Walmart’s business philosophy is to use their huge volume of sales to push supplier prices down every year. Once Walmart makes up too much of their sales, the suppliers can’t say no. So even if Walmart’s gross sales are flat, their net sales should improve.
The story of the Vlasic pickle jar is worth reading:
http://www.fastcompany.com/magazine/77/walmart.html
That is not true in the least. Wal-Mart has more buying power than the vast number of countries in the world. They are a monolithic and aggressive mega-corp in the purest sense of the word. They helped pay for their own regional airport (NW Arkansas Regional) because they needed airplane loads of people flying into their headquarters every day. They also dictated that most suppliers had to build satellite offices next to their gigantic headquarters so that they could respond within the hour. That caused the region to explode with growth. They can almost bankrupt a supplier with a few pen strokes. A few years ago, I read that they got really sensitive to that fact and prohibited suppliers that would certainly become bankrupt if they lost their Wal-Mart contract. Wal-Mart is exceptionally powerful even to the point of being more powerful than most of the countries in the world.
But at this point, who doesn’t? I mean, walk into almost any middle-class retailer, and most of the products will be made in China.
I would be curious if anyone has studied the situation. Would Wal-Mart be the biggest retailer in the world without China and would China be the manufacturing superpower it is without Wal-Mart?
Wal-Mart’s sales last year were in the neighborhood of $250,000,000,000. How much of that could possibly represent Chinese manufacturing? Possibly $50,000,000,000 if I’m being generous. And that’s retail pricing. The rule of thumb is that retail is twice that of wholesale which is twice that of factory. That brings us down to $12,500,000,000 of manufacturing sales. Obviously that’s a drop in the bucket to China’s economy.
While Americans keep getting China dangled in front of their eyes of a bogeyman, the reality is that manufacturing started moving out of China years ago to countries with even cheaper labor. Besides the powerhouses of India, South Korea, and Japan, there’s Singapore, Indonesia, Thailand, Sri Lanka, practically any country other than Burma and North Korea. All of East Asia does manufacturing.
And China makes far more money on heavy equipment and goods than on tschochkes for Wal-Mart. That’s where the real profit is, just as in the U.S. years ago when cars and machinery and appliances supplied the good jobs.
So while I’m sure it’s a profitable relationship for both China doesn’t depend on Wal-Mart and Wal-Mart doesn’t depend on China. When people say it’s a global economy now they mean that every country has a solid piece of it. There are no longer any one-to-ones.
Can you cite that, by chance? It’d be the first truly positive thing I’ve heard about Walmart.
Wait, so if one store has higher prices than another store they’re price gouging? Even if WalMart charges above-market prices for staples they aren’t cheating anyone unless they have a monopoly on grocery sales. Which they don’t.
Some grocery stores offer below-cost staples like milk and eggs and bread as a way to get customers into the store so that once they’re in the store they’ll also stock up on high-margin crap. What makes it price gouging if WalMart doesn’t do that?
Here are a few others. They are surprisingly laid back and relaxed on employees, within certain limits. They offer fair wages, and treat their people well, and are generous about increasing pay for more training, and offer that training themselves. There’s a reason I’ve known several people who transferred from one Wal-Mart to another when they moved, just because they liked Wal-Mart.
It’s business, not an Evil Society of Villainy. They know that having decent employees is difficult and work to get the ones they need. They don’t like unions, and won’t tolerate them, but respect their people more.
They push suppliers hard, but they are always willing to work with suppliers and to specify what needs to happen. Wal-Mart is basically the pinnacle of logistical efficiency ever - ever. The reason they force suppliers to adhere to high standards is that saying “we’ll get it there sometime next week” isn’t good enough. They need items on time on schedule on a given day, period, or they lose sales. And frequently, they need those items in a given hour. Sometimes, they specify an exact time to the minute with no more thana 10-minute over/under allowed.
Believe me, the reason the became the biggest ain’t because they just sat around and screwed people. They are quite literally the most efficient copany in the world, and still do more than almost anyone.
I disagree. There are enough national branded food items that would make the effort worth a shot.
Wow. Really? I’m glad to hear that’s true at some stores, at least. It certainly hasn’t been true for anyone I’ve known who has worked at Walmart. I’ve known people out on the floor, and also a person in the eye center in a position requiring a specific college degree. “Laid back” and “fair wages” are not what any of them had to say.
