# Is Wal-Mart functioning as a monopoly? **URL:** \ **Category:** Great Debates\ **Created:** [December 23, 2003, 3:21pm UTC](https://boards.straightdope.com/t/is-wal-mart-functioning-as-a-monopoly/220653 "2003-12-23T15:21:51Z")\ **Posts on this page:** 20\ **Page:** 3
**Author:** ![RTFirefly](https://avatars.discourse-cdn.com/v4/letter/r/c77e96/32.png) [@RTFirefly](https://boards.straightdope.com/u/RTFirefly)\ **Post date:** [December 24, 2003, 3:05am UTC](https://boards.straightdope.com/t/is-wal-mart-functioning-as-a-monopoly/220653/41 "2003-12-24T03:05:20Z")
**minty** , I’d also assume that if Wal-Mart sold below cost to drive competitors out of business, that would injure the competitive marketplace, which would meet your standard. ---
**Author:** ![The\_Asbestos\_Mango](https://avatars.discourse-cdn.com/v4/letter/t/edb3f5/32.png) [@The\_Asbestos\_Mango](https://boards.straightdope.com/u/The_Asbestos_Mango)\ **Post date:** [December 24, 2003, 3:09am UTC](https://boards.straightdope.com/t/is-wal-mart-functioning-as-a-monopoly/220653/42 "2003-12-24T03:09:14Z")
ooops, sorry about the link, gang. Try this [http://money.cnn.com/2003/07/02/news/economy/jobs\_walkup/](http://money.cnn.com/2003/07/02/news/economy/jobs_walkup/) ---
**Author:** ![minty\_green](https://avatars.discourse-cdn.com/v4/letter/m/f6c823/32.png) [@minty\_green](https://boards.straightdope.com/u/minty_green)\ **Post date:** [December 24, 2003, 3:15am UTC](https://boards.straightdope.com/t/is-wal-mart-functioning-as-a-monopoly/220653/43 "2003-12-24T03:15:35Z")
> [@](#): > > \*Originally posted by RTFirefly \* > **minty** , I’d also assume that if Wal-Mart sold below cost to drive competitors out of business, that would injure the competitive marketplace, which would meet your standard. I’ve already addressed the fallacy behind that precise point: > [@](#): > > _Originally posted by me earlier today_ > [T]here’s the old predatory pricing theory, that says a seller might be willing to take a loss now if it can undersell its competitors, put them out of business, and charge higher prices later. But that only works if (a) you drive all your competitors in the marketplace out of business, enabling you to charge higher than market prices, and (b) there are barriers to entry in the market that prevent new competitors from entering and undercutting your higher, monopolistic prices. Simply put, it’s next to impossible to make up the loss involved in predatory pricing through later sales at higher prices. ---
**Author:** ![minty\_green](https://avatars.discourse-cdn.com/v4/letter/m/f6c823/32.png) [@minty\_green](https://boards.straightdope.com/u/minty_green)\ **Post date:** [December 24, 2003, 3:28am UTC](https://boards.straightdope.com/t/is-wal-mart-functioning-as-a-monopoly/220653/44 "2003-12-24T03:28:04Z")
> [@](#): > > \*Originally posted by RTFirefly \* > WM isn’t making any profit on the loss leaders; it’s losing money on them. It’s making profit on the _other items_. > > This doesn’t mean that it’s overpricing the _other items_ relative to other retailers. Actually, it pretty much means exactly that. If you sell one item _below_ market price in order to attract buyers to your other goods, you have to make up that loss with prices above market price (even if only slightly above) to make it worthwhile. Otherwise, you’re just taking a shave off of overall profitability, and that’s not really one of the goals of most businesses. > [@](#): > > It may be making a higher _profit margin_ than its competitors on the _other items_ because it’s able to use its market share to drive a tougher bargain with its suppliers than its competitors can. That’s essentially what **JC** ’s article alleges, anyway. Okey doke. But if that’s the case, where’s the harm? Consumers get to purchase Trailer Park Barbie at a significant discount, and they still get to purchase other goods cheaper than at other stores, but not as cheaply as they would had Wal-Mart not been trying to make up for its loss leading items. Either way, the consumer comes out better off than if Wal-Mart could not leverage off its purchasing power. > [@](#): > > My question for you, **minty** , is: isn’t predatory pricing illegal? What I mean by this is selling at a loss to drive one’s competitors out of business. I do not have my antitrust volumes with me at home, but my recollection is that predatory pricing is not illegal–even if intended to drive somebody else out of business–unless the predatory pricing does result or is likely to result in monopoly power in the relevant market. Wal-Mart can grind Toys R Us into the dust, and it still won’t have monopoly power in the toy market, so pricing Trailer Park Barbie below cost is not illegal. ---
