With the economy in the dumps and people losing their jobs left and right, Wal-Mart may seem like a good buy. But is the discount megastore really good for America? Wal-Mart’s slogan “Save Money, Live Better” gives people a positive view of Wal-Mart. Its everyday low prices benefit millions of Americans. However, there is a bad bargain behind the scenes; the company puts people out of work and destroys local companies. Wal-Mart has become more than just a major retailer; it is an economic force, a cultural phenomenon and a lightning rod for controversy.
Behind smile, Wal-Mart’s effect on the people and the economy is degenerative for the United States. Not many people look behind that big, yellow smiley face that Wal-Mart shows on TV, and see what’s really happening. Wal-Mart is known as a one-stop shop that provides cheap and affordable merchandise, but the store actually makes money off the poor and simultaneously lowers their standard of living. The executives of the company understand the economy of the people, and they target the poor because it is most beneficial towards the company.
Sam Walton, Wal-Mart founder, came up with the idea on how to make money off the poor. His formula was to buy cheap, sell for less and make his profit on high volume. He located his first stores in poor, rural areas, but for his method to work, he needed more customers. For this reason, Wal-Mart gives Americans bad jobs and pays them barely above minimum wage, so that they can only afford to shop at Wal-Mart (Featherstone 639). This formula works effectively and is circular, staying true to the expression “the rich get richer while the poor get poorer.
A large part of Americans are in the middle or lower class, and as such, are compelled to shop fiscally. Wal-Mart offers these low prices, and draws in more customers than other megastores, enabling them to garner more revenue to keep them in business. The executives’ pay minimum wage from what the company earns, and their workers receive less than they should, effectively, the bosses who are rich become more rich while the workers who are poor lose money overall. Additionally, Wal-Mart encourages its workers to seek public assistance, which is subsidized from taxpayers (Featherstone 643).
Having to provide little to no health benefits, Wal-Mart saves a large sum of money. Despite Wal-Mart’s low priced goods, people ignore the fact that the store is participating in lowering the workers’ standards. There has been a power shift from manufacturers to retailers. With Wal-Mart’s success globally, it reverses a history in which the manufacturer was powerful and the retailer was the inferior. The market followed the push system in the past, which involves manufacturers deciding what they are going to produce and then trying to get retailers to buy and sell the products for them.
The market nowadays follows the pull system, which involves retailers deciding what is being sold and telling manufacturers what to produce and when to produce it (“Is Wal-Mart Good for America? ”). Today, Wal-Mart has more say over what is being produced, under what pricing, and at what time. These demands make it difficult for suppliers to grow as an industry without depending on Wal-Mart. The suppliers that want to do business with Wal-Mart must do it its way. This allows the company to do whatever it wants in order to increase profits, ignoring how it would hurt the suppliers.
For example, Rubbermaid was hurt by Wal-Mart through the pull-system. Rubbermaid was one of Wal-Mart’s suppliers until it was sold to its competitor because it could no longer drive down its products’ costs to what Wal-Mart wanted (“Is Wal-Mart Good For America? ”). Wal-Mart could provide a tremendous opportunity for volume sales, but these volume sales can be taken away if suppliers do not follow Wal-Mart’s rules. The store was the biggest customer of Rubbermaid until Rubbermaid decided to increase the price of its product. Wal-Mart would not take the price increase and later dropped a number of Rubbermaid products.
This declining volume impacted Rubbermaid so drastically that it was sold to its competitor. The overwhelming power of the pull system that Wal-Mart has abused has already harmed and can continue to harm small suppliers to the point of shutting down. Sam Walton’s low-cost, low price formula for success is how Wal-Mart pulls its shoppers. The “opening price”, the rock bottom prices that Wal-Mart showcases in their special displays (“Is Wal-Mart Good For America”) brings millions of shoppers to its market. The opening price point is the foundation of Wal-Mart, including the store’s interactions with customers.
Every line of goods has an opening price point, the cheapest item in the line. However, it is the bait that lures customers to the department. Once customers walk past the opening price and see a similar product that they want, they would instead purchase that product. However, the price for the item is not the lowest price in town. When people see the opening price, they have already formed the perception that everything in that department is the lowest price in town. As such, when people shop at Wal-Mart, they do not always get rock-bottom prices as advertised.
In order for Wal-Mart to keep its opening price low, Wal-Mart is dependent on low-cost Asian imports. Wal-Mart pushed its American suppliers to follow Wal-Mart to Asia. The pressure from the opening price forces the suppliers to move overseas (“Is Wal-Mart Good For America? ”). For suppliers to compete and remain viable as corporate competitors in the long run, they need to keep prices as low as they possibly can. Wal-Mart tells its suppliers to drive the cost down. In order for the suppliers to meet these bottom line price figures, it is necessary for them to move to China.
For this reason, America has lost more than a million jobs to China. In the end, is Wal-Mart good for America? As buyers, lower prices would be just good. Wal-Mart is offering consumers a wide range of goods at rock-bottom prices. The cheaper goods are a tremendous service for the United States. However, people are not just customers, they are also workers who need to earn a decent standard of living. People need to look behind that big, yellow smiley face and see what’s really happening behind it and see the reality of what Wal-Mart has actually done to the United States.
Courtney from Study Moose
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