The Wal-Mart Effect

by Charles Fishman. This was a very interesting read. One of those books that should be required reading for every American, whether they shop at Wal-mart or not, because it really lays out how Walmart's business practices affect us all. I marked quite a few passages, but the whole story is really only understood in the book with examples and in the order he constructs things.

'At the end of 1990, WM hadjust nine supercenters (where they sell groceries). Ten years later, at the end of 2000, they had 888 supercenters - an average of 7 supercenters a month for 120 months in a row - and WM was the number-one food retailer in the US...In that same decade, 31 supermarket chains have sought bankruptcy protection; 27 of them site competition from WM as a factor.'

'WM isn't just a store, it shapes where we shop, the products we buy, and the prices we pay - even for people who never shop there. It reaches deep inside the operations of the companies that supply it and changes not only what they sell, but also changes how those products are packaged and presented, what the lives of the factory workers who make the products are like- it even sometimes changes the country where the factories are located.'

'WM has changed the way we think about ourselves as shoppers and consumers. It has changed our sense of quality, our sense of what a good deal is. WM's low prices routinely reset our expectations about what things should cost. WM has changed the lens through which we see the world.'

'"The Wal-Mart economy" describes the nagging sense that there might be some unseen but terrible cost to be paid for "always low prices." The WM economy is a place where the jobs are traps: low wages, miserly benefits, stultifying work, no respect, no future. In the WM economy, we as consumers often buy too much because it's cheap. We are slaves to our impulse for a bargain.'

'The most potent, least public least well-understood power of the WM effect: the impact WM has in shaping the operations, the choices, the product mix of it's suppliers. Many suppliers hesitate to talk to WM about price increases, even when completely justified.'

'"Every time you see the WM smiley-face, whistling and knocking down the prices, somewhere there's a factory worker being kicked in the stomach."'

'WM's focus on pricing and it's ability to hold a supplier's business hostage to its own agenda, distorts markets in ways that consumers don't see, and ways that suppliers can't effectively counter. WM is so large that it can often defy the laws of supply, demand, and competition... The market didn't create the $2.97 gallon of pickles, nor did waning customer demand or a wild abundance of cucumbers. WM created the $2.97 gallon jar of pickles. The price - the number that is a critical piece of information to buyers, sellers, and competitors about the state of the pickle market - the price was a lie. It was unrelated either to the supply of cucumbers or the demand for pickles.  The price was a fiction imposed on the pickle market in Bentonville.'

'There's the yellow smiley face price slasher bouncing through TV commercials, slashing prices with a rapier. Sometimes the price slasher is dressed like Robin Hood - an audacious costume for the world's most powerful company.'

'What almost no one outside the world of WM and its suppliers sees and understands is the high cost of those low prices. WM has the power to squeeze profit-killing concessions from suppliers, many of whom are willing to do almost anything to keep the retailer happy, in part because WM now dominates consumer markets so thoroughly that they have no choice. The results can be dramatic or subtle, immediate or insidiously corrosive. Decisions made in Bentonville routinely close factories as well as open them. WM's way of doing business can hollow out companies, gradually transforming full-fledged consumer products companies who design and manufacture their own products into little more than importers. WM's price pressure can leave so little profit that there is little left for innovation.'

'They've lowered the price of TVs to the point where they can't afford to pay $1 or $2 an hour that they have to pay in Mexico. The production isn't poor quality, the products are. they are reducing the costs of the products by compromising the designs. They are designing the costs out by making poorer designs.'

'How can it be bad to have a bargain at WM? You can't buy anything if you're not employed. We are shopping ourselves out of jobs. The manufactured goods coming to the United States so cheaply are made under factory conditions that would not only not be tolerated in the US, they likely wouldn't even be legal. We want clean air, clear water, good living conditions, the best health care in the world, yet we aren't willing to pay for anything manufactured under those restrictions.'

'While WM added 480,000 new jobs between 1997 and 2004, US manufacturing jobs fell by 3.1 million, a loss of 37,000 jobs a month, on average, for 84 straight months. We find the abandonment of US manufacturing jobs unnerving, we find cheaper stuff on more shelves addictive. We don't connect the two.