What to do about Walmartization

[rlg94086]

This is a spin-off of another thread.

melensdad:

*I am very familiar with this particular issue. It is commonly referred to as the Wal-Martification of industry.

I’m not so sure this falls into a “blame the Republicans” sort of an issue. Here is how it works, and I do have 1st hand experience with selling products to Wal Mart so I have more than a casual clue about this.

Wal Mart calls up and says they want to sell your goods. They start to buy from you and become a big customer. Then about a year later they call you in for a presentation and tell you what they will pay you* for your item. You tell them you can’t sell it at that price and then they tell you that you can move your factory to some offshore nation, they will even supply you with contacts. Customers who shop Wal Mart demand ever lower prices, this puts pressure on Wal Mart to make the demands on you. KMart and other discounters also put pressure on Wal Mart. So now you are faced with a choice.
–Do you sell to them at a loss?
–Do you move your production overseas and cut American jobs?
–Do you give up the sales and lay off a large % of your workforce?

Who is to blame?
–Consumers because they will only buy the cheapest priced goods?
–Factory owners because they choose to stay in business and are forced to move jobs offshore?
–Retailers who want to remain competitive?

I would suggest that neither Republicans nor Democrats are to blame for this. But it is one reason jobs are moving offshore, and that is leading to lower wages here, which puts more pressure on Wal Mart/KMart/Costco/Etc to find lower and lower cost production to satisfy the needs of the shoppers.

My response…and the subject of this thread:

rlg94086:

Thanks melensdad. I knew Wal-Mart is a very aggressive negotiator, but you summed up the cycle very well. What is the solution? As a consumer, I often look for the best deal, but I don’t like to drive around chasing coupons or advertised loss-leaders. It happens that Wal-Mart has the best all-around pricing, so they are on our short list of stores. With a family of 6-7 (we have an extra teenager living with us this year), we have to consider our budget.

As a businessman, I understand the profit/pricing pressures my customers have (I am not in retail, but the principles are the same). The companies have to compete, otherwise they can and do end up with negative profit. Contrary to what anti-business voices believe, it is not all about greed.

 

[vern_humphrey]

First of all, I have seen these arguments before – long before, back in the '50s and 60s, before Wal Mart existed. In those days, the nefarious retailer was Sears. Or K-Mart. Or Borden’s Books. Or Barnes and Nobles.

Second, if you don’t like Wal Mart (or Sears, or K-Mart, or Borden’s Books, or Barnes and Nobles), don’t shop there.

 

[rlg94086]

First of all, I have seen these arguments before – long before, back in the '50s and 60s, before Wal Mart existed. In those days, the nefarious retailer was Sears. Or K-Mart. Or Borden’s Books. Or Barnes and Nobles.

Second, if you don’t like Wal Mart (or Sears, or K-Mart, or Borden’s Books, or Barnes and Nobles), don’t shop there.

Hi Vern,

You miss the point of the thread. I think we do have a problem with a loss of manufacturing to overseas suppliers. The “Walmartization” is just a term that is used. The cycle melensdad describes goes on in all businesses to a degree - Wal-Mart is very aggressive, but that isn’t necessarily a bad thing. My customers - semiconductor manufacturers - already shifted final packaging overseas and are starting to move wafer fabs as well.

My question is, what is the solution to the market pressures and shift of manufacturing out of the US? Personally, I am a big supporter of the Fair Tax, and I can see how that may turn things around. Any other ideas, or do you just think there is no problem at all?

 

[vern_humphrey]

Hi Vern,

You miss the point of the thread. I think we do have a problem with a loss of manufacturing to overseas suppliers. The “Walmartization” is just a term that is used. The cycle melensdad describes goes on in all businesses to a degree - Wal-Mart is very aggressive, but that isn’t necessarily a bad thing. My customers - semiconductor manufacturers - already shifted final packaging overseas and are starting to move wafer fabs as well.

My question is, what is the solution to the market pressures and shift of manufacturing out of the US? Personally, I am a big supporter of the Fair Tax, and I can see how that may turn things around. Any other ideas, or do you just think there is no problem at all?

If we really want to keep American jobs in America, we need to get government to stop killing the goose that laid the golden egg.