**Author:** ![RTFirefly](https://avatars.discourse-cdn.com/v4/letter/r/c77e96/32.png) [@RTFirefly](https://boards.straightdope.com/u/RTFirefly)\ **Post date:** [December 24, 2003, 3:28am UTC](https://boards.straightdope.com/t/is-wal-mart-functioning-as-a-monopoly/220653/45 "2003-12-24T03:28:56Z")
**Thea** - your link didn’t work for me. Is [this](http://money.cnn.com/2003/07/02/news/economy/jobs_walkup/index.htm) the article you were trying to reference? ---
**Author:** ![RTFirefly](https://avatars.discourse-cdn.com/v4/letter/r/c77e96/32.png) [@RTFirefly](https://boards.straightdope.com/u/RTFirefly)\ **Post date:** [December 24, 2003, 3:33am UTC](https://boards.straightdope.com/t/is-wal-mart-functioning-as-a-monopoly/220653/46 "2003-12-24T03:33:08Z")
I guess it was. ---
**Author:** ![5cents](https://avatars.discourse-cdn.com/v4/letter/5/46a35a/32.png) [@5cents](https://boards.straightdope.com/u/5cents)\ **Post date:** [December 24, 2003, 3:42am UTC](https://boards.straightdope.com/t/is-wal-mart-functioning-as-a-monopoly/220653/47 "2003-12-24T03:42:25Z")
> [@](#): > > \*Originally posted by minty green \* > **So what? If it is unprofitable for XYZ to sell its goods through Wal-Mart, then it can sell its goods elsewhere.** Ah, but there’s the rub. If you are selling consumer goods, walmart is very likely your largest customer, by a long shot. You either sell to walmart, or you don’t survive. > [@](#): > > If they don’t want to provide all Wal-Mart can sell, then they can either negotiate a set quantity or they can go sell their goods elsewhere. It ain’t a question of want, its a question of need. ---
**Author:** ![The\_Asbestos\_Mango](https://avatars.discourse-cdn.com/v4/letter/t/edb3f5/32.png) [@The\_Asbestos\_Mango](https://boards.straightdope.com/u/The_Asbestos_Mango)\ **Post date:** [December 24, 2003, 3:44am UTC](https://boards.straightdope.com/t/is-wal-mart-functioning-as-a-monopoly/220653/48 "2003-12-24T03:44:42Z")
**minty** , picture this scenario. Wally World for a period of time sells its toys at a loss for a period of time that it grinds Toys R Us into the dust, as well as a couple of lesser toy store chains. Then it raises its prices. Next, it drops its prices on hardware and sells them at a loss, grinding Ace Hardware out of business, and maybe Home Depot as well. Raises prices on hardware. Next, drops prices on sporting goods and sells them at a loss until it drives out most of the competition in the sporting goods area… See, Wal-Mart is a “big box” store that sells a lot of different things. Kinda like a department store, only more so. The chain has already driven most of the smaller competing businesses out of business in the areas where Wal-Mart exists, so it’s only real competitors are other discount stores, such as Meijer and Target. So it’s conceivable that Wal-Mart could drive out it’s competitors one product category at a time. I don’t see major chains like Sears disappearing, but they could lose considerable market share. What will most likely happen is that free-standing Sears stores (if there even is such a thing anymore) would close down in areas where a Wal-Mart opens up, so the only Sears stores will be the ones serving as anchors in malls. **RTFirefly** , yeah, that’s the one. Note the second link I provided? ---
**Author:** ![The\_Asbestos\_Mango](https://avatars.discourse-cdn.com/v4/letter/t/edb3f5/32.png) [@The\_Asbestos\_Mango](https://boards.straightdope.com/u/The_Asbestos_Mango)\ **Post date:** [December 24, 2003, 3:47am UTC](https://boards.straightdope.com/t/is-wal-mart-functioning-as-a-monopoly/220653/49 "2003-12-24T03:47:00Z")
I guess you did… ---
