Unit 100
The Wal-Mart You Don't Know
Wal-Mart is not just the world's largest retailer. It's world's largest company -- bigger than ExxonMobil, General Motors, and General Electric. The scale is hard to absorb. Wal-Mart sells in three months what number-two retailer Home Depot sells in a year.
Wal-Mart wields its power for just one purpose: to bring the lowest possible prices to its customers. At Wal-Mart, that goal is never reached. The retailer has a clear policy for suppliers: On basic products that don't change, the price Wal-Mart will pay, and will charge shoppers, must drop year after year. But what almost no one outside the world of Wal-Mart and none of its 21,000 suppliers know is the high cost of those low prices. Wal-Mart has the power to squeeze profit-killing concessions from vendors. To survive in the face of its pricing demands, makers of everything from bras to bicycles to blue jeans have had to lay off employees and close US plants in favor of outsourcing products from overseas.
Indeed, the real story of Wal-Mart, the story that never gets told, is the story of the pressure the biggest retailer relentlessly applies to its suppliers in the name of bringing us "every day low prices". It's the story of what that pressure does to the companies Wal-Mart does business with, to US manufacturing, and to the economy as a whole.
The giant retailer's low prices often come with a high cost. Wal-Mart's relentless pressure can crush the companies it does business with and force them to send jobs overseas. Are we shopping our way straight to the unemployment line? Of course, US companies have been moving jobs offshore for decades, long before Wal-Mart was a retailing power. But there is no question that the chain is helping accelerate the loss of American jobs to low-wage countries such as China. One way to think of Wal-Mart is as a vast pipeline that gives non-US companies direct access to the American market.
People ask, "How can it be bad for things to come into the US cheaply? How can it be bad to have a bargain at Wal-Mart?" Sure, it's held inflation down, and it's great to have bargains. But you can't buy anything if you're not employed. We are shopping ourselves out of jobs.
There is no question that Wal-Mart's relentless drive to squeeze out costs has benefited consumers. The giant retailer is at least partly responsible for the low rate of US inflation, and a study concluded that about 12% of the economy's productivity gains in the second half of the 1990s could be traced to Wal-Mart alone.
By now, it is accepted wisdom that Wal-Mart makes the companies it does business with more efficient and focused, leaner and faster. Wal-Mart itself is known for continuous improvement in its ability to handle, move, and track merchandise. It expects the same of its suppliers. But the ability to operate at peak efficiency only gets you in the door at Wal-Mart. Then the real demands start. Wal-Mart is legendary for forcing its suppliers to redesign everything from their packaging to their computer systems. It is also legendary for quite straightforwardly telling them what it will pay for their goods. |