For example, various taxes and mandated policies raise the cost of labor sky high. Various “environmental” policies make it impossible to build refineries or nuclear power plants here – thus in some cases exporting jobs and in other cases increasing the cost of productioni.

 

[Texas_Roofer]

Well
I have been in private business for about twenty five years now, and frankly it sounds like some one was afraid to walk away when it was time to walk. So may be one benefit from Wal Mart is exposing cowards?

How did you think a business exists for years then fails after doing business with Wal Mart for 18 months? My guess is bad management (and that is not on the Wal Mart side).

 

[rlg94086]

Well
I have been in private business for about twenty five years now, and frankly it sounds like some one was afraid to walk away when it was time to walk. So may be one benefit from Wal Mart is exposing cowards?

How did you think a business exists for years then fails after doing business with Wal Mart for 18 months? My guess is bad management (and that is not on the Wal Mart side).

I agree. It is incumbant on the business to make the best decision for their investors (regardless of who their investors are: public, private, sole proprietor, etc.). However, melensdad didn’t mention a particular company in this thread. He just explained the way Wal-Mart (and other companies) negotiates.

I did have this discussion on this forum a long time ago with someone in the bread business who complained about Wal-Mart’s tactics. Her company walked away, but she still complained. I didn’t see and I don’t see what the problem was.

Now, the issue is that some companies do choose to move their manufacturing overseas as the determined best choice for their investors. They like the business they have with Wal-Mart and don’t want to lose it. While that may be good for that individual company, it may not be good for America. That is really what I am asking for solutions for…how do we help business decide on America instead of China?

 

[MojeIme1981]

My question is, what is the solution to the market pressures and shift of manufacturing out of the US? Personally, I am a big supporter of the Fair Tax, and I can see how that may turn things around. Any other ideas, or do you just think there is no problem at all?

The solution is quite simple. The international community has to bring up trade barriers for those countries which don’t have labor and environment protecting laws. Under labor protection I see some very simple but important points:
-limitation of maximal working hours per week. (40 is reasonable),
-granted vacation (3-4 weeks yearly is reasonable)
-granted minimal wage (always in relative to the average wage of the given country) (50% is reasonable)

For countries which don’t exercise such laws the international community has to bring up trade barriers in form of import taxes, quotas, etc…

The most important thing here to see is that we MAY compete in every business aspect, but MAY NOT compete with worker rights. (and environment rights). These measures surely would slow down outsourcing.

 

[thomasf]

The Man Who Said No to Wal Mart

Great read. It’s a few years old, but I found it fascinating.

 

[rlg94086]

The solution is quite simple. The international community has to bring up trade barriers for those countries which don’t have labor and environment protecting laws. Under labor protection I see some very simple but important points:
-limitation of maximal working hours per week. (40 is reasonable),
-granted vacation (3-4 weeks yearly is reasonable)
-granted minimal wage (always in relative to the average wage of the given country) (50% is reasonable)

For countries which don’t exercise such laws the international community has to bring up trade barriers in form of import taxes, quotas, etc…

The most important thing here to see is that we MAY compete in every business aspect, but MAY NOT compete with worker rights. (and environment rights). These measures surely would slow down outsourcing.

Why is that the job of the international community?

 

[vern_humphrey]

Why is that the job of the international community?

And why is the solution always to use force?

Why not have free trade?

 

[rlg94086]

The Man Who Said No to Wal Mart

Great read. It’s a few years old, but I found it fascinating.

It is an interesting story, but not as fascinating to me. Primarily, this is because Wal-Mart is obviously not a fit for Snapper lawn mowers. If you go to their website and search for a dealer, you will find small shops. As mentioned in the article, 80% of their business comes from independent dealers. IOW…Sears, Home Depot and Lowes are also not a fit for Snapper.

He goes after a different consumer - someone looking for a quality lawn mower as opposed to someone just looking for a lawn mower to mow their lawn with.

When I shopped for a lawn mower, I compared prices at Home Depot, Wal-Mart, Lowes and Sears. I have a small lawn and was just looking for a decent, electric lawn mower…Lowes had what I needed, in this case.

 

[rlg94086]

And why is the solution always to use force?

Why not have free trade?

Yep. It is our issue to figure out how to compete. Now, as a country, it is certainly our right to impose tarrifs, choose not to do business with a country due to their work conditions, etc. But, there are going to be consequences to those decisions.

