Eliminating lazy thinking about Wal-Mart

Great Debates
41

I actually thought you were joking about that.

Were those actual figure you were citing? 70% of retail dollars are spent at Wal-Mart? Could I see a cite for that?

http://en.wikipedia.org/wiki/Wal-mart says:

I don’t see a trend adding up to 70%.

Who knows? Show me some real figures. Plus, there would be a tipping point at which the Federal Government would bust up WM as a monopoly, so WM certainly wouldn’t want to get anywhere near 100%.

Factors such as the above-mentioned government intervention, increased e-tailing, increased competition from stores out-niching, out-boxing (specialized big box retailers), or just plain out-competing WM (Target, Cosco, etc.).

Yeah, Microsoft has a monopoly, owing to some pretty special technological and historical circumstances (and some some unfair trade practices, admittedly; and some excellent products and product bundles, admittedly). The WM and MS cases are utterly unalike.

42

Aeschines, as I’ve already written, it’s not an issue of where WalMart is today. You don’t follow a pattern from one point of data. The issue is where WalMart is going. And as I have pointed out, WalMart has consistently expanded. So it doesn’t matter what percentage they control today - it’s a different figure for every product and the rate of increase is variable. But - and here’s the important part - all of these figures are increasing. So all of them are heading towards 100% - they may not reach it but they’re aiming to get as close as possible. And if you think a trend which had consistently moved in one direction for over twenty years is going to reverse direction, the burden of proof is on you.

Because as you have admitted, monopolies do happen. Microsoft controls 97% of its market and none of the counter-acting factors you described prevented it from doing so. So explain why another business, like WalMart, that is following the same path will not reach the same destination.

43

I’ve got to call you on the 97% of the market thing. The PC doesn’t even control 97% of the home computer market. Apple has almost 5% of the market. Of the PC market, Microsoft only has a big market share in desktop OS’s, with Linux grabbing about 3-4%. Microsoft’s market share for its web browser is dropping, btw. Mozilla and Firefox are starting to take a toll, now holding well over 10% of the market, and increasing.

In the server market, Unix is still a big player, and Linux is gaining ground as well. So Microsoft may actually be slightly on the decline. The Mac gained market share last year, and Linux is grabbing an increasing piece of the desktop OS market.

Microsoft is getting hammered in other areas. Zune may be a huge flop. Open source applications are eating heavily into the application market. MySQL, OpenOffice, Eclipse, and other open source apps are really starting to pressure Microsoft’s core applications. Google is encroaching on the desktop. Far from being a coercive monopoly, Microsoft’s sheer size and some corporate sclerosis may be significant competitive barriers. Their more nimble competitors are starting to hurt.

Another point about reading the tea leaves of the past: If you look at the history of any company that has recently grown in size, you will see a rapid curve of increasing market share. By Definition. This says absolutely nothing about where that market share is going in the future. I can remember a time when the big three automakers were unassailable, and people giggled at the efforts of the Japanese to compete.

44

It may be irrelevent in the larger question of economics, monopolies, what’s good for the poor, etc., but I don’t see how you can defend this part of your argument. In my experience, not only are WalMarts not Renaissance plazas, they’re not even Main Street America – they’re ugly and sprawling and souless, and help kill traditional urban centers of towns and cities. Again, that may be a minor concern among other costs and benefits, but I do wonder what the long term effect of them will be on our culture and the way we live.

45

The worst sort of statistical extrapolation is that which compares two short-term data points, notes a straight rise/fall correlation, extends it into the indefinite future claiming “see?” I remember newspaper articles written in the '70s claiming we were going to have $12 Big Macs by 1990 if inflation continued at then-current rates.

The world doesn’t work that way. Wal-Mart isn’t going to get 100% of discount retailing any more than Sears ended up with 100% of all mail-order merchandise or A&P ended up with 100% of grocery store sales. Big Macs are still a far cry from $12, with 1990 being 17 years ago.

No matter how big Wal-Mart gets, the world will always be bigger and the amount of externalities that will affect the company will grow in relation to its size. It will become unionized and saddle itself with bad labor contracts (Ford). The shareholders will clamor for dividends (Sears). The company becomes lazy (A&P). An Asian competitor, supported by a captive home market of 100 million-1 billion people, comes along in 20 years and undercuts Wal-Mart’s ass in its home market (with the corresponding complaints about American companies losing out to “subsidized” Asian competitors) (GM vs Toyota). Some executive commits some major fraud, damaging the company for good (Arthur Anderson). The government breaks them up (Standard Oil).

And MS? :rolleyes: They control 90-odd percent of the operating systems, true, but for a rather bulky platform that will become obsolete over the next 20 years as increasingly smaller and more integrated devices and networks make having a “PC”-type system rather cumbersome. MS might control the OS’ for those devices… but likely not. And MS does seem to be a company that has lost a little of its focus, as Gates is more concerned with his legacy and Ballmer, well, Ballmer is tired. And merely repeating himself.

