Why do the Wal-mart Watch people hate Wal-mart?

In My Humble Opinion
121

A couple of points:

  1. While WM might have, for example, 35% of the dog food market, that doesn’t mean that they sell 35% of each brands volume. The ratio likely goes something like this (numbers made up):

(Brand: Percentage of sales as a result of Wal Mart)
Store brand: 100%
Alpo: 22%
K-nel Ration: 46%
Pedigree: 4%

etc etc. Their “market control” does not necessarily lead to “company control”. They’ll have a much easier time squeezing Knel ration than they will Pedigree. But only because the CEO of Knel ration let his company be put in this position.

I also see that you didn’t note that the article specifically excluded Pet Store sales from the percentage regarding dog food sales :dubious: … so the percentage really isn’t 35%, is it?

  1. “30% market share in everything”? Please. The company has aimed for many things. And failed. Note that the “30% in everything” that they boast is only achieved in the dog food market (well, not really).

  2. In regards to video, it states that WMT was responsible for $1.5 billion in VHS/DVD sales for 2001. However, the entire US home video/DVD market in that year was 8.52 billion, giving WMT 17.6% of that market. Again, far less than 30% and far less than that which is needed to exert the sort of market control people are fearing.

Except in the war regarding DVD pricing in the mid 1990s. Blockbuster wanted “rental” pricing - pricing in the sub $100 range, driving people to rent more. Wal Mart wanted volume pricing, pricing that would move movies off the shelves. Both companies made their case, and Wal Mart won… a decision that marks the beginning of the end of the Blockbuster Video “juggernaut” myth and made DVD’s affordable to even their typical consumer. Much to our benefit, I might add. But, again, note that 82.4% of all DVD sales revenue has nothing to do with Wal Mart - this decision was obviously far better for the production companies than WMT.

  1. Note that music isn’t even in the top 10 categories that WMT carries. Seeing that, I find it increasingly hard to believe that they have such amazing control of the entire industry.

  2. The fact that they have a 60% share in “discount merchandise” is irrelevant. Somebody has to be top dog, and they are in a retail category that was despised as irrelevant recently as 20 years ago. What’s the big deal?

Forgotten Sears executive: “Wal Mart? They might be a threat to K Mart, but I’m not concerned - their customers are the NASCAR crowd - they can have them!”

  1. I don’t get the 24% in groceries figure. WMT’s last 10k states that grocery sales make up 28% of WMT’s sales, a figure approaching $60 billion. Compare that to the $530 billion total market size of all US retail food and beverage sales. That, to me, comes up to only 11.3% of the total retail food market, not 24%. (I can see where the blog cheated - they compared WMT just to other supermarkets and not to all grocers. :dubious: ) Even assuming the other sites $82 billion figure, that’s still 15% of the market, not 24%.
122

How exactly did you “rephrase” my post into yours? Run it back and forth through a online Japanese-English translator until it made no more sense? As far as I can tell, your post had nothing to do with what I wrote.

As for second post, I guess it just proves that if one person provides enough cites, it just gives another person enough facts to find a nit to pick somewhere. Nothing you posted disproves my original statement, WalMart controls an exhorbinant share of a number of markets. This market share might range anywhere between 10% to 60% depending on how and when and what is being calculated. But even the lowest possible figure is very large - large enough to make my original point true. Even with the lowest possible percentages, WalMart is big enough to unilaterally impose its decisions on the marketplace.

123

It still isn’t clear how Wall-mart imposes its decisions on the market place.

Let’s take your original example and original figures. Wal-mart controls, say, 30% of the market for music. And they won’t carry music that says “shit”. So Sister Sweetcakes wants to say “shit” on her album.

Wal-mart can certainly refuse to sell her album. My question is, how does Wal-mart stop the other 70% of the market from selling her stuff? If there is a pent-up demand for albums where people say “shit”, then Wal-mart loses market share. If there is a pent-up demand for albums where people don’t say “shit”, then Wal-mart gains share, but so would Sister Sweetcakes if she decided not to say “shit” on her own, and Wal-mart doesn’t control that. And if buyers don’t care if Sister Sweetcakes says “shit” or not, they just want to listen to her music, then they will buy her music from someone other than Wal-mart - and again, Wal-mart loses market share.

