I took at swipe at Wally World 4 years ago.
Pricing practices hurt us all
By Cliff Yankovich , CLIFF'S RIFFS
PUBLISHED: February 26, 2004
NOTE-since writing this column I have never been across the threshold at a Wal-Mart or Sams Club.
Warning: This column is going to pick on Wal-Mart and on those of us (notice the self-inclusive "us") who shop there.
Charles Fishman wrote a story on Wal-Mart in the December 2003 edition of "Fast Times" that blew my mind.
For those of you just emerging from a cave, Wal-Mart sells more merchandise than the next four or five retail giants combined, and we all love how their prices get lower all the time.
One of the ways Wal-Mart is able to lower prices is that it is the largest importer of things made in China, some 12 billion a year.
The other way it lowers prices is by letting suppliers know it expects or demands the prices of their products to go down every year. The company puts the same pressure on Huffy, Levi Strauss or Vlasic pickles.
Suppose I made shoes here in Michigan. Cliff's Shoes has a chance to do business with Wal-Mart. The retailer wants to carry my product. Yee-ha, I just hit the mother lode -- my shoes will be in the biggest retailer on the planet. However, doing business with Wal-Mart can spell the beginning of financial woes. Just ask Huffy, Levi's, Vlasic and others.
There are many who believe Wal-Mart's way of doing business puts the hurt on American industry.
Suppose it places an order for 4 million pairs of my shoes. I have never sold 4 million pairs before. Wal-Mart names a price lower than I have been selling them, but I figure the lower profit margin will be made up in the volume of the order.
I hire more people and get my little factory going around the clock. My other customers get ignored and fall by the wayside-- after all I've got an agreement with giant Wal-Mart.
Then it wants me to drop my price even more. And so on. After I trim all the fat at my plant, what can I do but trim people's benefits and paychecks?
I can't lose the Wal-Mart business; after all, it buys millions of my shoes. It keeps demanding price concessions because shoppers demand lower prices at Wal-Mart. The company might even tell me that if I don't supply the shoes at it s price, then it will have them made in China.
If I am big enough, I might decide to move my operation to Mexico or I might follow the lead of Levi Strauss and just cease to manufacture anything. Instead, I will make my own deal in China, close my plant in Michigan and make a slim profit just importing the shoes.
Can you see how the demand for low prices can actually put a stranglehold on industry in America?
Many people believe that doing business with Wal-Mart has contributed to the financial problems of some huge American companies. It might be great for shoppers who can get Cliff's Shoes for $19.95 when they used to be $35, but Americans are losing their jobs.
My attempts to contact a Wal-Mart representative for a response on how it does business were not successful.
My point remains that our effort to save money at Wal-Mart in the short term is costing us big time in the long run. What to do? One option is to stop shopping there until the company changes its policies. It might cost a few more bucks, but our cities and towns could be healthier for it.
Wal-Mart understands supply and demand. If we quit demanding its products, then maybe it will change how it deals with suppliers in this country.
Cliff Yankovich runs Chimera Design with Julie Claire in Lowell, when he isn't out somewhere on his motorcycle.
By Cliff Yankovich , CLIFF'S RIFFS
PUBLISHED: February 26, 2004
NOTE-since writing this column I have never been across the threshold at a Wal-Mart or Sams Club.
Warning: This column is going to pick on Wal-Mart and on those of us (notice the self-inclusive "us") who shop there.
Charles Fishman wrote a story on Wal-Mart in the December 2003 edition of "Fast Times" that blew my mind.
For those of you just emerging from a cave, Wal-Mart sells more merchandise than the next four or five retail giants combined, and we all love how their prices get lower all the time.
One of the ways Wal-Mart is able to lower prices is that it is the largest importer of things made in China, some 12 billion a year.
The other way it lowers prices is by letting suppliers know it expects or demands the prices of their products to go down every year. The company puts the same pressure on Huffy, Levi Strauss or Vlasic pickles.
Suppose I made shoes here in Michigan. Cliff's Shoes has a chance to do business with Wal-Mart. The retailer wants to carry my product. Yee-ha, I just hit the mother lode -- my shoes will be in the biggest retailer on the planet. However, doing business with Wal-Mart can spell the beginning of financial woes. Just ask Huffy, Levi's, Vlasic and others.
There are many who believe Wal-Mart's way of doing business puts the hurt on American industry.
Suppose it places an order for 4 million pairs of my shoes. I have never sold 4 million pairs before. Wal-Mart names a price lower than I have been selling them, but I figure the lower profit margin will be made up in the volume of the order.
I hire more people and get my little factory going around the clock. My other customers get ignored and fall by the wayside-- after all I've got an agreement with giant Wal-Mart.
Then it wants me to drop my price even more. And so on. After I trim all the fat at my plant, what can I do but trim people's benefits and paychecks?
I can't lose the Wal-Mart business; after all, it buys millions of my shoes. It keeps demanding price concessions because shoppers demand lower prices at Wal-Mart. The company might even tell me that if I don't supply the shoes at it s price, then it will have them made in China.
If I am big enough, I might decide to move my operation to Mexico or I might follow the lead of Levi Strauss and just cease to manufacture anything. Instead, I will make my own deal in China, close my plant in Michigan and make a slim profit just importing the shoes.
Can you see how the demand for low prices can actually put a stranglehold on industry in America?
Many people believe that doing business with Wal-Mart has contributed to the financial problems of some huge American companies. It might be great for shoppers who can get Cliff's Shoes for $19.95 when they used to be $35, but Americans are losing their jobs.
My attempts to contact a Wal-Mart representative for a response on how it does business were not successful.
My point remains that our effort to save money at Wal-Mart in the short term is costing us big time in the long run. What to do? One option is to stop shopping there until the company changes its policies. It might cost a few more bucks, but our cities and towns could be healthier for it.
Wal-Mart understands supply and demand. If we quit demanding its products, then maybe it will change how it deals with suppliers in this country.
Cliff Yankovich runs Chimera Design with Julie Claire in Lowell, when he isn't out somewhere on his motorcycle.
Comments