"Always Low Price, Always"
Wal-Mart's tag line has to be one of the best kept promises in corporate history. We're all familiar with the smiley face that skips around the store knocking a few pennies off the prices of our favorite products every day. Each and every year product prices drop an average of 5%. Ever wonder how they do it? I did. So I spent that last few months researching.
What I found is that the price tags on products lining Wal-Mart's shelves do not represent the entire cost of the product. Wal-Mart is able to sell products cheaply simply because they excel at keeping their overhead (expenses) down. How do they do it?
Wal-Mart is the largest retail buyer ever known to the world's economy, they are a monosopy. This power gives them control over the market allowing them to set prices vs. letting the market bear what it can. Control = Low Prices.
Setting dramatically low prices leaves the manufacturer little money left for innovation. In fact, many producers facing price pressure have switched to foreign made parts - effecting the quality of the product. You may have experienced that the Singer sewing machine sold at Wal-Mart is not the same Singer sewing machine sold at another retail location. Cheap Parts = Low Prices.
Some Assembly Required
You also may have noticed that a lot of the products purchased now require assembly. This allows for less labor in the manufacturing of the product. Less Labor = Low Prices.
The statistics for American companies who have filed bankruptcy stating price pressure from Wal-Mart is jolting. Wal-Mart sets the price, sets the shipping requirements, sets the turn around time, sets the.... you get the picture. If a company is unable to compete, they are out. If they are outed they oftentimes find that they've made so many compromises to meet Wal-Marts demands, they can no longer survive as a business. Price Pressure on Manufacturers = Low Prices.
In order to stay in business, American companies are increasingly outsourcing labor to foreign countries. Pushing business overseas isn't necessarily bad - unless you like high paying jobs and the luxurious lifestyle they afford. Cheap Labor = Low Prices.
But wait, doesn't Wal-Mart create jobs? Yes, Wal-Mart does create jobs, sort of. Of the 480,000 new retail jobs per year, 70% are Wal-Mart jobs. At the same time, however, there is an annual decrease in U.S. manufacturing jobs of 3.1 million.
Wal-Mart has acknowledged locking employees inside the store with they work. Less Shrinkage (stealing) = Low Prices.
Wal-Mart has admitted to hiring illegal aliens as independent contractors. Low Pay = Low Prices.
Wal-Mart has confessed to forcing employees to work off the clock. Fewer Wage Hours = Low Prices.
Wal-Mart was found guilty on charges of child labor. Underpaid children sewing clothes = Low Prices.
There has been a lot of discussion regarding how much Wal-Mart pays their employees. The truth of the matter is, they can't afford to pay more. The low prices mean low profit margins. The low profit margins means the overhead has to be kept low. The truth is, Wal-Mart would go bankrupt if they tried to give their employees a $2/hour raise. Low Wages = Low Prices.
Foreign Human Rights
Wal-Mart currently finds itself in court again, this time defending themselves in the foreign human rights arena. The outcome remains to be seen but the accusations include beating employees with the clothes they are sewing if they aren't working fast enough. High Output = Low Prices.
A peer reviewed academic magazine study reported "the presence of Wal-Mart [in a city] unequivocally raised family poverty rates in the US counties during the 1990s". An increased poverty rate puts a larger strain on our social welfare programs. Government Payed Benefits = Low Prices.
Farm raised Salmon. That is all I'm going to say because the process of how it works is so gross that I don't even want to speak of it. Feel free to do your own research if you're interested. No Clean Up Costs = Low Prices.
The way I see it, those great deals at Wal-Mart aren't such great deals if you know the whole picture. In order to save a few pennies on our favorite items, we are asking quite a bit of our fellow man, economy, and environment. We are passing on those costs to others. I say we because Wal-Mart meets the demands the consumers are asking of it - low prices. We are the ones profiting.
In a sense, Wal-Mart is a form of democracy - we vote yes and support their practices every time we make a purchase. I just would like to see us make more informed votes.