I don’t see how Wal-mart is forcing anyone to do anything. All the decisions involved are of people deciding what to buy and what to sell based on what they expect the market will bear. Wal-mart could only escape the constraints of the free market if they could stop everyone else from selling the “Sister Sweetcakes Sings Some Shit” album, as in the government tax on Timex you mentioned earlier. The government can do that, and enforce it, because the government can enforce a monopoly. Wal-mart can’t.

Regards,
Shodan

124

First off, when I bought my cousin the Seinfeld DVD set, I called around to all the local Wal-Marts (because they had the lowest list price on the internet (other than private sellers on ebay, but I lost those bids) to see if I could go and pick it up. Nope, not available. However, it was the same price as on the internet, so I ordered from there because they could guarantee pre-X-Mas delivery. Prices were the same. I bought it again, 5 months later for my friend’s birthday. Look at that, same price. And, the price for Raisin Bran and propane (the two things I buy) are the same at every Wal-Mart I go to. I thought about having my intern call around nationally comparing books and electronics prices, but that was just silly, I let her go home. Secondly, that is an accounting nightmare, especially for an overly scrutinizing retailer like Wal-Mart. The company thrives on cutting prices wherever possible, e.g., the corporate travel policy over there is humorous, at best, ridiculous in general. What products go on their shelves is a ruthless examination of what prices they can demand from their suppliers versus what price they can place on the market. They know their shelf space if valuable. Wal-Mart as it is noted all over this thread is notorious about price. If a product isn’t getting the return they want (low price, high turnover), off the shelf it goes. Third, this type of pricing would be easily transparent. If Wal-Mart is taking a hit on Harry Potter books and jacking up prices on DVDs (whatever), then what you have is what is commonly referred to as a loss leader. Again, what is to stop the consumer from going elsewhere – oh I forgot, there is no where else to go, look below to my response to that.

What you are trying to describe is, at best, predatory pricing (to the more skeptical, it’s called “doing business.”) I was going to post this long discourse on predatory pricing, on the federal level, but I’m too lazy on a Friday and I already let me intern go home for for lunch (I refuse to research anymore).

Let me summarize by saying that at the Federal Level, predatory pricing isn’t an easy thing to prove. This is through years of case law and analysis by many economists. For me, anyway, to fully explore this notion would take far more than a message board post, even though I studied this case in undergrad and law school:

The Supreme Court in Brooke vs. Brown & Williamson Tobacco, found that predatory pricing is generally implausible. However, the Court does lay out some foundation for predatory pricing: 1) prices have to truly be below cost to the retailer (note, not profits, and the Court was silent on which accounting method to use to determine the cost); and, 2) the predator must be able to recoup losses at the monopoly level pricing.

If you think they are actively engaged in this, please note that they haven’t been found guilty of it in either the state or federal level (though imo, I think you would have a better chance in the state courts, however, I don’t know the laws in Montanna). It’s been tried, but it’s been over-turned on appeal.

Anyway, on a lark, I looked at wiki and they do a much more concise job of explaining it than I would have. Look there and you can argue with that reasoning.

First off, the goal is to protect the consumers, as you correctly stated, not the competitiors. IOW, protect the competition, not the competitor. If your extremely local economy can’t maintain a small indy bookseller and Wal-Mart, or any small, indy anything and Wal-Mart, then your local extremely local economy is too small. If your local economy can only sustain the types of products that Wal-Mart sells, I don’t know what to tell you (i.e. cheap, commoditized goods, which require low labor and low production costs). You have my sympahties.

125

Shodan, did you know that it used to be that 800 lines didn’t work if you were calling from the same area code as where the line was based (true fact)? So if you were running a mail order business that used an 800 line, nobody could call your number in whatever area you were actually located in. So all the mail order companies set up their 800 telephone services in places like Nebraska. And why did they do this? Because if they set up their 800 numbers in New York or Los Angeles they’d lose all the millions of customers in those cities, but in Nebraska you’d lose fewer customers. Now nationwide, the difference between Nebraska and Southern Califonia or New York City might only be 2% of your potential customer base. But most companies did it because they all realized they couldn’t afford to fall even 2% behind the competition.

