Well, for one thing they only pay people enough to afford crappy socks.
Also, I think they make a lot of hay out of being your “one-stop” shopping experience. A lot of people will buy a crappy sock rather than load the kids into the car for another stop, sometimes.
I hold the offending socks in my hand. At the top of the sock there is a rubberband like piece of elastic, the rest of the elastic is useless and puckered down to the heel. The fabric on the rest of the sock is pilled and fuzzy, especially at the heel and up to the elastic. They are supposed to be kinda casual dressy, and they were useless at approximately 2 wearings and washings.
The reason I am describing how crappy these socks are, is because I believe that these socks did not slip by quality control, these socks were designed this way. The person who made this sock knew it was disposable. I have a hard time believing that the guy who made the deal to buy millions of dollars worth of socks for Walmart did not know enough about clothing manufacturing to know that these socks were not going to last. He or she knew he could make money off of them.
I understand there is a market for low cost stuff and high cost stuff. I understand that most people have limited economic choices. I myself am not a rich guy, I used to buy socks at Walmart for goodness sakes. Last week I bought a $12 shovel and passed on the obviously higher quality $30 shovel. But I am not talking about lower priced, lesser quality stuff, we are talking about when big stores sell crap. Have you ever bought one of those $19 to $22 dollar portable cd players? Those are crap and they don’t seem to last the month, but you always see them for sale, usually bought by 10 to 15 year olds.
It seems that big stores like Walmart are immune to the regular market forces that act on smaller stores. If the local independent brake shop used crappy parts, so that they could give their brake jobs $5 cheaper, they would probably go out of business quickly when their brake pads started squealing on their customers. They have a limited reach, they could not fool the local consumers for long.
Walmart, on the other hand, seems to have an unlimited number of guys going by that sock display, picking up the product. Even if they never bought another pair, Walmart would be fine, there are millions of customers everyday. They sell huge volumes of stuff, it seems that the market forces would never catch up to them, or at least not for a very long time.
Just to be fair, I also bought some Hanes Brand athletic socks from Walmart approximately 3 years ago, and they still look like I bought them last week!
You just don’t have enough facts to find out the answer. It could be one of dozens of reasons. But why are you so preplexed that a $200B company could have screwed up and sold you a bum pair of $4 socks? You seem to be assuming that Walmart is incapable of making a mistake. Trust me, every company makes mistakes.
I am not perplexed, I guess I am more cynical. In my mind, the socks are just a somewhat simple (and a little silly) example that I can use to help understand a bigger economic question. Though not in my original question, what I am really trying to understand is if a company can get so big so that in certain circumstances, it can get away with treating customers poorly, without having the usual market pressures affect it. The socks are really just a tangible example that I experienced. I am guessing that your position is that in this particular example, it could have very well been just a mistake, and not an attempt by Walmart to maximize profits because it can without financial repercussions.
WalMart is not the only company doing this, they all are, and it’s because of you and me.
Consumers buy stuff that is less expensive, generally.
Consumers do not have the time/expertise/experience in things even as simple as socks to know which one will give them the best value in advance. So they (myself included) purchase the least expensive item within a category/price group.
I have personal experience with a company that sells coats to all of the major retailers, under their own label and other labels. They were getting beat up, because they were using higher quality materials (which allowed for longer lasting coats, etc.) and the competition was using cheaper materials. They switched, got prices down and were able to compete very effectively again.
A company that escapes the normal market forces is a monopoly, and it’s why we have anti-trust legislation. Walmart may be a behemoth, but they’re no monopoly. Target is competing quite well with them.
I don’t understand why you think there’s a problem with Walmart when they can make money selling crappy socks (clothes, furniture, TVs). There’s no mistake here–a lot of people choose the crappy socks over the good ones. You might have a quibble with the population at large for not being rational economic actors, but that doesn’t obligate Walmart to treat them as such for their own good.
The poor really are trapped-and companies like WALMART actually make things worse. Part of the reason why being poor sucks, is that you never are able to climb out of the hole you are in. For example-take shoes: years ago, I splurged and bought a $200 pair of shoes (american made)-they were great! I wore them through two re-solings…and they were still good! I got 8 years out of them. Compare that with the poor guy who has tobuy $30 shoes at WALMART-these crappy shoes last maybe a year-and he has to buy another pair. Same with cars-if your poor, you can’t buy a new car and keep it 12 years…so you buy a crappy used car, and replace it every 2-3 years.
You are (in the ords of Willy Loman “in a race to the junkyard”) You can’t save money and get out of poverty, because of the junk that WALMART purveys to you.
We don’t have Walmart in Australia so forgive me for being ignorant but does Walmart ONLY sell $4 socks? Every big box store I’ve ever been to sells a range of different qualities, from ultra-cheap to high mid-range.
I am also sceptical that walmart is selling a sock that consistently lasts for only 2 washings. It seems far more likely to me that you just managed to get something that slipped passed QC. Of course, the simple solution would be to just spend another $4 and test that hypothesis.
Just to go ahead and pick the nit.
You are correct. But if you are going to add up all the choices a community had before and after the entrance of a WalMart, you have to include the WalMart itself. There certainly will be some products which were not available locally which will become so after the WalMart opens.