**Author:** ![msmith537](https://avatars.discourse-cdn.com/v4/letter/m/d9b06d/32.png) [@msmith537](https://boards.straightdope.com/u/msmith537)\ **Post date:** [December 24, 2003, 3:57am UTC](https://boards.straightdope.com/t/is-wal-mart-functioning-as-a-monopoly/220653/50 "2003-12-24T03:57:51Z")
> [@](#): > > Thea Logica > RickJay the actual umnemplyoment rate is much higher than 5.9% . See, if you exhaust your unemployment benefits, you are no longer unemployed, as far as the Labor Department is concerned. If you’ve become discouraged and given up looking for work, That is absolutely wrong. The unemployment rate is not based on the number of people collecting benefits. It is based on a survey of housholds. Discouraged workers is something else. This has been covered in a number of threads. According to the case study that we studied in business school (where we learn real business, not conspiracy theory business), Walmart is able to drive mom and pop competitors out of business because of economies of scale. They order so much from their suppliers that they can demand discounts that Mr. Fiveanddime can’t get. Now people may lament the loss of old man grocer’s down home hardware store, but they obviously don’t care enough to shop there. People vote with their wallets. > [@](#): > > 5cents > This is true, but I don’t blame walmart for it. walmart is a symptom of a society that, by and large, buys on price. Quality is way down the list. Than it is a symptom of a rational society. Quality is great and all but it’s expensive. ---
**Author:** ![5cents](https://avatars.discourse-cdn.com/v4/letter/5/46a35a/32.png) [@5cents](https://boards.straightdope.com/u/5cents)\ **Post date:** [December 24, 2003, 4:00am UTC](https://boards.straightdope.com/t/is-wal-mart-functioning-as-a-monopoly/220653/51 "2003-12-24T04:00:48Z")
> [@](#): > > \*Originally posted by minty green \* > \*\*my recollection is that predatory pricing is not illegal–even if intended to drive somebody else out of business–unless the predatory pricing does result or is likely to result in monopoly power in the relevant market. Wal-Mart can grind Toys R Us into the dust, and it still won’t have monopoly power in the toy market, so pricing Trailer Park Barbie below cost is not illegal. \*\* If you grind all your competitors into dust you do have a monopoly. Let’s see, in order of dusting we have wards, ames, kmart, toysrus, jcpenny, sears. The last few are a work in progress. Soon all you’ll have left is walmart, target, nordstrom and saks. Any bets on how long target will last one-on-one with walmart? ---
**Author:** ![The\_Long\_Road](https://avatars.discourse-cdn.com/v4/letter/t/b5a626/32.png) [@The\_Long\_Road](https://boards.straightdope.com/u/The_Long_Road)\ **Post date:** [December 24, 2003, 4:15am UTC](https://boards.straightdope.com/t/is-wal-mart-functioning-as-a-monopoly/220653/52 "2003-12-24T04:15:05Z")
K-mart tried to compete with Walmart in the price arena and got their asses kicked. I watched the stock tumble lower and lower as people said it was a good buy because it would recover. Very sad for the investors but it should not have been unexpected. If you can’t survive a price war, you do not engage in one. If a company can not be the price leader then it needs to concentrate on selection and service. Target is doing a good job with this and expanding greatly. K-Mart failed at it and is trying to survive. I seem to remember something about capitalism where if you were the best at something, you reaped the rewards. So are we now going to start punishing companies for being too good at what they do? Walmart invested in its supply chain in order to minimize costs and pass the savings along to their customers. Sounds like a damn good business plan and it sure has worked well. ---
