By Peter J. Quinn
When you’re out of milk, you have two choices:
Go to the corner gas station about half a mile away and pay $5.10 for the gallon of milk.
Go to the Walmart Super Center nearly 5 miles away and pay $3.97 for the gallon – a perceived savings of $1.13.
Your kids go through milk like they have a cow in the back yard so you get into the car, fight the traffic, and find a parking spot a half-mile away from the store to save $1.13. Of course, you need those coat hangers you saw on sale 24 for $5 and a variety of other stuff that you absolutely did not realize that you had to have until you wandered into the Walmart. At check out, the bill comes to $50.45 a net loss of $45.35 but you’re happy with all the money you saved. Never mind that you could have purchased only the milk you needed for five bucks.
Mooresville, TN – 1988
Walmart started in Bentonville, Arkansas, and expanded rapidly throughout the country during the seventies and eighties. Their business model was to go into small communities and put everyone else out of business through lower prices and margins until they owned the market. Then, they’d increase prices and margins.
Roger was a community leader and the owner of a local vacuum store. He had been in business for 12 years. After Walmart moved in, his business dropped by 30% and continued in a downward spiral. He was in a race to the bottom.
The conversation began.
“I hate Walmart,” I said to everyone and to no one, in particular, as I sat at the bar looking out the window at the new Walmart across the street.
Walmart had just started building the super centers. This Walmart was just an oversized five and dime.
“Brother, you are preaching to the choir. I can’t stand the bastards,” the man sitting next to me at the bar concurred.
I turned and look at him with surprise, most people defended the bastards to the death.
“I know. I just lost a big account that is buying their supplies from a cut-rate Chinese company due to the pricing constraints that they put on them. Another customer just closed the factory due to Mexican imports.”
“Tell me about it,” he said. “I own, well, I should say, I temporarily have a vacuum business in town. Probably got about a year before I will have to shut my doors. My rep who I have been doing business with for 10 years just informed me that they won’t be extending me terms and, on the side, he told me that Walmart’s price is 20% below mine. I buy more vacuum cleaners from those assholes than that Walmart does. He told me that Walmart said if his company wanted to do business with them they get the lowest price, period, no matter how few or many they buy.”
My bar mate took a swig of his beer as he shook his head.
“I guess your rep has to be happy about that getting credit for the stores in territory,” I said shaking my head in sympathy with his plight.
“Ha! He gets NO credit at all. Walmart is a house account and one VP is the only one they talk to. The conversation is, ‘Your pricing is too high.’ He figures it will be about two years when they move the plant to Mexico and he is out of a job.”
“Doesn’t that kill you? The people they are putting out of business are the ones shopping there.”
“Get this. My supplier delayed a shipment of 40 units by six weeks but Walmart got their 20 the next day, priced to sell below my cost. So, I went over to the store at midnight bought out their entire stock of vacuums at a 15% savings from my cost. Marked them up 20% and gave away free vacuum bags and finally had one of the best months in over two years.”
“Playing them at their own game, huh?”
“The security guard looked at me as I was checking out but wasn’t able to do anything. The next day I found out they put a limit on the numbers you could buy.”
“How do they get away with this?”
“Capitalism at its finest. The market is supporting them. I can’t be too hypocritical. They are becoming a power to be reckoned with. They will own the U.S. retail market and our jobs will be exported to Mexico or China.”
“I know. Every day more and more of my customers who sell into retail are hurting The Walmart slogan of buying US made products is bullshit – only if they are cheaper than what is made overseas. Sam isn’t stupid. He is not going to sacrifice Walmart profits to support U.S. inefficiencies or bloated corporate wages. Hey, we live in the South. It used to be the textile capital of the world. When was the last time you went to a clothing factory that actually made the end product?”
“At least we still make beer in this country!” he replied.
We introduced ourselves, raised our glasses, and toasted. I didn’t have the heart to tell my new friend was drinking a Heineken and I had a Budweiser, but I got the point.
Since then, Walmart has grown to dominate the U.S. retail market becoming one of the largest companies in the world. They stick to the dictum if they can get it cheaper they will. Estimates vary how many jobs have been lost to Walmart’s importing policies from hundreds of thousands to millions. Reliable sources say about 200,000 manufacturing jobs were exported to China or Mexico.
I can’t fault Walmart. I am a business man and this is a free market economy. Folks can shop where they want and Walmart seems to be the choice for hundreds of millions of people. Walmart is, no doubt, the dominate retail outlet in the world making the Walton family one of the richest families in the world. Forbes reports that Christy Walton is the richest woman in the world.
Personally, I get my milk at the local gas station and my vacuums direct from the manufacturer via the web. I haven’t been able to locate a private vacuum store in years. I have not stepped into a Walmart in over ten years. I bought some real charcoal there about 10 years ago and that is all I bought. I have no idea of how many thousands of dollars I have saved by spending a few more bucks with the local guy.