Walmart go back
Walmart is coming to India [16] and I am not exactly prepared to roll out the red carpet. Walmart go back. You can restrict your utterly destructive practices [17] to North America. India already has enough problems, that overwhelm the best of leaders (not that India has many), without walmart and does not need walmart to complicate things further.
A cursory search about walmart in google or wikipedia will yield us a tonne of results with a million arguments for [1, 2, 3] and against [4, 5, 6] walmart's case. With almost equal amount of 'scientific' study on either side of the argument, it would be difficult for the common man to determine the positive / negative effects of walmart. But history has an important lesson here for us. When studies started to emerge about the harmful effects of tobacco consumption, the tobacco industry ganged up and gave their own 'scientific' studies on the advantages of tobacco consumption. A more recent example would be of global warming where one can find equal number of articles for and against the case. Thats the history and to me it certainly has a lesson or two.
The primary reason why people are able get away with solecisms such as the ones that argue for tobacco consumption and the lack of global warming is that the so called advantages are on the face. It does not require too much analysis for the listener to convince himself of the 'correctness' of the arguments put forward. But, one must keep in mind that this is the hallmark of sophistry. To understand the harmful effects of say walmart one must NOT treat it as a black box and restrict oneself to its externalities i.e low prices. Instead one should analyze how it is able to give such low prices and what the real costs of these low prices are. This is obviously much harder than looking only at the fall in prices. But it is required to understand the realities.
The first and most important step to understand the ill effects of having a walmart in town is to understand that it is NOT the modern day incarnation of karna from the Indian epic Mahabharat. It does not give low prices for philanthropic reasons. It is an out and out capitalistic organization and is there to make profits. Elementary knowledge of economics is enough to understand that profits arise by selling above the cost price. So, as it drives its selling price down, it obviously is pushing its cost price way down. This results in what is now famously known as the walmart squeeze [7].
Walmart pushes its vendors every year to reduce their prices. This squeezes the profit margins of these vendors to such wafer thin level that it forces them to fire many employees, shut down factories and makes their lives hell [8]. The simple threat of removing a companies' product from walmart's shelves is enough to bring many a vendor in line. Walmart follows an all too common business tactic to achieve this. It becomes the biggest customer of any vendor by purchasing more than 50% of its produce. After a few years of operation like this, the vendor would now have lost many of his other major customers. Now, the vendor has to dance to every whim and fancy of walmart or else he goes out of business. Anyone who wants to find out more about such tactics from walmart can find tonnes of information on the web.
Now, consider the effect on its competitors. If there is one word that can describe what walmart is doing, then it would be predatory pricing. If selling at a high price is one way of making profits, driving out competitors is another way. Walmart adopts this strategy with absolutely no qualms [9, 10, 11]. The sad reality is that walmart is in the market to make big money while the local mom and pop store owner is there to make his living and that its an absolute certainty that walmart is going to win the market. With walmart selling everything from lingerie to electronic goods at an unbeatably low price, the local shop owner has no hopes of surviving the walmart threat. Many of them have to close down their shops and join walmart. From being a proud owner of a shop, they get transformed to a lowly worker in the jungle called walmart and have to dance to the tunes of their managers. Walmart is like the famed Sauroposeidon, the largest dinosaur that ever walked the earth [18]. The Sauroposeidon had no known natural predators due to its size. The same is the case with walmart. Its impossible for any of the retailers to even think of competing with walmart. One will simply get crushed under the gargantuan size of walmart.
Many other criticisms have been hurled at walmart with unending regularity. They have ranged from opening stores at culturally significant places [12] (I would absolutely detest a walmart in front of the Meenakshi temple at Madurai or the Taj mahal at Agra), extremely aggressive stance against labour unions and very poor employee treatment [13], environmental degradation it causes due to its world span of supply chain and its packaging of every single item [14] etc.. Most of them are well substantiated and corroborated with evidence. When walmart can indulge in so many not so ethical practices in the west where rules and regulations are reasonably well implemented, I can only imagine what they will do in places like India where enforcement of rules and regulations is lax. More so, in places like India, where money can absolve you of any guilt whatsoever, walmart will only be doubly at ease in carrying on many of its totally unethical practices.
Anyone who has shopped at walmart will attest to the fact that it is extremely difficult to purchase only the stuff that you had originally intended to purchase. By placing related products together and by placing products at strategic locations, walmart literally forces people to buy more and more. This unnecessarily increases consumption and brings with itself a plethora of problems. The most easiest one of them to fathom is the amount of garbage that this will result in. Every single item is packed with cardboard and plastic. All of them end up in the garbage and as a result the amount of waste produced by a city increases manifold. A large percentage of such waste is non-biodegradable. With waste collection and disposal being at such wonderfully efficient levels in Indian cities, the problem of waste can only be terribly exasperated.
All these facts and statistics will have no meaning if one does not visualize them. If you are from chennai, try and visualize a walmart in Pondy Bazar. The very thought makes me shudder. Thousands of people make their living directly by selling stuff there on the streets and in some of those big shops (which will become puny in front of walmart). Their supply chain consists of many more people. I am pretty confident that all of them will go home almost empty handed once walmart establishes itself in Pondy Bazar. Think what Saravana stores (Chennais own mini walmart) does to all the other shop owners in Pondy Bazar. This single shop attracts half of all visitors to pondy bazars and the whole of the market gets the other half. With walmart, which is known for a ruthlessness that far outweighs Saravans stores' and a pocket that is as deep as the mariana trench, one can expect an absolute carnage of the retailers wherever they go.