I am surprised at the low penetration rate for linux. From reading the SDMB and other message boards I figured it had a near 30% of the market. :wink:

46

I assume you’re talking about A&P, the company whose practices actually spawned some of our current anti-trust legislation. Not really a good case study to prove your points.

47

I think it is highly unlikely that you’re going to get WalMart with anything approaching a true monopoly. There are numerous large retailers who go head to head with WM and compete. From your direct competitiors like Target and KMart/Sears to department stores like Macy’s and JC Penney to supermarkets and pharmacies to stores that focus in specific areas like Best Buy, Circuit City, Home Depot, Barnes and Noble, Staples, Bed Bath and Beyond, to online/mail order where you can get anything from anywhere shipped to your home.

The reality is that mom and pop general merchandise retailing has gone the way of the buggy whip. The big box stores have way too many efficiencies to pass along to the consumer, and most of us don’t need personalized attention to buy cereal or a pair of pants. We are also a very mobile society, so it’s no trouble for us to congregate at one retailer vs. being spread out over many small stores.

Complaining that M&P stores are getting closed is no more sensible than complaining that the robotic welding machine in the factory put 5 human welders out of work.

48

I own a mom & pop store and I compete directly with Wal-Mart, sort of. My mom & pop store is owned by me and my friend, and since I have a full-time job, I just supplied the capital, while he runs it. We’re not married, and I have no intention of marrying him (not that there’s anything wrong with that :stuck_out_tongue: ) Some of my inventory is exactly what Wal-Mart sells. Guess what? We get hammered on price on 97% of the same items. We have at least 15% of our inventory sit around, not moving. I probably couldn’t even give it away. For some reason or another, we out price them on the other 3%. The rest of my inventory is stuff that Wal-Mart will never carry. They couldn’t carry it because they are mostly exclusive, limited run production models and toys.

I could care less what Wal-Mart does, they will never encroach on my market. If they do, there is enough product out there that I can switch to something else. Take electronics for example: half of Wal-Mart’s brands I’ve never heard of, because they’re cheap asian products that probably wouldn’t survive me turning the lights on and off really fast. I can sell high end products exclusively attracting those customer who wouldn’t be caught dead in a Wal-Mart. While it’s true that I won’t be able to outsell them on gameboys, PS3s and Xbox 360s, if I can get my hands on a Wii, I can outsell them because I have it and raise my prices at the same time. Trust me, there is plenty of market out there for everyone. The issue is how to reach them.

49

Not arguing any point here, just curious what this phrase means when applied to a corporation. Thanks.

50

Another way in which consumers can be hurt is by reducing the choices they have. WalMart takes care of its mass market customer pretty well, by forcing the lowest prices possible on a variety of goods, but some things just can’t be bought there. Take Levi’s for instance. There is a division of Levi Strauss called Levi Signature, which is their mass-market brand, most of the regular Levi product line isn’t sold at WalMart–501s are too upscaled for the likes of the mass retailer.

51

Basically, it means that large corporations tend to, over time, build up internal structures, fiefdoms, rigid ways of thinking, and other impediments to competitiveness. The people at the top lose their drive to excel, the Peter Principle leads to incompetent people in various management positions, and dysfunctional behaviours start to form. It manifests itself in different ways - some companies becomes so rule-bound and burdened with paperwork trails that they lose their ability to be agile. Some develop blockages to information flow which prevent needed information from getting to the people who could use it. An observation from an engineer in the field has to go through his manager, to another manager, to a committee, to senior management, to the planning board… Along the way crucial information is lost.

All kinds of problems set in. The best large companies actively re-invent themselves periodically and clean house to keep themselves fresh. Or they adapt by breaking themselves apart into smaller, more agile divisions. Or sometimes they get so bloated and inefficient at the use of their own resources that they fall prey to corporate raiders.

It’s the rare corporation that can gain a large market share and hold onto it for a long period of time.

52

Personally, I’m thankful for the Wal-Marts to show up and tell me what they’re willing to price things out at. I’m glad to know what products they’re going to carry. Why? Because as a competing business owner, I don’t have to carry that. I can now carry Levi Signature, and know that Wal-Mart will not out bid me. I know to stay away from the other Levis because I don’t want their customers in my store, and I probably couldn’t compete with them on price anyway. This scenario is only a loss to the consumer if there is no other player to fill the gap. The flip side is: if there is nothing to fill the gap, it probably isn’t worth selling anyway (at least not in that location).

53

I see Microsoft mentioned from time to time in this thread. It’s intersting to note that one reason Microsoft was able to flourish is because IBM was forced to unbundle its HW from its SW. At one time the only way you could get IBM OSs, compilers, and applications was if you had their HW. Once you had an IBM mainframe and had developed applications for it, you were pretty much locked in. The govt forced them to unbundle and this led to the development of plug-compatible mainframes from Amdahl and others.

