The Angst of Wal-Mart April 21, 2007Posted by Jim Satterfield in Business & Society, Economics.
BusinessWeek has an article about the problems facing Wal-Mart as it tries to regain its reputation with Wall Street. I don’t shop at Wal-Mart that often, in fact months can go by without me setting foot in there. I go there if it seems to be the most likely place for me to find something I haven’t found elsewhere. Given that there is a Target in walking distance should I choose to walk that far and the weather is cooperative it would be silly, wouldn’t it? In fact it’s mostly when I need something from their automotive department that I head that way because it’s one aspect of their store that beats Target hands down.
The article addresses many of Wal-Mart’s problems and how it got where it is today. It mentions the competition adapting to Wal-Mart’s tactics and learning some of them as well. It mentions Wall Street’s doubts about Wal-Mart’s claims to be able to still add thousands of stores in the U.S. and their problems trying to expand internationally.
What does it leave out? That there are just limits to Wal-Mart’s model. While it mentions as one of the key’s to Wal-Mart’s early success their ability to pressure suppliers and a refusal to accept automatic increases in wholesale prices it doesn’t mention other, less pleasant aspects to that strategy. Fast Company wrote about The Man Who Said No to Wal-Mart. Why would someone do that? Because they have a product that has a reputation for quality. A reputation that could not possibly survive continuing to sell to Wal-Mart. They had already taken efficiencies of manufacturing about as far as they could go. To follow the model Wal-Mart would want them to would mean lowering quality significantly. Mr. Wier refused to do so. Bravo for him.
While I do not want to turn this into (too much of) an anti-Wal-Mart screed the things that they have done must be considered. Frontline did a piece on them entitled “Is Wal-Mart Good for America?“. The Los Angeles Times won a Pulitzer for their reporting on Wal-Mart. Even as they are defended by themselves and others as providing low cost merchandise for low income Americans it is a legitimate question as to how many Americans they have helped turn into low income Americans. Their pay per hour isn’t the worst and most certainly isn’t the best. But in the name of efficiency and being tightwads they do keep as many employees as possible part-time and with no benefits. The moves they’ve made to counter that reputation lately just don’t help most of their part-timers in spite of Wal-Mart’s claims. But it is entirely possible that the single biggest contribution Wal-Mart has made to the rate of poverty in America is that their demands for low costs to them at any price to their suppliers has caused suppliers to find it impossible to continue operations in the United States any longer. Sure, there might be an office with as lean a staff as possible but no manufacturing jobs. Very few, if any jobs to help Americans stay in at least the lower middle class. It is a pattern that has been repeated over and over again. So Frontline’s question is a valid one. Where is Wal-Mart and those who believe in them and their model taking America? Do we really believe that we can have an easy transition to becoming more like the Third World economies that can provide low cost labor? Is that where we want to go?