There’s plenty of reasons to believe Wal-Mart is bad news.
The LA Times did a great series on the Wal Mart Effect.
I don’t recall any information on them cutting prices to run people out of business, and then raising them again once the competition is gone.
Yeah, from the wiki link they are terrible:
As a retail worker, I despise Wal-Mart because they perpetuate the belief that every retailer should sell crap for dirt-cheap or that we should match their dirt-cheap prices on our superior product. Sorry, but if you want to keep paying $30 for crappy boots that fall apart in no time flat, don’t actually fit your feet, without the assistance of a specialist in boot-fitting, knock yourself out. But don’t come into my store and expect me to be impressed when you tell me that you “could get boots for $30 at Wal-Mart…why should I pay your prices?”
What do you mean “What are you going to do?” If that’s what they’re actually doing, then they might be violating antitrust laws. Using predatory pricing to eliminate competition and establish monopoly power is illegal.
You can go to plenty other pharmacies and get the same deals. I have gotten those deals at Kroger and Bigg’s. Walgreen’s also has an affordable pharmaceutical program that I used when I was unemployed and uninsured.
But I guess we should ignore all that other stuff because they have cheap prescriptions prices, too.
Gee - did I say that?
I don’t shop at Wal Mart because the holding company that owns all of the commercial retail space in my town won’t do business with them. There simply is not one near me to visit.
I also know that doing business with them is hard, and I have heard first hand stories of what it means to have Wal Mart resell your goods. Their market size certainly has an impact.
The LA Times bit had one interesting portion - it talked of union workers shopping there because of the low prices, even though Wal Mart is anti-union. I have also seen some economic analysis that argued that Wal Mart has a measurable impact on the inflation rate - their practices have kept inflation down.
Very often there weren’t any. Wal-Mart stores are good “anchor” stores for shopping malls because they generate a lot of traffic.
Locating a business serving a different market near a Wal-Mart is good because it reduces the marginal cost of a trip to your business - the customer is right there anyway.
There is a big Wal-mart in my town, that opened about five years ago. Almost immediately a whole raft of other businesses opened up nearby - restaurants, specialty shops, and so on.
Regards,
Shodan
But Walmart did it first and caused all of those other pharmacies to drop their prices to compete. Isn’t lowering drug prices across the board a good thing?
Why don’t the other pharmacies complain that Walgreen’s and Kroger’s and Bigg’s are undercharging?
Regards,
Shodan
I guess i figured if they were breaking the law I would have heard about it. That is actually why I don’t believe my wife when she says this stuff, though.
Sometimes you hear about it; sometimes you don’t. I suppose with a company as big and as controversial as Wal-Mart, it seems logical to assume that the Antitrust Division of the U.S. Department of Justice has been keeping an eye on it. But then again, you never know. These things can be heavily influenced by political considerations.
The following is strictly anecdotal, I know, but based on years of experience in working with communities on this issue.
Wal-Mart really doesn’t have much of an impact on mom & pop stores, because big box retail is a phenomenon that goes back several decades. People seem to have an impression that up until the 1990s, most retail in the United States was Main Street-based, until big bad Wal-Mart came along and shut everybody down.
Actually, most small town Main Streets began their struggles in the 1960s and 1970s, with the rise of shopping plazas and malls, local and regional big box specialty chains, and early regional and national discount department stores such as Kmart, Meijer and the like. In rural areas, there were chains such as Farm & Fleet, Tractor Supply, Gibson’s, Alco, Pamida, and the like. This was also the era where suburban-oriented retail strip development started to become a small-town phenomenon. The businesses most affected were small, independent local department stores, shoe stores, clothing stores, appliance stores, toy stores, and the like. Restaurants, specialty stores, higher-end clothing stores, hardware stores, record stores, and services tended to weather the storm, but they did lose a lot of critical mass. The 1970s were probably the last decade where a majority of Americans could buy underwear on Main Street; an indicator I’ve often seen for the day-to-day utility of a business district.
When Wal-Mart came along, they tended to have the most impact on local and regional chains. Wal-Mart arrived, and Hills, Ames, Venture, and weaker big boxes folded. Wal-Mart may have hardware, but they weren’t direct competition with Mom & Pop Hardware, where you were more likely to find specialty hardware (screws, nails, nuts, bolts, hinges, etc) and higher-quality tools. They didn’t compete with the old-guard men’s or women’s clothing store, or mall stores. They might have been the final nail in the coffin of a long-struggling record store. Wal-Mart Supercenter hurt low- to middle end supermarkets, but higher end supermarkets such as Wegmans, Whole Foods, Giant Eagle and the like have been left relatively unscathed. They also hurt local and national generalist toy stores quite a bit by having a much deeper selection than the discount department stores of the past.