**Author:** ![minty\_green](https://avatars.discourse-cdn.com/v4/letter/m/f6c823/32.png) [@minty\_green](https://boards.straightdope.com/u/minty_green)\ **Post date:** [December 24, 2003, 4:16am UTC](https://boards.straightdope.com/t/is-wal-mart-functioning-as-a-monopoly/220653/53 "2003-12-24T04:16:55Z")
So in the end, **5cents** , you prefer to rely on irrational fear rather than any sort of proof that the consumers of this country are actually imperiled by Wal-Mart’s low prices. Sorry, but I’m afraid I can’t argue with that. ---
**Author:** ![desdinova](https://avatars.discourse-cdn.com/v4/letter/d/8baadc/32.png) [@desdinova](https://boards.straightdope.com/u/desdinova)\ **Post date:** [December 24, 2003, 4:17am UTC](https://boards.straightdope.com/t/is-wal-mart-functioning-as-a-monopoly/220653/54 "2003-12-24T04:17:14Z")
> [@](#): > > \*Originally posted by Thea Logica \* > **RickJay the actual umnemplyoment rate is [much higher than 5.9%](http://money.cnn.com/2003/07/02/neweconomy/jobs_walkup/) .** That article is a bit dated. [Here’s](http://www.bls.gov/news.release/empsit.nr0.htm) the most recent Employment Situation Summary from the Bureau of Labor Statistics. > [@](#): > > \*\*See, if you exhaust your unemployment benefits, you are no longer unemployed, as far as the Labor Department is concerned. \*\* Incorrect. The national unemployment rate is not based on unemployment insurance claims, and workers that have run out of benefits are still counted as unemployed so long as they meet all of the other definitions of “unemployed.” This is such a common misconception (almost urban legend, really) that [the BLS has a special page devoted to it](http://www.bls.gov/cps/uiclaims.htm) > [@](#): > > \*\*If you’ve become discouraged and given up looking for work, you’re not officially unemployed even though you’re out of a job and would like to be working. \*\* Well, you’re not counted so far as the most commonly cited unemployment rate is concerned. You are still couinted. [The broadest definition of “unemployed” in this table would be row U-6](http://www.bls.gov/news.release/empsit.t12.htm) > [@](#): > > \*\*If you’ve lost a job in a particular profession or occupation and have taken a lower-paid job in another field, you’re not unemployed, but you’re not making as much as you used to. \*\* This would be tremendously difficult to property define and measure in any reasonable manner, which is why the BLS does not estimate “underemployment.” Which is not to say that this is not a valid concern, and in fact there have been many studies that have tried to quantify this over the years (I don’t have any handy, unfortunately). Still, in the grand scheme of things, I’m more concerned with people earning no money than people earning less money. > [@](#): > > **5.9%. Makes a convenient little statistic if you’re, oh, say, going to be running for re-election next year, but it isn’t accurate.** Sure it is. It fairly accurately measures exactly what it sets out to measure: the number of people that are looking for work and can’t find any. The problem is that most people don’t understand what it measures, why it measures it that way, and what relevance it has to anything. On preview, beaten by **msmith537** ---
**Author:** ![minty\_green](https://avatars.discourse-cdn.com/v4/letter/m/f6c823/32.png) [@minty\_green](https://boards.straightdope.com/u/minty_green)\ **Post date:** [December 24, 2003, 4:25am UTC](https://boards.straightdope.com/t/is-wal-mart-functioning-as-a-monopoly/220653/55 "2003-12-24T04:25:16Z")
> [@](#): > > \*Originally posted by Thea Logica \* > **minty** , picture this scenario. **Thea** , read my blasted post and respond to it instead of repeating yourself endlessly: > [@](#): > > _originally posted by me earlier today, and reposted about an hour ago_ > [T]here’s the old predatory pricing theory, that says a seller might be willing to take a loss now if it can undersell its competitors, put them out of business, and charge higher prices later. But that only works if (a) you drive all your competitors in the marketplace out of business, enabling you to charge higher than market prices, and (b) there are barriers to entry in the market that prevent new competitors from entering and undercutting your higher, monopolistic prices. Simply put, it’s next to impossible to make up the loss involved in predatory pricing through later sales at higher prices. “Wally World,” as you call it, has been engaging using loss leaders, using strongarm tactics to drive down its suppliers’ prices, and putting competitors out of business for years and years and years. **So why hasn’t it raised its prices?** Out of the goodness of its heart, or is it just waiting another three or four decades to complete its master plan of world domination? ---
