and Daughters, giving them valuable sales, inventory, graphics, and customer service experience. Are they going to learn these skills as cashiers or grocery baggers?

So your father-in-law prospered as a monopoly. Too bad he couldn't redesign his product lines to offer goods and a service Walmart didn't provide. As you said the store was good for he and his family members. Did he employ many from town or just the family? If he did, how much above minimum wage did he pay his employees? Did he price his items high or a reasonable price so those he didn't give jobs to could afford what he sold? How many tax dollars did he generate for the community? I think I know the answers to these questions but would like your side.

There's one thing that Wal-Mart absolutely cannot compete on: expertise of sales staff. If you sell something that's fairly complicated and requires a lot of knowledge to buy correctly, your customers will get appreciated added value by having an expert sales staff present.

True enough, but having been in business for twenty-five years, let me assure you of this: Most people care about ONE issue, PRICE. I've been there and fought the added-value-through-knowledge battle. The percentage of people willing to pay a premium for that level of knowledge and service is unfortunately tiny. Most people just want a "flat TV" or whatever. They don't even care about details or ratings. They want that "flat screen" or "big screen" or you name it, at the cheapest price, and that's that.

Discriminating buyers like you describe are a small percentage. And many of those discriminating buyers will go to a specialty retailer, soak up the knowledge and advice they need, then go buy the product elsewhere to save a hundred bucks. In the end, once a market shakes out, you'll wind up competing on price virtually 100% of the time.

I'd agree with you if Pat limited himself to commenting on moral issues (in fact, in 1992, when he was preaching moral issues, I voted for him in the Republican primary). Unfortunately, he decided Perotistas know more about economic issues than, say, Friedman, Stigler, Coase, Buchanan, Fogel, North, Posner, Landes, Hazlett, Hayek, Von Mises, Sowell, Williams, etc., etc.

what i don't understand is why folks like you don't see anything wrong with grossly UNDERPAYING average working people and giving them as few benefits as possible

If these people are grossly underpaid, why don't they get a higher paying job somewhere else?

Or perhaps they wouldn't have any job if it weren't for Wal-Mart...

True enough, but having been in business for twenty-five years, let me assure you of this:

That all is pretty sad. Unfortunately, the current situation is a product of the consumers, no matter how much the consumers may complain. South Park's coverage of this phenomenon was the best.

Still, some specialty store can expect my mom as a customer soon, because Wal-Mart doesn't hack it. Another thing Wal-Mart can't give is post-purchase support, which she will need.

yes apparently there are different brands of conservatives. one brand i have particularly noted is the type who just want to make as much money as possible, care nothing for other people, the general society, or this country of america, and want to give back as little as possible. i see a lot of those types of people and i don't like them.

The there's "your" type of conservatives" - those that deplore the free market and capitalism, and blame the ills of society on those evil corporations.

"...yes, that's right - because Walmart underpays its workers so badly (and please don't tell me they should just get other jobs because Walmart frequently is the only employer of size in an area) and has such poor benefits, that many of its employees have to receive welfare benefits or tax subsidzed health care because what they receive from Walmart is totally inadequate."

Yep. Before Wall Mart, they got union wages and benefits working for the mom & pop shops and 7-11 convenience stores because those stores charged their customers so much more for the same goods. < / sarcasm >

Wal-Mart has its good points and its bad points. It is worth noting that those parts of the country where Wal-Mart has the least market penetration, the Northeast and the West Coast, are also the most socialistic areas of the country. In these states, which are "deep blue," state and local governments tend to fill in those areas of regulation and interference where the current Federal government does not enter but the central governments of most Western democracies do. As a result, a place like Massachusetts more resembles a Western European social democracy than it does the Southern, Border, Plains, and Mountain states.

Whatever problems Wal-Mart's retail dominance may have, I have a greater fear of those who would prohibit or severely curtail the corporation.

Technological advances have caused the decline of required skill levels for certain types of jobs. For example, my first real job was as a sales clerk in a department store.

