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| From | "Michael Bennett" <mrhonorama@hotmail.com> |
| Subject | Re: Walmart |
| Date | Wed, 03 Dec 2003 23:11:34 -0600 |
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Its too bad Paul Krugman's not an Auditeer -- I'm sure he could do a concise
explanation of economic theory that would explain why Wal-Mart (and Clear
Channel, and Microsoft, for that matter) have gotten to where they are and
what impact this will have.
All three companies took advantage of market conditions to obtain a large
market share, and then used the resulting leverage as advantageously as
possible to become dominant forces in their respective markets. Part of the
leverage is a result of the economies of scale that allow large enterprises
to do certain things more efficiently and more cheaply, giving them a
gigantic leg up on their competitors.
But just because the foreseeable future seems to forecast Wal-Mart, et al.
swallowing more and more and getting larger and larger, the efficiencies
that favor a company as it grows can erode as a company achieves (or comes
close to achieving monopoly). Microsoft is actually a good example --
because of its utter dominance of operating systems, and the other markets
it rules in (with some competition) due to related products, it no longer
has the incentive to improve based on either competition or consumer demand.
This means that inefficiencies will creep in -- this will lead to consumer
dissatisfaction and may ultimately lead to changes in the market, either
from new competitors who have all the incentive, or government intervention
in response to large scale consumer outcry.
The Fast Company article that Dale sent this morning is well worth a read.
Wal-Mart's practices have short term positive effects for the company, but
will ultimately be hurt Wal-Mart, unless Wal-Mart decides that after they've
killed or subjugated their suppliers that they may also getting into
supplying also. This might be too much for the company to handle or for
consumers to handle, because certainly, if Wal-Mart becomes a wholly
vertical company controlling products from manufacture to sale, it's
incentive to drive down prices will be decreased, and ultimately consumers
will no longer be served. Then again, maybe Wal-Mart will become
Globo-Chem, the fictional mega-monopoly posited by the old HBO program Mr.
Show with Bob and David.
Anyway, whether looking at Wal-Mart or any other corporate monolith, there
seems to be a consistent pattern of corporate profit coming ahead of the
need to sustain suppliers, or more often, a well-paid work force who can buy
the goods the corporation offers. This seems counterintuitive, but a
corporation's sole function is to generate profit. Thus, if the corporation
follows those goals, it may find that by seeking large short term profits
they will eventually scuttle a long term future.
Of course, I'm not an economist -- just a music fan venting his spleen --
Mike Bennett
NP: Robert Palmer -- PRIDE
Record reviews and more at http://fufkin.com
>From: DanAbnrml9@aol.com
>Reply-To: audities@smoe.org
>To: audities@smoe.org
>Subject: Re: Walmart
>Date: Wed, 03 Dec 2003 22:23:43 -0500
>
>I realize that we've strayed far from the discussion of insanely great pop
>music, but this Wal-Mart discussion IS relevent, because Wal-Mart is (yes,
>folks, its true) the largest music retailer in the United States. But I'd
>like to add something.
>Stewart IS right. Wal-Mart is NOT the cause, it's an effect. Don't get me
>wrong, I'm a bleeding heart liberal who doesn't like Wal-Mart any more than
>the others who've posted, but blaming them for a phenomenon that predated
>most of their expansion isn't fair. There have been vast, sweeping changes
>in the way that Americans live, eat, shop, and work in the past
>half-century, and Wal-Mart merely developed a strategy that capitalized on
>this. Do they kill mom and pop chains? OH they most certainly do. Do mom
>and pop chains inhabit downtowns? Often. But they also inhabit strip malls
>in sprawling suburbia, and those mom and pop stores die too.
>As Stewart said, there are not many Wal-Marts in Massachusetts (his
>half-dozen figure is off, but it's true that the immediate Boston area has
>only 3, and the extended suburbs probably have only a dozen... which is not
>many by most standards), but this doesn't mean that Massachusetts is immune
>from the ills about which you speak. Plus to say that "Wal-Mart kills
>downtowns" ignores other things they've killed--such as mid-sized
>discounters like Caldor, Bradlees, and Ames--retailers that, while not
>mom-and-pop by any stretch, were at least REGIONAL and employed people from
>their designated region and aware of the needs of the region they inhabited
>and--more importantly--were not so gargantuan so as to have immense
>leverage against their distributors and suppliers.
>The fact is, it's become downright popular to attack Wal-Mart, but most of
>the rhetoric rings hollow. How many times do people trash Wal-Mart or Best
>Buy on audities, but then talk about how they found this-or-that new
>release at either store for the best price in town? This is just an example
>that most of us can relate to, but speaking as a retailer I see it every
>day--all that 90% of the consumers truly care about is PRICE. But what
>happens when the competition is gone? What happens when these "category
>killer" chains manage not only to kill mom-and-pop chains, but also the
>competing, smaller chains? Do you really think they're going to keep
>offering you incredible, almost-at-cost deals? Give me a break.
>Speaking as an employee of an indie record store--a big one nonetheless,
>but still an indie--I can say that at this point in time, the LIKELY
>outcome is that most of us have only a few years left. I am NOT
>exaggerating. Profits are down almost 50% from two years ago. It's easy to
>blame downloading (and it does play a part) but a big part of the problem
>is that electronics and general merchandise retailers are undercutting us
>by selling product below cost. That leaves record stores to make money by
>selling slower-turning product that places like Wal-Mart won't carry, but
>the only way these CDs can provide enough money to cover overhead--such as
>rent, salaries (believe it or not, some of us make a living by working
>retail, and I assure you it is not a good living), etc-- is by charging
>seemingly exorbitant prices. You may have seen your mall retailer charging
>almost $20 for a CD... this is why.
>What Wal-Mart has done is dramatically cut the number of pockets that money
>flows to. This has affected mom and pops and chains alike, and while this
>does have some affect on "downtowns", Wal-Mart isn't directly responsible
>for their decline. Rather Wal-Mart came a generation later, and is largely
>responsible for the decline of the regional shopping mall, a target whose
>passing few will lament. But consider this--if your typical shopping mall
>contains 100 stores, and probably 2/3 to 3/4 of those are chains--depending
>on how upscale the mall is, generally--then the money that the mall takes
>in is divvied up amongst a variety of places, even if it's not the sheer
>number of the olden days before big chains. But now if you consider that
>Wal-Marts are replacing malls (and they are; do any internet search for
>"dead malls" or any variation thereof and you'll find a wealth of
>information), then figure that all of the money divided up in American
>malls is now going to one place. Now !
> that's scary.
>I'll end the rant, but I ask you all to please remember that when you buy
>things, you're effectively voting. You're casting a vote of confidence in
>the retailer, you're saying that you support their practices, you enjoy
>their variety, you enjoy the atmosphere. If Wal-Mart is your thing, then by
>all means spend your money there. But if Wal-Mart and Best Buy aren't your
>ideal future of America, then for goodness sake don't give them your money.
> --Jason
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