Wal-Mart Effect

Yesterday, The Washington Post had a lengthy article on the Wal-Mart Effect, a business phenomenon and the title of a book by Charles Fishman. What is interesting about the article is the relatively non-stance it takes. Even the author,Bob Thompson, who wanted to be skeptical, quickly gets caught up in the frenzy of cheap prices and the tens of thousands of items in stock.

Say what you want about Wal-Mart, it has been single minded in its approach to provide low prices to customers—often to the detriment of it suppliers. At least according to the suppliers. The Wal-Mart Effect is the changes in business practices and in the national economy as a result of the singular focus on low prices. Companies change the way they do business and sometimes it makes the company more profitable and sometimes it moves jobs offshore.

Of course, Wal-Mart is neavily criticized for forcing companies to move manufacturing operations off-shore, in fact, aside from maybe its much criticized employee health benefits, it may be the biggest bone of contention among Wal-Mart critics. But, despite the movement of manufacturing jobs off-shore, unemployment in America has not changed that significantly. What does that tell us, that perhaps the jobs were indeed expendable here in the states. What does it mean for workers overseas—no matter what you say—it is always better wages. Assuming that a Pakistani clothing maker was making $3 per day making goods to be sold at Wal-Mart, that could be a massive improvement if that person was making $3 per week. The flood of jobs in other coutries, at much better wages, tends to have a positive effect on that country’s economy and standard of living. Thus, everyone benefits. Americans get cheaper goods and foreign workers get better wages.

What is telling is a quote at the end of the Post story, quoting Charles Fishman, "Wal-Mart is the ultimate form of democracy—we vote yes each time we buy something." We vote yes to the business model, we vote yes to the movement of manufacturing jobs overseas and we vote yes for Wal-Mart—to the tune of 100 million shoppers every week, to the tune of 95% of Americans every year. Apparently the boys in Bentonville know what they are doing.