If two companies are selling the same product and one of them is selling theirs for 10% less, which company does succeeds and which one fails? If two companies are selling the same product for the same price and one puts 10% more in the box, which company succeeds and which fails? If you slap a 10% tariff on imports, how much does it benefit a domestic business? If you put a 10% tax on gas in one state, how many people will cross a stateline to buy it elsewhere? If there are two market funds and one of them is earning 10% more than the other, which one gets more investors? The simple fact is that in most businesses, a 10% advantage or disadvantage is huge - if two companies are in the same business and one of them had a 10% advantage over the other, the long term prospects for the weaker company are bad.

And WalMart is in the position to decide who gets a 10% advantage. If you can make a deal with WalMart you have 100% of the customers - if you don’t make a deal with WalMart you only have 90% of the customers. Or 80% or 70% or 60% or whatever the relevant figure is in a particular business or location. Is that enough to close down a business overnight? No, of course not. But 10% is enough to close down a business eventually.

Now, maybe what you’re saying is that WalMart isn’t the only game in town. But for a lot of people it really is. I live in the suburban area. Where I live now, WalMart is about five miles away and it’s the closest department store to me. But I could drive another five miles and go to Target. Or another miles past that and go to KMart. If I want to buy a DVD, I can go to Best Buy or Circuit City. If I want to buy a book I can go to Borders or Barnes & Noble. If I want to buy groceries I can go to Shop Rite or Price Chopper.

But my parents live in another town. Where they live the closest department store is a WalMart ten miles away. The next closest store is a WalMart thirty miles away. The next closest store after that is a WalMart that’s sixty miles away. There isn’t a non-WalMart department store within two hundred miles of where they live. If my father wants to buy a pair of pants or my mother wants to buy a coat, they have two choices - buy what WalMart sells or drive for seven hours. Do you want to tell me WalMart isn’t a monopoly? It is where they live.

A free market is where buyers and sellers can get together and trade freely. But WalMart is now sitting there in the middle. It’s able to tell sellers, “You can work with me or you can go out of business. Those are your choices.” And it’s able to tell buyers, “You can buy what I’m selling or you can go without. Those are your choices.” When anyone is big enough to say those things, then it’s no longer a free market.

126

I worked for a smallish global company (fewer than 3000 employees at the time IIRC). It is probably safe to say that everyone who uses this board has seen something affected by the company I worked for. WalMart would only do business with our Asian divisions, even though the work product was going to be used in the United States. Although many of the Fortune 100 and 500 did business with the company I worked for, to the best of my knowledge WalMart was the only one that worked exclusively through Asia in this way. The other companies did business with the divisions closest to their headquarters or closest to their customers sometimes spreading work across many of our divisions.

127

This is something that I’ve found VERY interesting, because I find it so difficult to believe. Can you tell me what town your parents live in? Or at least a nearby town?

If they still get US Mail, UPS or FedEx, in that remote a locale, they can buy anything WalMart sells (outside of groceries) from somebody else, and often at a pretty decent prices. Maybe not Wal-Mart prices, but Mom&Pop Shop prices.

128

I won’t even say what town I live in online, so sorry, nope. That may sound like I’m whimping out, but someone else in this thread didn’t want to name their town either and they were using it as an example of how WalMart didn’t drive out competition.

Seriously, Cheesesteak, do you know anyone who buys their pants online? A screwdriver? A bag of dogfood? Lightbulbs? Blank videotapes? A towel? A case of Pepsi? Windshield wipers? Aspirin? There are hundreds of items people buy every week that they aren’t going to buy online (even assuming they have a computer).

129

No, I did not know that. But it is no longer the case, is it? IOW, the free market worked, because nobody was able to prevent the change from occuring. Right?

See, this is the part that is wrong. WalMart cannot prevent their customers from shopping elsewhere. They can offer a better price, or a better product, but that same strategy is available to anyone else, so they can steal market share from WalMart just as WalMart can steal from them. That is what “the free market” means, and one party being more successful does not mean that the market no longer operates.