 

[TotaTua]

WOW, this is a topic near and dear to my independent Catholic bookseller heart. We have to compete with XMart, megastore.com, etc.

Each and every time that someone chooses to not ask us to match price or help them acquire materials for their bible study or regular books, we are not making $ to stay in business and be a resource to the larger Christian community.

Our neighborhood already lost an independent hardware store, an independent evangelical Christian store (that referred a TON) of business to us.

If each person chooses to shop with local independent retailers, then the tide of Walmartization is held off a tad.

 

[melensdad]

The solution is quite simple . . .
-limitation of maximal working hours per week. **(40 is reasonable), **
-granted vacation (3-4 weeks yearly is reasonable)
-granted minimal wage (always in relative to the average wage of the given country) (50% is reasonable)

What you find “reasonable” would be considered completely unacceptable in many nations. I can’t even imagine getting 4 weeks of vacation, I’m not saying I’d turn it down, but the most vacation I’ve ever been able to use in a year is 2 weeks. A limit of only 40 hours per week??? Many people work more just to make ends meet and I know many who are begging for hours not limits to hours!!! YIKES

If each person chooses to shop with local independent retailers, then the tide of Walmartization is held off a tad.

Claudia
GodSpace ~ Religious Books, Gifts and Music
www.godspace.biz
805-777-7177

Unfortunately for too many people, they will go to a “full service” store, learn about a product, then drive down the street to buy the same product for less at the big box store.

 

[vern_humphrey]

Yep. It is our issue to figure out how to compete. Now, as a country, it is certainly our right to impose tarrifs, choose not to do business with a country due to their work conditions, etc. But, there are going to be consequences to those decisions.

And in the end, the same guy always pays for those consequences – the consumer.

 

[MojeIme1981]

Why is that the job of the international community?

And why is the solution always to use force?

It has nothing to do with force. If USA choose to bring up trade barriers for Chines products, where exactly do you see here force?
I used the term international community because such barriers are in interest of more then one country in the world. They are in interest in all those countries where effective labor rights exist. Besides it’s much easier when a critical number of countries agrees to make such step together.

Why not have free trade?

Because free trade enables us to buy products which are made in inhuman conditions. (sweatshops).

 

[MojeIme1981]

What you find “reasonable” would be considered completely unacceptable in many nations. I can’t even imagine getting 4 weeks of vacation, I’m not saying I’d turn it down, but the most vacation I’ve ever been able to use in a year is 2 weeks. A limit of only 40 hours per week??? Many people work more just to make ends meet and I know many who are begging for hours not limits to hours!!! YIKES

Yes in our modern society people really do work very hard to purchase many products. But the question is, do we really need all this stuff??? Especially if these products are made without any consideration about labor and environment protection?

 

[MojeIme1981]

Originally Posted by rlg94086:
Yep. It is our issue to figure out how to compete. Now, as a country, it is certainly our right to impose tarrifs, choose not to do business with a country due to their work conditions, etc. But, there are going to be consequences to those decisions.

[Originally Posted by vern humphrey]
And in the end, the same guy always pays for those consequences – the consumer.

Yes indeed, the consequence would be: Less hurry, less stress. I don’t know for you, but I would like it.

 

[melensdad]

Yes in our modern society people really do work very hard to purchase many products. But the question is, do we really need all this stuff??? Especially if these products are made without any consideration about labor and environment protection?

Who are we to judge what someone “needs” or does “not need” in their life?

You make things seem so very simple.

And what if the good is deemed by you to be “not needed” but still made with great consideration to both labor and the environment?
For example “Fair Trade” coffee from Columbia is certainly not needed by anyone. It is, however grown in an environmentally friendly way and labor rates are higher than other coffee growing methods, often from small family owned farms. It also costs up to TWICE as much as other coffee.

 

[melensdad]

Yes indeed, the consequence would be: Less hurry, less stress. I don’t know for you, but I would like it.

The consequence might also be spending more time and gasoline driving around to buy things at many different stores at higher prices. The entire distribution system is built on economies of scale and that is a major factor in keeping prices low. Your economic model would raise prices, spread out goods to different stores and cost consumers greater money, time and fuel.

Somehow I don’t think people would like that. I also think it would increase stress on many people who would spend more time shopping and less time with their families.