6/30/2004

We’ve Created a Monster……and it’s eating the world.

In 1962 in Rogers, Ark. Sam Walton opened Walton’s Five-and Dime store. A small but no doubt humble operation. Few if any could have ever guessed that it would become one of the greatest American entrepreneurial successes. That humble Five and Dime became Wal-Mart the “super” or should we say “monster” store giant.
Here are a few facts to help one understand the growth of what I’m sure at some point is going to have the moniker “monopoly” attached to it. Here are some facts from a now year old article I have come across. One Nation Under Wal-Mart
As of July 2003, Wal-Mart Stores, Inc.'s U.S. operations included 1,514 traditional stores, 1,343 Supercenters and 528 Sam's Club warehouses. What’s even more astonishing is that since 1992 when Sam Walton died Wal-Mart was about one-fifth its present size. The article has popped up in more than one place. It was even used in my last semester marketing class. I found it recently at a United Food & Commercial Workers International Union website. The food workers are heavily affected whenever a super-center moves into their neighborhood and takes a large chunk of their business. They even have a link Not in My neighborhood to try and combat the problem. I’m sure they get some satisfaction from venting their frustrations but there’s no stopping the monster now. As new Wal-Mart’s keep popping up more stores and of every variety disappear, along with our choices of places to buy.
The question that has to be asked is whose fault is it that Wal-Mart got so big? The answer is all of us who shop there, it’s more our fault than Sam’s. We kept asking for it and he kept giving it to us……. cheap!! This gave us more buying power so we bought more and asked for more, and he kept giving it to us…… cheaper!!
For now nothing will get in Wal-Mart’s way and when it has they’ve just expanded somewhere else. In 2002, Wal-Mart had 1,288 stores in foreign countries. Wal-Mart has even made its way to the ballot box A Big-Box Ballot Bully
It’s only a matter of time before the government finally steps in and cries foul. As long as consumers keep getting low prices they won’t complain. That could well change when there’s only one place left to shop. For now the government is just interviewing a lot of people named David with sling experience. Then like Ma Bell we’ll end up with a bunch of baby Mart’s.

5 comments:

Dr. Tufte said...

I don't think we will end up with a retail monopoly called Wal-Mart. The industrial organization model that corresponds to big box retailing doesn't seem to support that degree of economies of scale.

Also, the historical evidence is that dominant retailers come and go: Sears, Montgomery Ward, and so on. Currently Wal-Mart is being pushed hard by Target, which is the current face of an older, and formerly much larger, retailer called Dayton-Hudson.

As to the unions, they are very ticked off at Wal-Mart. They are a threat to each other. Unions want to exercise monopoly power on retailers, who may be able to pass on the costs to consumers. Alternatively, Wal-Mart's low pricing strategy requires avoiding that at all costs. Check out the papers next time there is a protest about a Wal-Mart somewhere ... the unions are always involved.

And frankly, I think the more sucessful Wal-Mart is, the more likely that the government will find an excuse to interfere. The trial lawyers are already going after Wal-Mart because that is where the money is.

arielle Sudweeks said...

I live in a small community 2 hours northeast of Cedar City. Our town is getting larger every day. Around January or February we had a Wal-Mart open just across the street of our K-Mart. Every body was way excited to have a Wal-Mart in town because this meant that they wouldn't have to travel one hour north to Ephraim to go shopping at one or pay the little bit higher prices in town. I myself hated the idea. Our town has a lot of small business and I could see that Wal-Mart would hurt them. Wal-Mart has been opened about 5 months and already the small-business owners are feeling some effects. One little store in particular told me that they have cut their orders in more than half since Wal-Mart has been there and the sad part is that they really weren’t overpriced for the quality of products that they sold. The K-mart in town lost more than half of their workers to Wal-Mart and then because they have been so slow they are still having to layoff some of those employees that were loyal to them and stayed. Like Dr. Tufte said Wal-Mart probably won’t become a monopoly nation wide or any thing but I foresee it becoming a monopoly in my little town. The more stores it runs out of business the less competition it is going to have and you know as well as I do they will raise their prices.

C-Dizzle said...

A lot of my family members have the same ill feelings towards Wal-Mart in that it seems to just walk on whole communities when it comes in.

From a business perspective, it seems to me that they’re doing a really good job. They do have the lowest prices and the price matching policy is great. Just last week I spent 25 dollars shopping there where I normally would have spent nearly 40-50 before price matching.

For the little guys who want to own their own businesses though, good luck. This seems to be where most people disagree with the Wal-Mart Corp. They could care less about the community effects, or externalities, of their moving into a neighborhood. They move in and all of the little mom and pop stores close up because the competition is too much.

Jordan said...

Dr. Tufte said:

"I don't think we will end up with a retail monopoly called Wal-Mart."

I have to agree. As long as there are people who don't like Wal-Mart, there will always be other stores to meet those consumers' demands. In Cedar, Linn's has a very loyal customer base. Every time I go in, the lines are full. To make my point, those who make low prices a priority will shop at Wal-Mart. Those who prefer to support local business will shop at local businesses. I don't think it's rational to think that Wal-Mart is going to take over the world. As long as consumers have a choice, some will choose Wal-Mart and some won't.

Dr. Tufte said...

Didja' notice how in the 4 years since this was posted originally that Wal-Mart has struggled a bit, and now there is less pressure on it.

I may be cynical, but I think this was all about Wal-Mart having lots of cash in big easy-to-carry bags for whomever could raise the most ruckus.