After just reading this commentary by Seth Jayson over at the Fool, it got me thinking -- is Wal-Mart just a distributor or reseller? What value does Wal-Mart add to the customer equation besides being a clearinghouse for customer goods and everyday staples? While there is sure to be many varying answers and opinions to that question, I'll venture one based on my interactions with the company in a former retail interaction I had with them.
Wal-Mart's sole value-add to the customer equation is "low price for the customer, at all costs". Yes, that statement is sure to be picked apart by some people -- and that's alright, obviously. If Wal-Mart offers the lowest price (or even that perception through marketing efforts), more shoppers on a tight budget will shop there -- for groceries, tires, camping tents, clothes and TVs. With sales volume, Wal-Mart will slowly try to find a higher-margin product mix, over time, to boost revenue along with store growth. It's in the midst of doing this now, of course.
But, beyond being a "warehouse" that basically sells goods as a reseller for many companies across the globe -- with China thrown in for good measure -- what other value is there to the Wal-Mart existence? I've seen a wide swath of comments on Wal-Mart recently on the pros and cons of shopping there and working there. So, here's another chance to get your voice heard -- what is Wal-Mart's intrinsic value to the world beyond the "lowest price" mantra? Is there one or are there many reasons? If you're a WMT investor, customer or employee, chime in below and let me know what you think.
Last updated: May 16, 2012: 06:40 PM
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Reader Comments (Page 1 of 1)
6-15-2006 @ 2:25PM
JF Siefer said...
While Wal-Mart is not my favorite place to shop and I do not agree with some of their policies , I do think they add an element of competition to small communities. I do not think they drive out the small businessman because in a small town the loyal locals will continue to support the small guy even if they pay more. Competition is what makes things work. It aolso provides employment for those with no formal training or education so they can have a steady job and create self esteem and give themselves a step up.
6-15-2006 @ 3:22PM
Mike said...
Wal-Mart acts as advocate for the consumer. They negotiate the best possible price for the customer and then use their vast distribution network to deliver that product to stores near the customer.
Their value lies in their ability to extract cost and improve efficiencies in the marketplace.
Do they cause the "Mom & Pop" shops to go out of business? Absolutely not. Look around. It isn't the 1950s anymore. Urban sprawl, shopping-malls, strip-malls etc have all evolved from small-town america. The customers choose where to spend their money. If mom & pop provide a product and/or service that Wal-Mart doesn't or are somehow able to compete on price, then the customer will reward them.
As far as the political gobbly-gook about "living wage", "health-care", "outsourcing of american jobs", etc... Come on folks. It's a retailer. You buy your toothpaste there. Just like K-Mart, Target, McDonalds, Blockbuster video, and all of the other low-end service jobs it will pay only what the market demands.
With 25,000 people showing up for around 300 jobs at a recent Chicago store opening... it doesn't seem that supply/demand is leaning in favor of the labor unions.
Do we (as consumers or shareholders)really want SEIU and UFCW to get their claws into Wal-Mart, Target, or any big-box retailer? They would introduce artifical costs into the formula that can only be passed on to one entity - the consumer.
No thanks.
6-15-2006 @ 3:41PM
GUY KRISAY said...
WAKE UP..wal mart is a killer for small town business. after wal mart enters , local stores close. net full times jobs decline.
6-15-2006 @ 4:14PM
d m coll said...
WalMart strives for lowest price sometimes at the cost of quality-manufacturers take quality and substance out of products in order to meet WalMart low cost demands-----Plastic garden tractors??? Who thought that was a good idea. You might pay the lowest price now and end up having to replace in a shorter time span.
6-15-2006 @ 5:08PM
JRO said...
Society gets what it pays for. Mom & Pop retailers can not compete with Wal-Mart's scale of operation and Sam Walton has been quoted as taking pride in shutting down downtowns.
Wal-Mart is the big bully of the retail world. The only benefit they really bring is that they force some of the other "kids" to learn how to fight. So when you go into another retailer and wonder why they don't have the staff to give you better service, it's because they are fighting to survive in Wal-Mart's playground.
6-15-2006 @ 8:37PM
Chris said...
