I watched a special on CNBC yesterday that focused on several different aspects of Wal-Mart: national and international expansion, suppliers, employee salaries and benefits, and lawsuits pending against the company.
When I think of Wal-Mart, I think of a little smiley face man running around, knocking down prices across a well-lit store, with happy employees watching. Very reminiscent of the happiest place on earth (to shop, anyway), but that's such a distorted view of how things really are.
First of all, WalMart has now expanded into ten countries across the globe, with approximately 5500 stores worldwide. They're the largest employer in both Canada and Mexico, and the largest retail store in the United States. Clearly, they have some pull in the industry. So much, in fact, that the process of setting prices with their suppliers is actually the opposite of most other retail stores. In most cases, the supplier sets the price on goods for the retail store, which in turn sets the price of their goods accordingly. WalMart has so much power, though, that they tell the suppliers what they will pay for goods, and suppliers have to accomodate WalMart. This sounds great to the consumer in terms of short-term prices, but it's been brutal to the suppliers, which typically have to cut jobs in order to keep their profits up. (On a side note, I've heard that Rubbermaid has either gone out of business or is on the verge of going out of business as a result of this process.)
In terms of competition, there really is none for Wal-Mart. On average, small businesses in direct competition with Wal-Mart lose 25% of profits each month after Wal-Mart invades their local market. This trend continues in most cases, until smaller stores are forced out of business. Slowly but surely, Wal-Mart's becoming a monopoly over the retail market. And when monopolies are formed, consumers lose power because of the lack of competition that normally results in price wars.
With all these profits that Wal-Mart makes, you would think that the employees would benefit in some way. But no - wages are low (about $7.00 - 8.00 per hour for most full-time employees), more than 4,500 pending lawsuits accuse Wal-Mart of paying higher wages to men versus women, and where the average U.S. employer pays $4400 toward the cost of each employee's insurance premiums per year, Wal-Mart only pays $3400 per employee, leaving the employee to pick up the remainder of the premiums each year.
So basically, Wal-Mart keeps prices down at the cost of the suppliers and employers, drives smaller stores out of business, expands at a rate of about 9% per year, and is threatening to gain a monopoly of the retail market nationwide.
Keep this in mind when you feel the need to save a few dollars on groceries this week...
