The Blog of Harald

Fast Company | The Wal-Mart You Don’t Know

An interesting (if long) article describing the effects, good and bad, that Walmart is having on the US (and probably Canadian) markets.

Wal-mart is an 800 lb gorilla, and can force its suppliers to do pretty much anything. Wal-mart is using that clout to relentlessly lower prices. There’s nothing wrong with that; Wal-mart is a business, and has a mandate from shareholders. Shoppers like lower prices, and so Wal-mart is doing brisk business. (Remember, Wal-mart is really in the business of selling shelf-space, the same way that TV and magazines really sell eyeballs to advertisers).

As always, there’s a downside. The push for lower-prices is accelerating the movement of manufacturing overseas, closing down American businesses and putting people out of work. Well, except for the management shell; see an earlier “How to Save the World entry”:http://blogs.salon.com/0002007/2003/11/04.html#a504). This also leads to the destruction of most small retail businesses in any area with a Wal-mart. Small businesses cannot compete on price, because Wal-mart gets such huge concessions from suppliers, and/or gobbles up all available supply. For many retail businesses, there are no other effective differentiators; too few people are willing to pay for quality or service these days. This is not because they don’t want quality or service; it’s because they don’t have the cash.

Ironically, the very same people who shop at Wal-mart for its lower prices are the ones losing jobs (or businesses) as a result of the cycle. It becomes a vicious cycle. Which brings us to “Dave Pollard’s comments”:http://blogs.salon.com/0002007/2003/11/18.html#a520 on the same article. He explains it better than I, so go read his entry :-)