I would like to say to a few of you that, you have a few things backward. Everyone thinks ma and pa's are good and big business is bad. However just because a business is small doesn't mean its good, and just because a business is big doesn't mean its bad. All Big businesses were at one time small. And Remember no business can put another out of business, only the customers can do that. And The only businesses that do go out of business are those that have a bad business plan in the first place.
Here in Bemidji Minnesota, when Wal-mart came into town, the two of the local grocery stores merged, and took to a plan of reselling products walmart couldn't or wouldn't, the another fully upscaled there store. Not a single business here has gone out of business because of Walmart the Succeed or failed on their own merit with customers, all of the long time businesses here that compete with walmart are still standing and most have more business now then they ever have.
Now as for the labor side, Walmart pays 3% better then the rest for the same work, that is part of their pay policy. They have created many jobs here in Bemidji. In terms of benefits, think about this, how many of the ma and pa shops out there can afford benefits? I have a friend who works in a ma and pa computer shop he makes $7.00 and can only work 20hrs/wk, has no medical, no dental, no vacation, no sick time, no personal time, and he is union. I work in a Walmart Deli, I make $8.50/hr I work no less then 40hrs/wk many weeks I am into overtime(nice money), I have full medical, full dental, 2 weeks paid vacation, 2 weeks paid sick time, 1 week paid personal time, double on holidays, premium pay on sundays, 401k, profit sharing, myshare bonus upto $1,600, Safty bonus upto $500 and I am non-union.
My point to all of this is, that Big Buiness in not always bad and small business is not always good, it goes both ways. I am 23 years old and I have work for a few ma and pa's and I have worked for sears and I have worked for Walmart and I will pick walmart as the best out of them all. And I have watched some of these ma and pa's do some pretty nasty things to both there customers and workers. So there maybe somethings wrong with Walmart but there are also some things right with it. There are somethings wrong with any business and somethings right. Walmart and any other business are what they are and it is as simple as that. You can not just black and white the issue, they are what they are a full color spectum.
Now I am building my own company, a computer manufacture, in doing so I may have to go head to head with Dell, and I going to say they are evil because they are the big company in that industy, no, they are just a business and if my business is as good as I want it to be it will over come them. Its the nature of business.
6-15-2006 @ 8:40PM
Helen said...
Ah the liberal elite wants to save the lower class. Here's a tip to improve your life. You folks don't like Wal-Mart? Don't shop there.
Spending your time online fighting a corporation is an absolute waste of your life. Go spend time with your families. I'm going to go take my own advice. Ciao.
6-15-2006 @ 9:22PM
Chris said...
Now wait a min here helen I am a liberal, and I don't think that personal politics enters the debate about walmart much. I know just as many conservitives that hate walmart as I do liberals that hate. So I think your statement shows a lack of understanding of the debate of walmart. And it is plain and simply uncalled for.
6-16-2006 @ 5:11AM
Tim said...
Study after study proves that Wal-Mart does not creat jobs and in fact communities after fewer jobs after Wal-Mart opens. It is simple math. When this is pointed out, all Wal-Mart can do is respond that it's union critics are at it again. Wal-Mart rarely disputes the facts of any study -- they attack the source. They know they are guilty.
6-16-2006 @ 9:11AM
Mike said...
Guilty of what??? Of operating a business? I have bad news for you folks, Wal-Mart is not a social program. It's a BUSINESS.
Should they really abandon plans for expansion, growth, profit simply because you folks don't like their business model??? How exactly do they sell THAT plan to their board of directors? Their stockholders?
Fact is, as long as they comply with local and federal laws, they can continue to expand and open outlets anywhere they want. Their competitors then simply have to build a better mousetrap and learn to COMPETE.
If you think that this controversy is about anything OTHER than the unions wanting 1.5 million new members I have some oceanfront real-estate in Arizona to sell you. If Wal-Mart were unionized the opposition would evaporate overnight.
Don't like Wal-Mart? Don't shop there. -- But do me a favor, tell me where you ARE shopping. Target, K-Mart, Home Depot, Best Buy? What exactly do you stand for?