The Wal-Mart Experience That Has Captured Us All.

7 11 2010

“Wal-Mart is a retail planet with a gravitational pull so strong it shapes our economic universe in ways we can barely comprehend.” – Bob Thompson, The Washington Post

The above quote sums up Wal-Mart pretty well.

From a consumer point of view, it certainly seems like a planet. If you need something, Wal-Mart has it. There’s no trouble getting there, since they’re everywhere. And once you get there, there is no problem parking in an endless supply of pavement and white lines. Inside, there is an endless supply of whatever it is you came for – and whatever it is you didn’t come for, but… its so cheap, why the heck not?

“Push” is a strategy in marketing whereby a company  “pushes” the product in customer’s faces, hoping they will buy it. These companies try to attract returning customers to build brand loyalty. Of course, there has to be an incentive for customers to come back – Wal-Mart’s incentive is economic. Wal-Mart is synonymous with the words “rollback” and “low prices”. Its cheap prices combined with our society’s love for material goods keeps customers coming back, under the guise of saving money.

When compared to other retailers, you are technically saving money. Instead of spending $10 on a shovel, you spend $4. How Wal-Mart gets you is when you don’t need a shovel. Economic theory assumes that we are all rational. In reality, that’s not true. Your eye catches the happy face with bright letters that exclaim “ROLLBACK!”, and the bold numbers that seem to yell the price at you. Immediately, you start to rationalize: “well, it’s going to be winter and I’m going to need to shovel. The one I have in the garage is starting to look old. What if I want to buy it later? I might as well buy it now and save myself another trip.” And the same thing happens with ten other items and you walk out of Wal-Mart with ten things you don’t need, and you have no idea what just happened.

What happened, was that you spent money to save money. You could have very well spent $0, and used your existing shovel another winter. Instead, you spent $4 to feel like you were going to spend less than you should have.  You’ve just bought into the Wal-Mart experience. And chances are, you’ll be back for more.

Having thousands of customers like this around the world has been key in Wal-Mart’s huge market share. There aren’t many companies like Wal-Mart, as it is the biggest in the world, and no one is close enough to invoke competition. That being said, Wal-Mart is not a monopoly. It is a monopsony – a major buyer with many sellers. As the only major buyer, Wal-Mart has the upper hand when dealing with suppliers, and can control their supply market. Suppliers do things Wal-Mart’s way if they want their product to be on Walmart’s shelves, and to make money with this major customer. Because even with its low prices, Wal-Mart makes huge profits. Even though most cost-cutting ventures are passed down to customers, customer loyalty means people keep coming back to buy more, contributing to Wal-Mart’s profits. Also, since Wal-Mart buys from suppliers in bulk, they experience economies of scale, which helps to decrease cost. Suppliers have no choice but to cut down their costs, as well.

Sometimes, suppliers cutting costs is good for the industry, sometimes it’s not. For example, deodorant used to come packed in boxes. Wal-Mart told deodorant companies to scrap them, since customers had no use for them. So deodorant companies cut boxes and the costs associated with them, and they, Wal-Mart and its customers saved money. But box manufacturers lost money and went out of business. And that trickled down to people who make boxes losing jobs too.

So, is this good or bad? Well, its certainly good for Wal-Mart – they are the largest company in the world, and they are making lots of money. It’s good for suppliers who sell to Wal-Mart regularly, as they have a secure customer whom they can make money off of. And it’s good for the millions of customers who save money all over the world. Stated this, the concept of Wal-Mart is absolutely genius. It is a brilliant entrepreneurial idea that has become an extremely powerful company. It has re-invented retailer/supplier relationships and brought savings to customers across the world.

The problem occurs when that entrepreneurial genius clashes with business ethics. Controversially, Wal-Mart limits economic opportunity for local businesses, supports cheap labour in developing countries with questionable human rights records, ruins lives for box-makers and continuously feeds our endless hunger for material goods. Many critics point these ideas out, and see Wal-Mart as the root of all evil.

But what do they expect Wal-Mart to do? If you’re a big business and your formula has been successful, why would you change? Wal-Mart is making money and is  successful – most importantly, people are buying their products. The question if whether Wal-Mart is good or bad is much like the question of whether an item can be overpriced. If there is demand for an item, and people continue to buy it, retailers will continue to sell it.

A documentary I recently watched compared North American consumers to a “sleeping giant”. We have so much power to tell retailers what we want, yet we don’t utilize that power. If we really cared about our local businesses, child labour, and human rights, we wouldn’t be shopping at Wal-Mart. Then, there wouldn’t be a demand and those problems would be smaller. Unfortunately, not shopping at Wal-Mart means not spending $4 to feel like you’re saving money. It means not looking at a smiley face and shiny signs that proclaim “ROLLBACK!” It seems that as a society, that’s something we can’t live without. Which means that Wal-Mart must be good for our society, if we can’t seem to live without it.

All the more evil genius credit to Wal-Mart.

by Daphne Feng

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One response

17 12 2010
stinkingluck

I really liked the first few paragraphs of your article because it brings to light what saving should be. It should be plain “don’t pay for something you don’t need”. However, a lot of us are enticed by the fact that we see something less expensive than what we are accustomed to (i.e. a cheap shovel at Wal-mart), and we make the decision that it is a great purchase because we would have gotten it for a more expensive price somewhere else. All in all, I think your article demonstrates this point that a lot of us overlook when we shop at Wal-mart.

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