But in order to show that the market is not operating, you need to demonstrate how WalMart is preventing other department stores from moving into the area and attracting customers away from WalMart. If there is any kind of genuine demand for non-WalMart shopping, or if WalMart is gouging their customers or something, then another retailer can move in and take over, by undercutting WalMart or offering a better product. If there is such a huge demand for people who absolutely hate WalMart, but are forced to shop there, it seems there is a major business opportunity for some mom-and-pop store to open up.

Regards,
Shodan

130

They “aren’t” going to? You mean they CHOOSE not to. Right? You’re not suggesting they CAN’T, just that, for whatever reason, they choose to patronize Wal-Mart rather than an online or catalogue retailer.

131

How does one buy groceries online? How is that even practical? Do you buy milk on line? Gas? Meat?

132

If you were following the conversation, you would recall that Cheesesteak qualified his original statement.

Here, I’ll quote it for you:

I trust this clarifies the matter.

133

Why not? Most of that stuff is available online, it’s easy to order, and you don’t have to feed the Evil Empire.

My last purchase at Amazon was razor blades, toothpaste and condoms. Why Amazon? Low prices and free shipping.

Lands End is all about selling stuff like pants, shoes and coats via catalog or online. You can go to levis.com and have the entire selection of jeans at your fingertips, instead of finding only sizes two inches too short or two inches too big around, or a shade that you don’t like.

If I want a car part, I can go to Napa or Advance, pick the correct item for my car and have it shipped right to my home, no deer in the headlights stare at the multitude of wipers at the store. The websites have automated databases to help you select the right item.

Honestly, if you don’t like the options at the stores near your home, there are hundreds of companies willing to send you catalogs or provide a website so you don’t have to worry about a thing, just pick what you want and go. There is a long history of catalog shopping, especially in the more remote regions of the country. Sears did it for a century.

And, in NYC at least, you CAN buy groceries online. FreshDirect offers a full slate of grocery, fruit/veg, dairy, frozen, meat and deli selections, delivered to your door the next day, frozen stuff is kept frozen, chilled stuff kept chilled in the truck. Instead of dragging the kids out to the store for an hour and a half of hell, you can make all your selections in the comfort of your own home, and they can’t whine about that candybar at the checkout.

134

Don’t know if they’re in your end of the state, but Genuardi’s and Safeway both have online grocery shopping in the Philly metro area and suburbs. You can specify expiration dates on perishables, and make notations such as the degree of ripeness desired on fruits. A friend of mine has started using it, and he says it’s the cat’s pants.

135

I said there was no point in continuing this debate and yet I went on anyway. Why don’t I listen to myself? Okay guys, I’ll give up. WalMart is a boon to the free market. Ronald Reagan won the cold war. Kennedy was killed by a vast conspiracy. The CIA invented AIDS. UFOs built the pyramids. Cigarettes don’t cause cancer (but cell phones do). Jesus was the son of God. Santa put those presents under the tree. Homeopathic medicine works.

136

Yes, I’m sure all of the local stores have the same price. When a Wal*Mart comes into a new area, they don’t have to discount as much on the items nobody else in the area carries. Once they kill off competing businesses, they don’t need to discount to a predatory level on those products, either.

You aren’t honestly telling me that isn’t what they’re doing, are you?

Implausible? Didn’t work in the semiconductor industry in the 1980’s, did you? I saw PLENTY of predatory pricing there, by any definition of the word.

Our local economy is capable of supporting a bookstore and a grocery store and a clothing store and so forth. If WalMart came in, that would make it TWO bookstores and TWO grocery stores and so forth, and no, our economy couldn’t support that. WalMart is capable of running a store at a loss for a year with no problem. The independent stores aren’t. Hence, WalMart would kill the local stores first, and then the local economy. I’d have to go and get the book to get the names of the towns, but I read last month of an area where WalMart put in two stores within 20 miles of each other. They killed off the competition in both small towns. Then they put in a WalMart Supercenter 20 miles away and shut down both WalMarts, leaving the two towns in dire economic straights.

137

Depending on where you live, Peapod is you friend. Seriously, it covers a lot of territory. I don’t think you can by gas, though. My sister uses it (and she calls me lazy), and thinks it’s of great value. I like looking at my meat before I buy it (then again, she’s more anal about food quality than I am). Others have listed other places. It’s a thriving business last time I read about it in D.C.