People are shortsighted and selfish, they’re quite willing to save a dollar now even if it means they’ll all be out of a job in five years.
“Uncle Sam” hasn’t operated in the public intrest for at least 6 years, and maybe never. :dubious:
I think you completely missed the point.
I’m asking why customers and consumers in small town America have been so quick to abandon Mom & Pop stores and have chosen to shop at Wal-MArt instead.
Wal-Mart has never FORCED a Mom & Pop store’s clients to shop elsewhere. Rather, people have CHOSEN to abandon local retailers for lower prices elsewhere.
If small retailers go broke as a result, sure, you can assign part of the blame to Sam Walton. But you might also blame their customers, who apparently felt absolutely no loyalty to their neighborhood retailers.
And that’s when you stop talking reality. Of course WalMart has a vested interest in driving their competition under. Every business has a vested interest in how their competition is doing. Pretending otherwise is ridiculous.
Almost as ridiculous is pretending that competition is something that happens automatically. Major businesses don’t just “magically appear” or “pop up”.
Predatory pricing is illegal under current anti-trust law. If you have a deliberate strategy of undercutting smaller suppliers to drive them out of business, and then using your subsequent monopoly power to consolodate supply, you are in violation of federal law. Standard Oil, AT&T and Microsoft all learned this lesson the hard way, although the case against Microsoft was probably the weakest.
SpartyDog wrote:
Your cite is weak on information. It states “many” main street retailers were driven out of business. How many? What types of businesses were these? What did they sell? It states that one had been around for 50 years (which is nothing other than an emotional argument anyway), how long were the others in business? Did any of them re-open after Wal-Mart left? Did any other local entrepreneurs open up in Hearne to fill the void (if one existed) when Wal-Mart left?
Your article is critical of Wal-Mart keeping its space as a warehouse. Why? Are local small businessmen clamoring to buy a 120,000 sq/ft property to re-open their businesses that were previously open in small downtown shop fronts? Or are the locals who hated Wal-Mart so much anxious to pull in another retail giant to replicate the harm caused by Wal-Mart?
Having grown up in small town like Hearne in Texas, and being familiar with Hearne itself I am very suspicious of stories such as these. Where did the residents of Hearne do their shopping before Wal-Mart came to town? I’ll bet the majority of them drove to Bryan (a 15 to 20 minute drive) for everything other than mere convenience shopping. This article, even though it is critical of the Wal-Mart closing confirms this. It also shows that the Wal-Mart closing will be a boon to some Hearne businesses such as the two pharmacies it mentions.
It seems to me that a few people are more angry that they have to go back to driving to Bryan on the weekends than they are angry about the closing of local businesses. Until you can provide a cite showing exactly what goods the residents of Hearne were buying in Hearne before Wal-Mart came to town that aren’t available to them in Hearne after Wal-Mart left then it is all just a bunch of noisy non-specific complaining.
Except, of course, what you spent to build the store in Shelbyville in the first place is about the same as five years’ worth of overhead. And when you move out of Shelbyville, you’re leaving a pre-built store that would be just perfect for one of your competitors (and Walmart does have competitors at the same scale) to move in to and steal the Shelbyville business.
Does Walmart move into towns, drive locals out of business, and then later decide that the town isn’t profitable enough and move out? Sure. Do they do this as a business strategy? That’s ludicrous.
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Many chains after they leave a building refuse to let someone else rent or buy it. MalMart in particular is notorious for this. Our county refused recently a building permit for a new WalMart since there were already empty ex-WalMarts in the county that WalMart refused to give up. (WalMart then had the land annexed by a nearby city which quickly approved the store. Ahh, campaign donations. Legalized bribery.)
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The commercial expected lifetime of a retail building here is only three years. That is, the builder (whether the chain itself or a build-to-leaser) plans on making the building costs back in three years. (And constructs the building to “standards” that fit such time scale.) After that it would be pure gravy except for the maintenance costs get quickly out of hand due to the shortcuts made in construction.
This is a secondary reason we have so many vacant boxes in our area. They are too expensive to maintain for the store types that might want them and it’s a lot of money to buy an existing store, tear it down and build new. Building on empty land is cheaper.
- What is truly ludicrous are those people posting in this thread that don’t understand basic large scale corporate stratgies. Driving other stores out of business is one of the most important things on a CEO’s mind. WalMart losing a few million bucks driving 50 out of 400 of another store’s chain out of business is a big win. The other chain is severely crippled and WalMart barely had to break a sweat.
After a battle, how often does the winning army hang around the battlefield? Generals move their armies to the next battle site. So do corporations. “The Art of War” is mostly read by business managers, not generals.
And your credentials are…?
Just askin’ since you brought it up.
Yeah, but if you run that store at a loss, you’ll never make back that construction figure, in fact you lose even more, then when you shut down the store you’ll make zero money on your “investment”. Only profitable stores can make back the building costs! If you plan on selling stuff below cost how can you ever make back building costs?
The only way to profit is to hope that the loss you take at your throwaway stores will be more than made back at your other stores. So you’ve got millions of dollars in sunk costs that you have to make back at your profitable stores, which have to charge really high prices.
Except WalMart doesn’t seem to have a two-tiered pricing structure. They never seem to implement the crucial last stage of their secret plan, jacking up the prices once all the competitors have been driven out of business. ALL WalMart stores sell cheap crap. We don’t see some WalMart stores selling cheap crap at a loss, others selling expensive crap at an obscene profit. All WalMart stores sell cheap crap for very slim margins.
And too bad that WalMart can never really crush the competition. If the destroy downtown retailers, close shop, and force everyone to drive 100 miles to their nearest store, people just might chose to drive 101 miles to go to Target. WalMart’s major competition isn’t Mom and Pop downtown retailers, it’s other big box chains. And there are plenty of regional chains just itching to expand. That’s what WalMart used to be, after all.
