Why has Walmart not failed due to opposition?

[QUOTE=sqweels]

[quote=eleanorigby]
If Walmart can drive down the price of goods d/t its sheer sizie and clout–is that always beneficial to the entire market/economy?

Yes. The money and resources saved can be used elsewhere in the economy to perform other work.

Good God, now I’ve agreed with everything Sam Stone posted :eek:, except the part where he says he doesn’t like shopping at Walmart. I don’t mind shopping there, but I’m not as dainty about my surroundings as some people.

Actually I take that back. It’s good for the economy OVERALL. There are always winners and losers in any economy.

Those same prices are almost certainly available to any other retailer, provided they buy in such massive quantities and write periodic price reductions into the contracts.

Companies don’t charge their smaller customers more to compensate for giving discounts to larger ones. They give discounts to larger companies as an incentive to keep their buying with them. They make money either way- it’s just a better deal to sell more and discount it some than it is to sell a little at a higher price.

So smaller retailers are charged more than Wal Mart, at times I’ll wager more than Wal Mart sells retail. So the playing field isn’t level and smaller stores can’t hope to compete.

The playing field is level, and when it rains, it rains on both sides of the field.
The difference is that some of the players on the field are more highly qualified athletes than others.
Wal-Mart or their LARGE, well-run competitors are highly qualified to play.
Small shops that fail to add adequate value to their merchandise or buy their merchandise at low enough prices to compete with more competent players eventually go under. It’s been happening since before Wal-Mart was around and it’ll keep on happenning as long as humankind has competitive marketplaces.

Exactly. A smaller store can compete, it just can’t compete using the SAME TACTICS as WalMart. But small stores have their advantages, and if they specialize, they can offer value where WalMart can’t. Besides, a “level playing field” can’t possibly be construed as saying that all stores must be the same size, or that all stores must get the exact same negotiated contract. Forcing either of those constraintswould REDUCE competition, not increase it.

I guess I really ought to take a class instead of asking dumb questions…

…but isn’t there a limit to this?

Also, what advantage and/or specialty does a small store inherently have that WalMart can’t gain?

The only thing I can think of are, say, specialty products that WalMart can’t get ahold of - but, then, that’s not really competition in the same domain, is it? That is, if some mom&pop is selling t-shirts and shorts, start feeling the competition from a new WalMart, and then change to selling tuxedos - well, they’ve been effectively put out of business (in their domain).

Yes indeed, they will have been put out of business if they insist on trying to sell the same NASCAR and Tasmanian Devil t-shirts that Wal-Mart sells.

But… if they offer personalization for local sports teams, offer different types of licensed merchandise, etc… they’ll be providing products that Wal-Mart doesn’t, and adding value.

It’s like I said earlier- differentiation or low-cost. That’s the way it goes. That’s why companies like Calphalon, Henckels, Wusthof and Le Creuset are still in business in spite of Wal-Mart’s selling of $5 saucepans and knives. People don’t always want the dirt-cheapest stuff. It’s why you can go buy Bertolli olive oil at Wal-Mart for $5/12 oz, or spend $35 on 750 ml of artisan olive oil from Italy.

However, Calphalon most likely couldn’t survive trying to sell their current products with a low-cost strategy. Neither could the other companies I mentioned. Some of that’s due to more expensive materials and labor intensive production, while some of it is due to economies of scale on the part of the low-cost producers.

As for the pricing issues- it’s not uncommon. If you go to a wholesale supplier and order 4 of something, you’ll almost certainly pay a higher price per unit than if you bought 40, which is higher than the unit price for 400 of them. It’s not so much that larger companies get discounts by virtue of being larger, it’s that they get discounts based on the quantities they buy. That, along with production efficiencies from larger scale production are what constitute economies of scale- the idea that the more you make, the cheaper per unit they become.

There also may be other factors at work- market penetration, etc… that affect prices to certain retailers in certain areas.

It doesn’t have to be things that Wal-Mart can’t get ahold of. It can be products that require technical sales staff. It can be higher-end products. Audiophile stereo stores have survived Wal-Mart and Best Buy. It can be stores that sell local products, offer services, or value-added resellers who are willing to deliver, place special orders for different colors or sizes, etc.

There’s no end to the number of ways a store can compete other than on price.

Or they could turn to the internet. Hundreds of small businesses are thriving on the internet, providing niche products for geographically disparate groups of people who hold a common interest.

70% of all American businesses have a commercial web site. So I’d guess the number is in the hundreds of thousands.

Sites that do actual E-commerce would almost certainly number in the thousands. Maybe the tens of thousands, I’d think.

One of the things I really don’t understand about all this Wal Mart hubbub is why people don’t understand that Wal-Mart, like all corporations, has a limited shelf life, soon, within most of our lifetimes, to die (or worse, become irrelevant) like Sears, Montgomery Ward, A&P, Winn Dixie, Piggly Wiggly, Kmart, and a whole host of other national and regional players.