Each clerk had a sales pad on which the clerk wrote such as:
5 towels at $1.99 = $9.95
3 tee-shirts at $0.99 = 2.97
Subtotal = $12.92
Sales Tax 3% = 0.39
Total = $13.31
Each clerk would do the math on the sales pad. Not rocket science, but still.

Nowadays, the sales clerk has been replaced by a cashier who needs to know no spelling or math, only how to cause the Uniform Product Code reader to go "beep," to make sure that the UPC reader goes "beep" for each item, and how to make change for the few customers who actually pay cash.

My next real job involved charting performance of electronic equipment which required math knowledge. To have such a job required licensure. To get the license, you had to pass an exam consisting of a series of mathematical computations. Again, not rocket science. Now, technology is such that the computations are made by the machine and they mail you the license if you ask for one.

Technological advances cause declines in skills levels necessary for certain jobs (but an increase in skills levels for certain other jobs (although usually fewer of them)). People with skills levels for yesterday's jobs but not for tomorrow's are naturally going to be frustrated and dismayed as they discover their jobs can be done by people lacking their skills but that they are not prepared to move to the next job.

Wal-Mart came to two towns near mine; one is 9 miles away and one is 8. Now, my hometown (which had earlier supported two major supermarkets, an expanded convenience store, and neighborhood delivery green grocerer) has one supermarket, which stocks a limited amount of goods (mostly booze).

This is the REAL WAL-MART EFFECT: If Wal-Mart doesn't have it, you can't buy it. There is no place in town to buy a more exotic meat (like lamb) or canned goods (like hearts of palm). But Wal-Mart doesn't carry these things either. An Easter dinner other than traditional ham was not possible--period.

Sure, we've got plenty of dress shops, art galleries, and antique stores--but if you need a wrench set, you have to drive 8-9 miles. And, if Wal-Mart is out of them, forget it. If you need 2" drapery hooks and they only have 1", get used to it.

Worst, worst, worst of all, if your taste isn't Wal-Martized--you're screwed. I looked for a tablecoth for Easter. I got something--white when I wanted pastel, round instead of rectangular, but I got something. (Yep, the better dry goods store in my hometown that used to sell linen napkins, etc., went out of business because they couldn't compete with the prices Wal-Mart charged for gift items, a more profitable product.)

I know that Wal-Mart is the ultimate demonstration of the marketplace at work, but shopping based upon item supplied rather than price alone doesn't recommend the merchandise or its vendor.

Thank God for mail-order!

Walmart beneficial?? Come on, all those customers can't be right!!!!!

Yeah it's funny.... they shop there and they complain about Walmart at the same time. They complain the lines are long, while they deride jobs there as 'low class.' I actually enjoy it, the people in our particular store, at least the day and evening people, have a great sense of humor and are quite fun to be around.

They complain if the lines are long but you know they'd complain if we didn't give our employees their breaks on time or made them forfeit breaks for 'busy times.'

They complain about Chinese 'unfair labor' but they buy the stuff from there, and would have a fit if we didn't offer the less expensive alternatives.

You're right about the boutique aspect. Wal-Mart has contracted with an artist I know who made her living working upscale craft shows. They are patenting her designs for reproduction in plastic, which she originally made in wood. She feels lucky that they just didn't grab one and copy it but involved her, via an agent, in the process.

There are also plans in Wal-Mart to put larger (usually family-owned) supermarket chains out of business. They are going to open smaller neighborhood stores in strip malls and sell beef and chicken as loss leaders but keep the basics on the shelves. Again, if you need a specialty product, you'll have to go back to your upscale super-duper market, but they'll be losing money badly because they will not be able to undersell the market across the street in the usual basics that keep them afloat.

Already, you can hardly find the special cuts from independent butchers, if you can even find one of those. Some recipes that just will not be possible to try at all.

The only saving grace is that I've found a Trader Joe's which has filled an interesting niche in this new playing field of food competition.

Alot of those same merchants are now running internet shops, often via ebay. It's amazing how many auctions I win that are from mom-and-pop operations, now run out of their homes. Same is true of the used book options that amazon offers. These are relatively obscure shops that were novelty businesses before the internet.

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