« Exploring the Math Behind China’s Astounding FDI Numbers   |   Main   |   Venture and agency issues »

Contemplating Walmart

Recent articles have been probing the Walmart phenomenon. I mean economic phenomenon - it’s changed the way people shop, work, and live. The excruciatingly slow recovery has made us more protectionist, or at least willing to brave the accusation. Below are two articles that shed some light on the negative aspects of Walmart.
LA Times series
FastCompany article
This begs the question of what drives Walmart on. It’s financial performance has been so-so, and it’s actions to constantly cut prices benefit consumers most. It could be just a grab for share, surely the grocery store chains of California, Safeway and Albertsons among them, quake at Walmart’s entry in the grocery market with their megastores.

From an outsider’s view, I’m inclined to think that it’s more a matter of culture. Those Walmart commercials with the bouncing dot knocking down prices is the key. That’s a very precisely targeted commercial - with a strong message for everyone. Consumers see that Walmart will not be undersold. Suppliers see that their concessions on pricing are passed directly on to consumers, which perhaps makes their own belt tightening more bearable (i.e., at least Walmart is not getting fat off those hard-one concessions). And lastly competitors can watch those commercials, always the same, with the sense of impending doom; they simply don’t have the machinery to drive such measures.

But why would Walmart continue along this path, drilling down prices, burying their now-distant image of “Pride in USA”, and indeed, making conditions worse nearly everywhere they touch? Is there a point to such a drive to squeeze and squeeze and squeeze? Do we, US consumers, really need a gallon of pickles for $3? Where does this relentless pursuit of price stop making sense?