Walmart’s Squeeze on Society

For a shopper at Wal-Mart, it is difficult to say that the company is evil in any way.  Evil is probably too harsh a word to use anyway, but if the consumer looked past the low prices and considered that economic stability is a matter of cycles, they may not be so quick to speak.  Sure, one could even go as far to say that Wal-Mart is driving pure, American capitalism at its finest, but I would make the conjecture that they are doing more worse than good.  (This comes from a strictly economic standpoint — I rather enjoy the everyday low prices as a college student with limited funds.) 

It is no secret that Wal-Mart’s strategy in providing the lowest possible price to consumers is by squeezing every last drop of life and margin out of suppliers day in and day out.  If a supplier doesnt cut it, then their product misses the shelves of the largest retail company in the world.  This spells disaster for that supplier.  If the product does make the shelf, chances are the supplier is making next to nothing on the item.  Because the margin is so small, this forces the supplier to become as streamlined as possible.  Good thing, right?  Not if the supplier is already as smoothly run as legitimately possible.  And the choice doesn’t lie with whether to strike a deal with Wal-Mart or not, it lies with how will the supplier survive and still meet the demands of Wal-Mart.  This has a drastic effect on those companies supplying products to Wal-Mart, and stunts their growth immensely.   Instead of being able to become prosperous, those companies are basically feeding their margin to the profit machine that is Wal-Mart with their own spoon.  Competition is good, but only to the extent that it doesn’t bring down the entire economic system by starving all the players out.

Wal-Mart is obviously an organization, perhaps the best example of what an organization can become when it is nothing but a streamlined profit making machine.  But I believe that it struggles to fit the model of capacities.  Specifically, I do not believe that Wal-Mart is accountable for their actions.  Sure, they are blatant about what they do, but who is really going to stand in the way of such a giant?  A higher level of accountability, specifically to their employees and suppliers, would cost more, but the squeeze cannot continue for very long.  It is a problem that must be dealt with soon.

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4 Responses

  1. I really enjoyed how you addressed the problems suppliers have with the “Wal-Mart” effect on squeezing profit margins. As a supplier do you take your product to more profitable markets? Or is the opportunity cost of not selling your product at Wal-Mart just too high? I would like to hear more about Wal-Mart and what you explained as “accountability” to their employees. As the largest employer in America would you consider their business practices ethical?

    • I am conflicted about their business practices relating to their employees. In one instance, it is clear that they are skirting the line with practices that do not meet standards (only allowing people to work 39.5 hours so they wont be full time, unannounced scheduling changes, etc.). On the other hand, strict rules must be in place since they have 2.1M employees. There must be standardization, especially given the level of education most of the employees have — autonomy is, in most cases, not an option. Still, from a decency perspective, I believe the employees deserve more than they are getting. It would be interesting to see what the upper management’s rationale is.

  2. I agree with Ross’ comments.

    I like how you use the image of feeding your margins to Wal-Mart with your own spoon. Perhaps that could have been part of the title?

    Your explanation of the squeeze on suppliers was pretty clear. Still, maybe a simple example would make it easier to follow.

    The opening paragraph can be clearer. You throw out evil and then retract it. I am not sure what the reference to economic stability is. You also try to use first person to build rapport with the reader. These three ideas are all jumbled in the first paragraph and can be parsed out more cleanly.

    Finally, how about any sources for this? Who else has talked about the squeeze on suppliers?

  3. http://www.financialarmageddon.com/2010/02/losing-space.html

    I found this interesting post that talks about recent cases where Walmart has actually taken popular products off their shelves and agreed to restock them after some negotiations with those companies.

    However, Walmart is not the only popular retail store putting a squeeze on society. With the current state of the economy, many consumers are actually looking to the less expensive store brands. So these days it seems to be an costly nuisance to keep 20 different brands of every product on the shelves.

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