**Author:** ![5cents](https://avatars.discourse-cdn.com/v4/letter/5/46a35a/32.png) [@5cents](https://boards.straightdope.com/u/5cents)\ **Post date:** [December 24, 2003, 4:28am UTC](https://boards.straightdope.com/t/is-wal-mart-functioning-as-a-monopoly/220653/56 "2003-12-24T04:28:52Z")
> [@](#): > > _Originally posted by 5cents_ > \*\*walmart is a symptom of a society that, by and large, buys on price. Quality is way down the list. > \*\* > [@](#): > > \*Originally posted by msmith537 \* > **Than it is a symptom of a rational society. Quality is great and all but it’s expensive.** It is rational to ignore quality? Lack of quality can also be expensive. If you can buy a product that will last for a year and cost $100, or a similar product that will last for 5 years and cost $200, which is the better deal? If you intend to use the product for at least 2 years, I’d say the $200 product is a better deal. Getting back to something I know, bikes. A $75 department store bike is a great bargain, if you want to hang it on your garage wall. But that’s not rational - I can think of nicer wall-hangings I could buy, and for less money. If you actually want to ride it, that’s another story. It is poorly assembled from lousy parts, is hard to maintain, and probably won’t fit you well. If you try to use it, you’ll either get frustrated ('cause it don’t fit, and it ain’t tuned), or it will break within a year. Take it back to walmart and see if they can help you get a better fit, or fix the broken parts. However, a bike in the $250 to $500 range, assembled by people who know bikes, fit to you by people who know bikes, and maintained by people who know bikes, is a pretty decent deal. It could last you 10 to 20 years of daily use with minimal maintenance (chains, tires, tubes, lubes). You can spend more, and you will probably get more, but there is the unavoidable law of diminishing returns. A $250 bike is 10 times better than a $75 department store bike, but a $2000 bike might be only twice as good as a $500 bike. But if the vast majority of people are lured by the $75 special at walmart, even if you want a real bike you won’t have that option, because there won’t be a real bike shop left for you to deal with. ---
**Author:** ![5cents](https://avatars.discourse-cdn.com/v4/letter/5/46a35a/32.png) [@5cents](https://boards.straightdope.com/u/5cents)\ **Post date:** [December 24, 2003, 4:48am UTC](https://boards.straightdope.com/t/is-wal-mart-functioning-as-a-monopoly/220653/57 "2003-12-24T04:48:19Z")
> [@](#): > > \*Originally posted by minty green \* > \*\*So in the end, **5cents** , you prefer to rely on irrational fear rather than any sort of proof that the consumers of this country are actually imperiled by Wal-Mart’s low prices. Sorry, but I’m afraid I can’t argue with that. \*\* Irrational? How so? Walmart has already ground many competitors into dust, there aren’t that many left. Its a simple fact. They may not be a monopoly now, but they’re marching in that direction. ---
**Author:** ![minty\_green](https://avatars.discourse-cdn.com/v4/letter/m/f6c823/32.png) [@minty\_green](https://boards.straightdope.com/u/minty_green)\ **Post date:** [December 24, 2003, 4:57am UTC](https://boards.straightdope.com/t/is-wal-mart-functioning-as-a-monopoly/220653/58 "2003-12-24T04:57:55Z")
“There aren’t that many [competitors] left”?!? Are you crazy? Wal-Mart has only a small share of the overall market for retail consumer goods, maybe (I’m guessing) 10% for the kinds of products it deals in. That makes it the largest retailer by far, but nowhere near large enough that it can wield any power whatsoever to dictate that consumers pay higher prices. To the contrary, the evidence is pretty good that consumers pay lower prices because of Wal-Mart. **That is a good thing**. > [@](#): > > They may not be a monopoly now, but they’re marching in that direction. So is every other successful business on the planet. Call me when they get anywhere near having monopolistic power, okay? Otherwise, you’re just whining about something that shows no reasonable likelihood of ever happening. ---
