Tuesday, February 21, 2006

The Devil Is Me And All Along I Was So Sure It Was Wal-Mart Part 2

OK, now I can begin to vent about why I think Wal-Mart may be the Anti-Christ and control the world one day.

Wal-Mart sells half the blue jeans sold in America, one-quarter of the health and beauty supplies and they continue to be the top seller of guns, DVDs, bicycles and many other products. Wal-Mart is so large and so powerful that it directly influences the places we shop, the products we buy, and the prices we pay, even for those who choose not to shop at Wal-Mart.

Wal-Mart invested a vast amount of its resources into technology from the very beginning, developing its own distribution network and software system, which radically changed the relationship between supplier and retailer, shifting the balance of power to the retailer. This has forced both suppliers and retailers to become much more efficient - a good thing - and what a capitalistic economy strives for, but at the same time, efficiencies will also disrupt an economy due to job loss. Normally, the creativity of the economy will reabsorb those who are displaced by efficiencies, assuming all other variables are determined by the free market, and that is where our troubles begin.

Wal-Mart is so big and so powerful that whatever it decides to do with its vendors, its competition, its prices, and its staff deeply affects the rest of the business world which in turn affects us.

Wal-Mart likes to apply great pressure on its suppliers by deflating shelf price so much so, that the suppliers make little if any profit. One example of this strong-arming is Vlassic Pickles. Wal-Mart demanded the shelf price for a gallon jar of pickles be $2.97. Vlassic was only making one-cent profit on each gallon jar and because the gallon jar of pickles became so popular it all but wiped out their other business. Vlassic had to file for bankruptcy shortly afterwards. The Vlassic example shows how the free market did not determine the price of the jar of pickles, Wal-Mart muscle did, and Wal-Mart dictating prices to suppliers upset the natural equilibrium of the market economy. These suppliers, many times, are forced to outsource their manufacturing overseas - where none of the rules and regulations we have in place exist - because they can’t afford to pay for it in this country.

I forgot to mention that Wal-Mart also requires suppliers to accept their collect phone calls or provide a 1-800 number, does not pay their suppliers for 180 days, and the list goes on and on but I won't for now...I'll save it up for part 3.

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