I wonder if there is such a difference between stores, or whether there is perhaps a different class of employees? My brother worked as a pharmacist at a national grocery store chain for awhile, and he noticed that he was definitely treated much better than the “regular” employees.
Wal-Mart has made the Forbes list of the 100 best places in America to work several times.
Wal-Mart has been a very powerful force in keeping inflation down in the last two decades and in driving economic growth, because it has pushed the entire consumer goods manufacturing industry to streamline, cut out fat, improve processes, and cut profits to the lowest possible point.
Wal-Mart has resulted in great improvements in the standard of living of poor people, giving them more buying power with their dollars.
Wal-Mart has made it easier for single mothers with children to shop. Wal-Marts tend to locate near such families, and are either on major transit routes or major transit routes come to them because of their size. So a woman with two small kids can make one stop and collect everything the family needs - a huge convenience.
Wal-Mart demonization by the left is not reality-based. It has more to do with the fact that Wal-Mart will not unionize, and therefore comes under constant attack from big labor and liberals who just swallow the big labor line. Many negative Wal-Mart studies are funded by labor unions, as is a lot of the propaganda against it.
Wal-Mart also comes under attack by anti-globalization people, who are generally operating under a gross misunderstanding of what globalization actually does and who it benefits.
I dunno about that. Around here, public resistance to Walmart has kept them relatively marginalized. Recently, they managed to work out a deal to get a toe-hold in Vancouver proper, starting sometime this year.
As it is, they don’t really have an appealling location. We received a $600 gift card for Walmart in August and haven’t been arsed to get down there to use it yet. The only time I’ve been in one was to use another gift card we’d received for Christmas - and it was summer before we got in there. They’re all kind of inconveniently located.
There’s a difference between stores, or rather, there’s a difference between store managers and district managers; a good management team can make the store an enjoyable place to work. A bad team can grind associates down and lowers morale considerably. Wal-Mart has a policy of rotating store managers every few years, so an individual store can have its ups and downs.
As far as “fair wages” is concerned, I suppose the concept of “fair” depends on how a person views market rates for unskilled retail labor. Wal-Marts pay about the same in any given market as other big box retailers (with slight differences based on which stores might be offering shift differentials and such); if one thinks the local Target pays a fair wage, then one should be inclined to also feel the local Wal-Mart’s wages are fair. OTOH, if one feels Wal-Mart’s wages are unfair, then one should find its competitors’ wages to be unfair as well.
I don’t think that is price gouging.
That just makes up for some of the loss leaders they have in other departments that Winco doesn’t have (DVDs e.g.).
Pricing, especially on perishable items, is not as simple as saying “take our cost, add 15 %, and slap a tag on it”.
Everyone strives to have a price mix that is closely matched to what the buyer in an individual store will pay to take the item home, and to maximize the profit of the basket of stuff they choose. Not only that, but to do it over time, under the constraints that you may or may not know your actual costs at any present time or in the future. Not trivial, but everyone does it. No one does it better then Walmart though.
This is mildly interesting. Purported slides from a Wal-Mart demographics study from a pool of shoppers with access to Wal-Mart:
http://www.erinword.com/2007/03/which-wal-mart-demographic-are-you.html
The commentary is somewhat misleading. The study actually identified 7 categories of shopper, the 3 listed being the “price conscious” ones they chose to focus on, 56% of shoppers in their study. The other four categories were “social shoppers” (7%), “trendy quality seekers” (12%), “concientious objectors” (14%) and “convenience seekers” (11%). The last category is also labelled “one stop shoppers”.
Very likely that last group is a good fit for Wal-Mart, too, in areas where there aren’t too many other big-box stores competing. If such a shopper happens to be closer to a Target, they’ll simply go there instead, though.
Wal-Mart also differentiates itself by entering small town / rural markets more than their rivals like Target, and not having much presence in suburbia. It’s probably a large part of the reason for them both prospering, and being on the receiving end of criticism for forcing out small local businesses. Target, Big Lots, etc have locations more skewed to metropolitan areas where non-chain and local retail operations other than specialty businesses shriveled up and died years ago. The fight’s over.
I wonder where Costco fits in this discussion. It draws a lot of that “price conscious” demographic - the ones that aren’t particularly concerned with brand name, and who are willing to put with Costco’s “membership” nonsense and other idiosyncracies to save money (Gee, I can save money by buying a 3 years supply of toilet paper all at once. Now how do I get it in the damned car, and where do I stash it at home?).
