THE WALMART EFFECT

Fishman, C. (2006) The Wal-Mart Effect New York: The Penguin Press 

Wal-Mart is the largest corporation in the United States and other countries in the world.

Their growth from 1966 to date has been beyond belief. They have a secret formula, thus the author was able to only talk with former employees, vendors, manufacturers and draw upon a paltry 20 academic articles that have been conducted at the time of the writing of the book.

Think of Wal-Mart as a cell that becomes malignant and spreads throughout the body that we call society. This huge discounter begins a relationship with a consumer that the price of anything in the store will be the lowest in the surrounding shopping area. Always. 97% live within a half an hour from a Wal-Mart. A vendor makes contract with this discounter. The first year is great as the orders roll in. The second year, Wal-Mart wants the same item for 5% less. Each year, they pay less and less. The vendor and the manufacturer begin to outsource jobs to cheaper states, then to Mexico and finally to China and Asia. As the years roll on and the labor costs are rock bottom, the quality of the item cheapens.

As the prices remain low, millions of low end purchasers flock to the big box stores. Inflation is checked or muted. Wages are stagnant. Some benefits are outsourced to state governments. Some construction and land allocation is supplied by local governments.

Smaller competitors die off. Many vendors can no longer make any money lose their contract or go bust or both. Many out of work employees from competitors come to work for Wal-Mart. This economic giant then announces the number of “new job” creations in an annual year. Many are recycled employees from the busted competitors. Once they have a monopoly share of the retail, they do not increase prices like other monopolies in the past have. They still have the same low price. They are not greedy. They want control.

Other more upscale shops start lowering prices, because their offerings begin to appear outrageously high. Vendors indirectly become a part of Wal-Mart by the fact that if they break ties they can go under. The biggest corporation in the country along with other mega-corporations then indirectly creates a society of low wages and cheaply built goods. Consumers still have choices but they become more limited and they feel conflicted about Wal-Mart..

To keep prices low, they will close a store if collective bargaining becomes viable. They will lock employees in the store overnight to reduce internal theft.  Employees will work more hours at times then they are paid.

If you go to the headquarters in Arkansas, you will sit in a cubicle with a card board table and folding chairs. No one works in luxury offices.

This is the account given by Charles Fishman a senior editor for a business periodical and the 2005 Gerald Loeb Award for business journalism. As his book attempts to give a balanced account, generally the narrative is negative to Wal-Mart. Thus, to get another view from this huge discounter, go to walmartfacts.com/

The book is worth reading and at times has incredible insights to the world of mega corporations.

Joel C. Snell

Kirkwood College.