**Author:** ![5cents](https://avatars.discourse-cdn.com/v4/letter/5/46a35a/32.png) [@5cents](https://boards.straightdope.com/u/5cents)\ **Post date:** [December 24, 2003, 5:14am UTC](https://boards.straightdope.com/t/is-wal-mart-functioning-as-a-monopoly/220653/59 "2003-12-24T05:14:11Z")
> [@](#): > > \*Originally posted by Thea Logica \* > \*\ ***minty** , picture this scenario. Wally World for a period of time sells its toys at a loss for a period of time that it grinds Toys R Us into the dust, as well as a couple of lesser toy store chains. Then it raises its prices. Next, it drops its prices on hardware and sells them at a loss, grinding Ace Hardware out of business, and maybe Home Depot as well. Raises prices on hardware. Next, drops prices on sporting goods and sells them at a loss until it drives out most of the competition in the sporting goods area… > \*\* Judging from trends around here, ACE is already on the ropes due to competition from Home Depot and Lowes. Many independent building suppliers, hardware stores, etc are gone. If you want hardware or building materials, your choices are Lowes, Home Depot, Expo (Home Depot’s high-end store brand) or a specialty supplier. If you want, say, a bathroom vanity mirror cabinet, you have your choice of several sub $100 units at Lowes or Home Depot, or several $500+ units at Expo or a specialty supplier. If you want something better quality than what you get at $100, but don’t want to pay at least $500, you’re out of luck. I just completed a pretty extensive renovation/addition on my house, and that’s really the way it is. (I opted for a mirror, no cabinet) ---
**Author:** ![drachillix](https://avatars.discourse-cdn.com/v4/letter/d/48db29/32.png) [@drachillix](https://boards.straightdope.com/u/drachillix)\ **Post date:** [December 24, 2003, 5:26am UTC](https://boards.straightdope.com/t/is-wal-mart-functioning-as-a-monopoly/220653/60 "2003-12-24T05:26:19Z")
> [@](#): > > \*Originally posted by gobear \* > \*\*Good for consumers in the short term, but ultimately it leads to jobs being outsourced to countries that pay their workers a pittance, further contributing to the Bangladeshization of America. Monster companies like Walmart despite being very bottom line oriented also (as demonstrated, by several comments in this thread) have level of service and vendor managed inventory demands as well. The magic words, response time. It is far more doable for a reasonable price to ship product between two points within the US. A US based business can easily have bulk product delivered in 24-72 hours, No way in hell are you going to get 10,000 25" color TV’s from Taiwan to Bentonville for a reasonable price in 3 days, it will be in customs longer than that. Many typical LTL/FTL carriers in the US can get stuff from LA to NYC in 3-4 days. My employer often has to deal with 8-12 week lead times when recieving product from overseas suppliers. It all depends on the products in question and how long the retailer is willing to wait for the price they want. Vendors of high demand product will on occasion also offer first dibs on product to the highest bidder. So If Target was willing to pay 5% extra per unit on a 4% smaller order to scoop up the first few months or weeks of production, Walmart is SOL until the vendor can fill Targets order and the vendor would be better off taking Targets order. During this time everyone is purchasing the item in question at Target. Even if Walmart later gets the item, much of the high demand for it will have been saturated already. [Previous page](https://boards.straightdope.com/t/is-wal-mart-functioning-as-a-monopoly/220653.md?page=2) [Next page](https://boards.straightdope.com/t/is-wal-mart-functioning-as-a-monopoly/220653.md?page=4)