There are also people like me who know products are inferior but buy them anyway. I buy white socks at $7 for 6 pairs at kmart. The socks fall apart after 6 months or so (maybe 15 wearings) but I still buy them because those socks fit better than most of the other brands out there. I usually end up buying a dozen to 18 new socks a year which comes to $14-21, so I don’t really care much about the extra money I have to spend on them to have comfortable socks.
WalMart is a 200 billion dollar company and they pay their workers shit?!?! I didn’t realize they were worth that much. Wal Mart is stronger than the international illicit drug trade. Wow.
/I really didn’t think they made that much
erl: I really didn’t think they made that much.
Wal*Mart is the second largest corporation in the entire world. They have an economy larger than that of most nations.
Updated for 2004:
Exxon/Mobile: $298B
Walmart: $256B
Well, actually it’s closer to 250 billion. They also employ about 1.5 milllion people.
Sorry…I meant they are oppressing 1.5 million disadvantaged workers.
Oh please. It is possible to suggest poor wages without suggesting outright oppression. They are crappy wages. A blind man could see it.
Absolutely, not true.
Why does the OP care whether Wal*Mart sells crap socks?
But Wal-Mart just retails all those products - they don’t make them. It’s not valid to compare the gross revenues of a company who creates most of their products, versus one who just sells them. And certainly not valid to compare Wal-Mart’s gross retail revenue to a country’s GDP.
About the market forces/ socks question. It’s true that the market for socks is not as efficient as other, higher-profile items. People typically don’t do lengthy research before buying socks like they do with cars. But even though it’s not as efficient, there is still some feedback that, if these socks don’t meet buyers’ standards for what they get at that price, the manufacturer won’t be selling as many. Is that what you’re asking? An admission that the market on low-end socks is not very efficient?
erislover said:
Since when is $9.18/hr for unskilled labor a ‘crappy wage’? In fact, Wal-Mart made Forbes’ “100 best companies to work for” list this year - the only big-box retailer to do so.
That’s revenue, not profit. Last year, Wal-Mart made a profit of just over 10 billion dollars, as I recall. Wal-Mart also has 1.5 million employees. If an employee works an average of 1500 hours a year, that’s 2.25 billion man/hours per year that Wal-Mart needs to generate its profit. If you gave every employee a $5/hr raise, you’d wipe out Wal-Mart’s profit and its reason for existance, and there go 1.5 million jobs. That profit, by the way, represents only about $2.50 per share, and a share in Wal-Mart costs about 50 bucks. That’s a 5% profit rate. Not so outrageous when you look at it that way, is it?
Wal-Mart is very, very labor intensive. Therefore, its whole business model is going to revolve around keeping labor costs as low as possible. But it still has to attract workers, which is why the average salary at Wal-Mart is almost double the minimum wage.
People who constantly complain about Wal-Mart pehaps don’t realize just how much good it has done. Wal-Mart has had a significant effect on keeping the inflation rate and interest rates low. Wal-Mart alone as been responsible for something like ten percent of GDP growth in the last five years. Wal-Mart employs 1.5 million people (the largest employer in the U.S.), which is over 1% of the entire American work force. Wal-Mart’s main business is catering to poor and low-middle class consumers, and the fact that it has been so wildly successful suggests that it has done those people an awful lot of good.
By the way, I buy the cheapest socks I can, because I have flat feet and calluses on my toes that go through socks like sandpaper. It doesn’t matter how expensive they are. So I buy socks in the big value packs. By the way, the best socks I have found so far for longevity are at Wal-Mart. Kodiak socks with 17% Rayon. They don’t pill, and they seem to last longer than the expensive socks.
Your quote about walmart being labor intensive isn’t true. Assuming 1.1 million of the 1.5 million employees are low wage service people and that they work on average 1500 hours/year that is 1.65 billion spent for every $1 raise given to the employees. A $2 or $3 raise would not bankrupt walmart. And their budget is $256 billion, so if all their low wage employees make $9/hr at 1500 hrs/yr that is 13.5 billion for low wage labor, barely 5% of their total budget.
And your argument that cutting low wage labor is the only way walmart can stay afloat doesn’t make any sense. Why can’t they cut advertising, or construction, or cut down on overhead or the $50k they pay the managers somethign else? Why must all the sacrafices come from the low wage laborers when they are only 5% of Walmarts total budget?
Wal-Mart is considered to be one the best-run companies on the planet. Until recently, it was the most-admired company among readers of Forbes. You can rest assured that you’re not going to find a few billion under the seat cushions.
Some people just insist on treating corporations as though they should be charities. They aren’t. They offer a wage for a service. People are free to accept or not. Wal-Mart has decent benefits - full time employees, of which 70% are, get medical benefits. The average in the retail industry is only 40% full-time, which means Wal-Mart spends more on medical benefits than most companies.
Ultimately, Wal-Mart is an organization put together to sell products to people at a profit. It is not their responsibility to ensure their workers have a certain standard of living. Their responsibility is to make sure their hiring practices get them the best employees they can get, at the lowest price they can negotiate, while offering enough in incentives to keep the employee once they’re hired.