I’ve price-compared my local Wal-Mart and my local supermarket over the years. I can make the comparison work either way.
If I buy only private-label brands, Wal-Mart will come out narrowly ahead.
If I buy only brand names, Wal-mart comes out way ahead.
However, my local Wal-Mart doesn’t sell meat or produce. A few miles away there’s a Supercenter with groceries. Most of their prices for pacakged foods beat my local supermarket, but for fresh produce and fresh meat, the price differential is a lot tighter and depends a lot on what’s available. For example, when pork is plentiful, my local supermarket tends to have lower prices and a better selection of different cuts. But when pork is in shorter supply, Wal-Mart beats it.
Same thing with produce. When the local vegetables are in season, my local supermarket beats Wal-Mart. But right now, in February, there’s basically no local produce, and Wal-mart is priced lowers for stuff like apples, fresh corn, lettuce, etc.
All the local supermarkets here price-match Wal-Mart on milk. However, for Wal-Mart, the price is the price. For the local supermarkets, milk is a loss leader.
I read an interesting study a while ago about price differences between various big-box grocery chains, including Wal-Mart. It turns out that common practice in most of these stores is to have a revolving, almost random order in which they put items on sale and sell others for full retail. The reason for this is that people go into the store with shopping lists, and buy whatever’s on the list. So the store needs the sale items to get the customers to come in the door, but they make their markup by pricing everything else higher. And they change it often enough that you can’t know which store to go to to get all the items you need at the best price.
The upshot is that what you want to do when you go shopping is to go *without a list, or with a minimal list of necessities, and then keep your eye out for sale items and buy them even if you don’t need them immediately. The goal is to buy the highest percentage of your products that you can on sale. So even if you’ve got Ketchup at home, you know you’ll need to buy more in the next month or so anyway, so if you see ketchup on sale, buy it.
Since I read that, I’ve kept more of an eye out for that sort of thing, and it’s saved us a lot of money.
You’d be a fan of the The Grocery Game, then. Really. They track the sales cycles and the coupons, and tell you when to buy. Even though I’m dirt cheap, it saves me from ever having to set foot into a Wal-Mart (I guess I’m not that cheap, plus it’s not convenient to go to a store for just groceries, because everything else is pretty crappy quality).
This is what I don’t understand. What products are you saying are crappy in quality? There are a few store brands, and perhaps their clothes are lower in quality, but most of their merchandise is name brand. Pet food, toiletries, pharmacy stuff (like contact lens solution or vitamins), DVDs, etc, some electronics, batteries…
Where do you shop that has the high quality stuff? And what brands are they?
Most of what Wal-Mart or any large store sells is clothing. K-Mart is at least as good, Kohl’s and Target much better, Penney’s and Sears better yet, major department stores another level up.
Most electronics and computer items are specially designed for Wal-Mart at the lowest possible acceptable quality to drive down price. They are rarely if ever the equal of what you might find at a Best Buy.
This is true down the line. Some products are certainly equivalent or identical and Wal-Mart uses large orders to drive down prices. But in huge numbers of cases the actual products found in Wal-Mart are created especially for the company at a lower price and quality to maintain its niche in the market.
It’s a fair niche for those who know what they’re getting and can do the comparisons for themselves. But they are deliberately at the bottom. They drove out all the competitors at the bottom because nobody can compete with them on price. The only alternative competitive routes are quality or service. That’s why every competitor has a higher level of quality in order to survive.
Yes, that’s what was implied, but it doesn’t hold up. I go to Best Buy and Target and Macy’s and all that too. Linksys wireless routers are the same everywhere, as are Sony TVs of the same model. Crest toothpaste is Crest toothpaste. Black and Decker cordless drills are the same at Home Depot or Wal-Mart. The only things that are lower quality are Wal-Mart brands like Faded Glory or the other store brands. Hanes underwear, however, is the same quality as it would be at Dillards. If you read the article linked above, the key seems to be that Wal-Mart is a hell of a negotiator and demands that its suppliers are as efficient as it is.
I also see a lot more people buying groceries and pet food and the like than clothes. Whenever I am in line I see a lot more perishables and odds and ends than clothes.
I’d like some evidence or examples that counter my own long experience with Wal-Mart. 95% of the stuff I purchase is identical with stuff at any other retailer that sells those brands. And I am almost compulsive about comparison shopping, so it’s not as if I have just been unaware for years that I am buying lower quality goods.