Back in college I once calculated Sears revenues accounted for a full 2.1% of the US GDP in 1972… today, Wal-Mart’s revenues are at 2.6% of US GDP. Sears dominated the American retail landscape for 100 years, and then nearly died, to be purchased by a discount retailer that itself was in bankruptcy two years prior to the “merger.” And Sears just wasn’t a mega-corp, it was an American Icon, the institution that made it possible for housewives in the prairie to get pot-bellied stoves, starched cotton shirts, the latest perfumes, and a whole host of “luxuries” quickly turned into necessities. Not to mention the catalog itself, a book put to many, many uses. :dubious: :wink:

Today Sears doesn’t mean shit to people, a company largely supported by their financial services division, but still not worth saving from the likes of Kmart. Poof, gone, now no longer a proud organization that benefited our nation but a brand, a name for the marketers.

And Sears isn’t the only one. From the mid-twenties to the mid-thirties, A&P opened up over 14,000 grocery stores, wiping out local grocer after local butcher after local baker (I don’t know what happened to the candlestick makers - sorry.) They ignited a fiery storm of protest (overwhelmedin the greater story of the Depression, FDR, and Hitler) much like the one heard today, and are now no longer a market maker but a market taker, reduced to a regional grocer of 105 stores in New York/New Jersey.

So what about Wal Mart?

Of their $287 billion in 2004 revenues, they have an operating income of $17 billion, or 5.96% of gross revenues… many people here expect their stock portfolios to do better than this (so they then load up on Wal Mart. :wink: ) After taxes, etc, you end up with a mere 3.4% return for your efforts.

But for the company, it gets even worse. They pay out 21% of their income in dividends, leaving them with retained earnings of a paltry 2.7% of gross revenue! Sorry for exclaiming twice in consecutive sentences, but that’s horrible! The damn inflation rate in the US is 3.15% for March, meaning that with bad planning on Wal Marts part, their entire profit could be spent on inflationary pressures rather than increased capital improvements, acquisitions, R&D, and the all important “improving your cash position.”

Cite, PDF document, skip all the crap in the front and go to page 33.

Don’t get me wrong - they’re currently doing well, and things are proceeding and growing at a nice clip… but they’re not so large as to be unaffected by externalities such as bad management or somebody else coming up with a “better way”, as every single one of the above listed retailers found themselves to be.

Here’s my prediction: Some Asian store is going to come out of nowhere, supported by a home or regional market of 300,000,000+ and kick Wal Marts ass, just as Toyota is doing the Big Three. You wait and see. And then people will really be yelling! :wink:

Theres a difference between having a web-page and establishing a small business solely for the purpose of internet sales. In retrospect, the hundreds figure is a gross understatement and your cite is as well if you consider everyone who runs an ebay store or home business.

Walmart can only really complete in areas where your selling a few million units over the entire country. It doesn’t have the agility to pursue markets where only a few hundred units per year are sold but small, internet retailers are perfectly suited to that niche.

Wildfires and tornadoes have a limited duration as well, but we don’t advise people to just chill out and wait it through when one runs rampant through their neighborhood.

But is Walmart running rampant through our economy or, as JohnT suggests, only the current in a string of retail successes going back well into the 19th century, when companies like Proctor and Gamble took over soapmaking from housewives?

Face it: many of the small businesses blaming Walmart for their failure do so because it’s easier, less painful, and hipper than to admit their own incompetence. A business model that worked in 1950 will not work today and to force consumers to support those businesses because of a knee-jerk reaction that says “big is automatically bad” is a regressive tax on lower-income consumers.

I don’t shop at WalMart, mostly because I tend to find their stores overcrowded and chaotic, as well as dirtier than other stores. I tend to shop at Target, where I may find that a product costs only slightly more but provides me (who hates shopping) with a much more pleasant experience in their stores.

I don’t, however, consider WalMart to be evil. I can’t speak to their business practices overall, but I can see that they treated my sister very well while she worked there and attended graduate school.

The WalMart in my area does a huge business and pulls customers in from three states. It’s not uncommon to find WV and OH license plates in the parking lot as people flock to the WalMart to buy groceries and clothing sans sales tax here in PA. The local businesses that cater to niche markets are still here, but those that did not were drying up and dying long before WalMart showed up.

I could never understand that thinking unless one was buying a big-ticket item, like a car, that made the savings worth the gasoline. Like when people line up at gas stations to take advantage of “low” prices before a gas tax increase. Folks, your tank is only twelve gallons and gas is only going up seven cents. Is your time really worth eighty-four cents?

Considering that Washington, PA is only 19 miles from WV if you take Interstate 70 straight in, and not that much further to Ohio (even Weirton and the like are not that far. It’s about a 20 minute drive from Weirton, WV and Steubenville, OH to Robinson Township, PA), it’s apparently not that hard ot make a once-monthly shopping trip in the big family van where several relatives all get their supplies for the month. So in they come, buying $300-400 worth of supplies at one time, and instead of paying the WV or OH sales tax on those groceries and clothes, they get them here, sans tax.

If you have 3 people on that trip, and each one is stocking up for the month, they’ve spent 900$. The same purchases in WV would total 954$. They’re very likely more than making up for the gas they use on the 20 minute drive, especially if the closest shopping center in WV is 20 minutes away.

Tell me about it,
If people were really that concerned about how much they were spending on a gallon of gas they’d be more concerned with the MPG when buying a vehicle. But everyone wants an AWD SUV V8 these days.
Someone who gets 21mpg and drive 15K miles a year pays 20cents less a gallon than the guy who gets 19mpg.