My advice for communities in trying to compete with Wal-Mart - don’t go head-on, but rather go higher-end. For example, the toy stores that survived the onslaught of the first big box wave, early chains such as Child World and Kay-Bee, and Toys-R-Us in the 1990s, either specialized in high-end or educational toys, or catered to adults with “hipster toys” such as those from Accoutrements. The hardware stores that survived Kmart, Home Depot and Wal-Mart became known as the old-school place where you could quickly and easily find a specialty hinge or fitting, buy a few bolts without having to buy a package of 100, a piece of hardware commonly found in houses in the area that are otherwise unavailable at a big box, get high-end paint such as Benjamin Moore or Pratt & Lambert, or tools made in the United States.
To me, what happens to smaller local shops is more of a side effect. Wal-Mart has the huge advantage of size. They can afford to eat the cost of opening a store that may take several years to make a profit. They also have the sheer size to create their own supply chain. These are not anit-trust abuses, but just part of the efficiencies of scale. Wal-Wart can disrupt local businesses with tight margins both by opening a competing store and if they decide to close a store that is acting as an anchor. But that would be true of any large store.
My problem with Wal-Mart is the way they have warped consumer expectations and the power they wield over suppliers. They push their suppliers to continually cut costs in a way that forces them to look for cheaper and cheaper labor. Wal-Mart could not function as it does without some portions of the planet being wretchedly poor with no work or environmental protections.
Human nature being what it is, I honestly don’t expect any major change until the price of oil goes up and stays up. When the cost of shipping a tee-shirt across the ocean is more than the cost of producing it locally, you will see things start to change.
Re: the spread of national pharmacies: beginning in the 1980s, cities started to experience intense “pharmacy wars”, where national pharmacies began to saturate local markets. More often than not, independent pharmacies closed not because they couldn’t compete, but because national chains made too-good-to-be-true offers for the rights to prescriptions. Basically, Walgreen’s, CVS and the like would buy out the mom & pop.
I can’t believe some would think Walmarts don’t affect small business.
My own ‘mom and pop’ had a franchise hardware store in a small town with the closest city 100 km away. Being a small town hardware store they also carried a large variety of items - toys, automotive supplies, sporting goods, housewares, yarn etc. One year a Walmart opened in that city. They found they couldn’t buy most inventory wholesale at the prices Walmart sells retail.
Walmart has enormous purchasing power due to volume. So of course the Walmart impacted my parents bottom line - hugely. Especially at the make or break time of Christmas when consumers where more likely to drive to the city and buy their toys/gifts etc at the Walmart instead of my parents store.
I’m not saying Walmart is bad - but it definately changes the retail landscape - especially in smaller centers.
And yes, my parents did sell off their inventory a few years later. They were still breaking even - but the small town didn’t need their hardware store anymore. Now people can drive 100 km to buy some plumbing parts.
Well yes, but almost impossible to prove however.
Charging less than your competitors and then raising prices when they go out of business isn’t in and of itself predatory pricing. It’s smart competition, which is protected under the antitrust laws.
For it to be predatory pricing, you need to (a) price below cost; and (b) have a realistic likelihood of recovering the losses in the future.
Even assuming (a), (b) is tough in a contestible market like retail. If Walmart jacks its prices up later, then other stores will reopen. The barriers to entry in retail aren’t significant enough to make a predatory pricing case easy to prove.
What do you define as a “mom and pop” store? Most of those places you have named are regional or national chains. I mean, it is possible to be a chain and still be a mom and pop operation I suppose, but at some point when a chain is big enough it ceases to be so.
Wal-Marts are LOUSY “anchor” stores, because they won’t accept such locations, according to several books and websites. Wal-Mart won’t be part of an attached series of stores, whether an “indoor” or and “outdoor” mall. I’ve never seen any that wasn’t a stand-alone store.
They’re not the only ones – Target is usually the same way (the one near me shares a wall with a supermarket, but that’s it).
In fact, this refusal to be a mall anchor has been cited as one reason for the decline of shopping malls – large “stand-alone” stores like Wal Mart are displacing them.
This site lists only 11 WalMarts acting as anchors. I wonder how many of them are actually “attached”. I know of two WalMarts in the central Massachusetts rehgion that are among other stores, but not physically attached (or even that close to) the others.
But large, standalone Walmarts regularly anchor large shopping plazas. Often, they are plazas built specifically to house the Walmart and the other stores build around it.