When IBM developed the PC they allowed Microsoft to sell the SW independently of the HW. I’m not sure if they were legally required to do so, or if they anticipated that they may have to do so in the future.

To me the takeaway is that sometimes the govt needs to step in and place some restrictions on a company to allow new companies and technologies to flourish. Whether this is the case for WM is open for debate.

I would like to see Microsoft broken up to three or four companies: OS, applications, services (e.g., search), and possibly HW (mice, keyboards, etc.). That way you could make it a level playing field for everyone without micro-managing whether Microsoft is giving everyone equal access to APIs, roadmaps, etc.

54

I guess the part that I don’t quite understand in the Mom-'n-Pop vs. Wal-Mart argument is that it’s a classic example of competitive advantage, and yet it’s somehow seen as evil, when it’s something that’s gone on for hundreds of years.

There are 2 basic strategies for a business:
[ol]
[li]Low Price. You offer the cheapest goods to your customers.[/li][li]Differentiation. You offer different goods, or different service than your competitors.[/li][/ol]

Wal-Mart is obviously taking the low-price approach, combined with (possibly monosoponistic, I’ll grant) economies of scale.

Mom-'n-Pop stores should take the differentiation route, whatever that is.

Let’s use the example of sporting goods.

If you’re a Mom-'n-Pop sporting goods store somewhere, and there’s no Wal-Mart, Target, etc… nearby, then you can make good money selling athletic shorts, jock straps, socks, baseballs, basic FMJ ammunition, etc… because you’re THE ONLY GAME IN TOWN.

However, when a Wal-Mart moves in, those things are now more common. You can buy all of the above in a Wal-Mart extremely cheaply.

So, as the Mom-'n-Pop shop, do you try and keep selling your $7 jock straps, when Wal-Mart sells them for $3? Of course not. What you do is sell things like DeMarini softball bats, and high-end hunting rifles, and specialty ammunition that Wal-Mart doesn’t sell. Since Wal-Mart doesn’t sell it, you can mark it up plenty as a result.

That’s why chains like Dick’s, Sports Authority, Academy, Bass Pro Shops and Cabela’s still are in business. You can go buy a rifle, some ammunition, and some camouflage at Wal-Mart, but you can buy better versions of the same at the above places. You can buy a one-size-fits-all cheapo $1 karate mouthpiece at Wal-Mart, or you can get a super-duper one made for kids with braces with a medical warranty at Sports Authority for $6. You can buy cheapo Pro-Staff golf balls at Wal-Mart, or you can buy Titleist Pro-V1s at Dick’s.

That’s what it’s about… that’s why there are still specialty bakers and butcher shops out there… they generally don’t make hamburger meat & everyday loaves of bread, but instead you can get New Zealand venison roasts and rosemary garlic focaccia bread.

55

Most of the “Mom & Pop’s can compete in a niche” arguments ignore the fact that a large portion of the Mom & Pop’s that were put out of business by WM were in very small towns. Towns way too small to have a Sporting Goods store, a high-end electronics boutique, eclectic clothing stores, etc. Most Mom & Pop stores in those towns sold the same things Wal-mart does, albeit with higher prices and a smaller selection, precisely because only general stores can make it in many of those towns. The other Mom & Pop stores that were put out of business in those small towns were grocery stores. Do you expect them to switch to something like a “Natural Foods Market” or “Vegetarian’s Paradise” niche in a town of 10,000?

It can certainly be debated that Wal-mart isn’t doing anything wrong, but to say that those people being put out of business can compete in niche markets ignores the reality of many Wal-mart towns.

56

Why should anyone (other than the investors in the losing mom/pop store) care?

57

Did you read the last line of my post?

58

A few reasons I can think of:

  1. “Mom & Pop” stores tend to have developed an expertise in their area. They can help you choose products (or deliver services) in a way that chain-store employees generally can’t.

  2. “Mom & Pop” stores tend to carry more diverse/eclectic/obscure things. Chain-stores have the philosophy that they can afford to stock things that don’t ‘move’ quickly.

  3. As mentioned above, “Mom & Pop” stores tend to support other local institutions - running ads in the yearbook, sponsoring little-league teams, etc. Chain-stores (esp WM) generally don’t.

Thus, when “Mom & Pop” stores close, the quality-of-life is markedly diminished.

59

Yes, and I’m just pointing out that it’s a moot point.

If anyone cared about the above, they would pay for it, would they not?

60

Human nature is funny. Often you don’t realize the value of something until it’s gone.

In my community (~20,000), we had a marvelous Mom & Pop bakery. They sold something like 150 pies every Thanksgiving and another 150 every Christmas. SuperWalMart came. Suddenly Mom & Pop sold 8 pies for Thanksgiving. They closed.

A couple of years later, everyone figured out that WalMart’s pies, while cheap, in fact suck. Somehow Mom & Pop were persuaded to re-open. They did and they’re quite successful once again.