You failed to read the OP. This isn’t about Wal-Mart driving other chains out of business. Hell yes, they do that and that is their strategy. Just ask Ames, Caldor and a bankrupt K-Mart, etc., all of which suffered from poor management, poor merchandising, poor inventory control and stupid business decisions. The OP is about Wal-Mart making it their corporate objective to drive out small local business. That’s a different matter altogether.
Wal-Mart is and has been an expanding business. You don’t expand by closing profitable stores. You don’t assume that leaving a market where you are making money automatically “forces” customers to drive 100 miles because they must shop at your stores. Market presence is worth a lot if only for the purpose of making it more difficult for a competitor to move in. That is why a chain will oftentimes maintain some stores that are slightly unprofitable. It makes no sense for a cash rich, profitable, expanding business to shut profitable stores. What possible rationale could there be?
As for credentials, I have done business with Wal-Mart. I’ve been to Bentonville. I know how difficult and ruthless they can be. You can rant and rave but you have to respect them. I will guarantee you that none of their buyers, merchandisers or catagory managers are being wined and dined by vendors at the Masters golf tournament, the Super Bowl or the even the Pancake House. All those luxury boxes at football stadiums are being paid for by businesses in after-tax dollars. That is costing YOU money in some direct or indirect fashion. I will guarantee you that there are no Wal-Mart personnel in those boxes unless they are paying for it out of their own pocket.
If Wal-Mart can kick K-Mart in the teeth, so what? But they didn’t get as big is they are by spending their time worrying about Ma & Pa Kettle’s candle shop.
For a glimpse of the tip of the Wal*Mart policies, here’s an item from this morning’s Indianapolis Star. http://www.indystar.com/apps/pbcs.dll/article?AID=/20060830/BUSINESS/608300390/1003
We must tread lightly here in General Questions, but you can Google WalMart lawsuit courts for lots more.
People who are smart consumers are going to be torn between saving money and abandoning the mom & pop stores.
Also, WalMart will simply have more stuff, it’s a one stop shopping place. If you were going to Dollar General to buy chips and paper towels, why not go to WalMart and buy chips, paper towels, some shoes, and a DVD?
And your point is?
This is an old case where the parts of the suit that were dismissed had little merit. It was another case of lawyers trying to use RICO to prosecute nearly everything. Take a look at the wide range of groups and individuals that have been sued under RICO.
So what does it have to do with Wal-Mart policies?
None of which are the subject of this thread.
This sounds like the MBA equivalent of holocaust denial. Sure, a business is expanding. And sure, it has strategies for its expansion. And sure, it follows certain patterns when it expands. And sure, these patterns produce the same results. But to claim the business planned those results? Heavens, no, I’m sure they’re shocked every time it happens.
Sure you do. If you don’t, you’re a poor businessman. Consolidating unneeded overhead is an obvious step in increasing profit. And having two stores in an area where one will sell the same amount of products is clearly a case of unneeded overhead. It doesn’t matter if the two stores are both making a profit; by closing one you’ll be making more profits.
So, they let their empty building stand while it accrues taxes? Is WalMart bribing it’s way out of income tax, too, or don’t leaders need to be elected in these small towns?
So, after 3 years the building falls apart? The building can’t be used after 3 years? This totally ignores straight line depreciation typically at 39 years for commercial property, not to mention mountains of advise from structural engineers and various types of builders who would approve against making such a death trap. Seriously, what are you trying to say here?
Yet building a building the size or WalMart’s is going to have significant costs involved. Do you realize how many man hours on many levels from C-Level executives to tax accountants and lawyers down to construction laborers are involved in such a project? Building these stores isn’t like planting seeds and letting nature take its course. Every local area has its own laws, its own ordinances, and its own politics to navigate. While there are some similarities, there are just as many differences. My company’s retail branch has mountains of issues and that’s with stores 1/10 the size, building in vacant strip malls.
What’s ludicrous is actually believing that corporations willing take losses of this scale, especially WalMart. Corporate travel is highly suspect and when they do travel, it’s as cheap as possible. They don’t pay a lot at corporate, and they make everyone work a lot (even at corporate). WalMart is succesful because they squeeze at both ends: not just the suppliers, but against its labor as well. WalMart lives at the margins. Driving out stores will cost them money, which is not in their coprorate game plan, which is cutting costs above all else.
Isn’t this GQ?
- Not 3. GAAP, the IRS and all that.
It occurs to me, after reviewing the thread, that the shrill critics of Wal-Mart, including Dr. Heinberg, don’t understand retail accounting and realities of the retail market. It’s those making the accusations that probably don’t have any real world experience in large scale retail.
I sense that the Wal-Mart critics don’t have a hands-on knowledge of retail cost accounting, start-up costs and logistics of distribution.
Retail can be a nasty, high pressure, cut-throat business. Any large retailer that rests gets killed. Just look at Sears, Montgomery Ward, K-Mart, Woolworths and hundreds of others. Anybody that overextends gets killed. Look at some of the problems Wal-Mart is having with their foreign operations.
You can hate Wal-Mart all you want but throwing out the accusation that “they win because they cheat” without providing any empirical or legal evidence just sounds like sour grapes. Wal-Mart is an easy target and so are the New York Yankees. Do you hate them because they are crooks or do you resent the win percentage?
I’m not clear on the tax incentives offered by local government when Wal-Mart decides to build a large store, and how that figures in with their actual cost in building, and, therefore, further decision to continue certain stores. Can anyone clarify that? I know I could search for it, but better minds here are more able to explain it than I would be.