It is almost impossible to stop the juggernaut called walmart given the wonderful leaders we have in the government and the culture of greed that has descended amongst us. But there is hope and it comes from the most unexpected quarters. Sam walton, the founder of walmart, claims in his book [15] that the customer is the boss and that he can fire everyone including the CEO from the company by deciding to spend his money somewhere else. Rings a bell in me.
References
[1] Pro walmart article
[2] Pro walmart study - 1
[3] Pro walmart study - 2
[4] Anti walmart article
[5] Anti walmart study - 1
[6] Anti walmart study - 2
[7] Walmart squeeze
[8] Criticism of walmart - article on wikipedia
[9] Walmart Inc vs American Drugs Inc
[10] Walmart settles predatory pricing charge
[11] German high court convicts walmart of predatory pricing
[12] Walmart next to mexican pyramids
[13] Walmart and labour union at Quebec, Canada
[14] Walmart watch
[15] Made in America by Sam Walton
[16] Walmart report on rediff
[17] Walmart: high cost of low price - trailer on youtube
[18] Sauroposeidon article on bbc
PS: I've been at this for more than 2 hours now. Though I had done a lot of study on this over the past one week, I just cant seem to end. So, fatigued by this effort, I stop at this point. Please bear with me if some paragraphs look/feel half baked.
Walmart is coming to India [16] and I am not exactly prepared to roll out the red carpet. Walmart go back. You can restrict your utterly destructive practices [17] to North America. India already has enough problems, that overwhelm the best of leaders (not that India has many), without walmart and does not need walmart to complicate things further.
A cursory search about walmart in google or wikipedia will yield us a tonne of results with a million arguments for [1, 2, 3] and against [4, 5, 6] walmart's case. With almost equal amount of 'scientific' study on either side of the argument, it would be difficult for the common man to determine the positive / negative effects of walmart. But history has an important lesson here for us. When studies started to emerge about the harmful effects of tobacco consumption, the tobacco industry ganged up and gave their own 'scientific' studies on the advantages of tobacco consumption. A more recent example would be of global warming where one can find equal number of articles for and against the case. Thats the history and to me it certainly has a lesson or two.
The primary reason why people are able get away with solecisms such as the ones that argue for tobacco consumption and the lack of global warming is that the so called advantages are on the face. It does not require too much analysis for the listener to convince himself of the 'correctness' of the arguments put forward. But, one must keep in mind that this is the hallmark of sophistry. To understand the harmful effects of say walmart one must NOT treat it as a black box and restrict oneself to its externalities i.e low prices. Instead one should analyze how it is able to give such low prices and what the real costs of these low prices are. This is obviously much harder than looking only at the fall in prices. But it is required to understand the realities.
The first and most important step to understand the ill effects of having a walmart in town is to understand that it is NOT the modern day incarnation of karna from the Indian epic Mahabharat. It does not give low prices for philanthropic reasons. It is an out and out capitalistic organization and is there to make profits. Elementary knowledge of economics is enough to understand that profits arise by selling above the cost price. So, as it drives its selling price down, it obviously is pushing its cost price way down. This results in what is now famously known as the walmart squeeze [7].
Walmart pushes its vendors every year to reduce their prices. This squeezes the profit margins of these vendors to such wafer thin level that it forces them to fire many employees, shut down factories and makes their lives hell [8]. The simple threat of removing a companies' product from walmart's shelves is enough to bring many a vendor in line. Walmart follows an all too common business tactic to achieve this. It becomes the biggest customer of any vendor by purchasing more than 50% of its produce. After a few years of operation like this, the vendor would now have lost many of his other major customers. Now, the vendor has to dance to every whim and fancy of walmart or else he goes out of business. Anyone who wants to find out more about such tactics from walmart can find tonnes of information on the web.
Now, consider the effect on its competitors. If there is one word that can describe what walmart is doing, then it would be predatory pricing. If selling at a high price is one way of making profits, driving out competitors is another way. Walmart adopts this strategy with absolutely no qualms [9, 10, 11]. The sad reality is that walmart is in the market to make big money while the local mom and pop store owner is there to make his living and that its an absolute certainty that walmart is going to win the market. With walmart selling everything from lingerie to electronic goods at an unbeatably low price, the local shop owner has no hopes of surviving the walmart threat. Many of them have to close down their shops and join walmart. From being a proud owner of a shop, they get transformed to a lowly worker in the jungle called walmart and have to dance to the tunes of their managers. Walmart is like the famed Sauroposeidon, the largest dinosaur that ever walked the earth [18]. The Sauroposeidon had no known natural predators due to its size. The same is the case with walmart. Its impossible for any of the retailers to even think of competing with walmart. One will simply get crushed under the gargantuan size of walmart.
Many other criticisms have been hurled at walmart with unending regularity. They have ranged from opening stores at culturally significant places [12] (I would absolutely detest a walmart in front of the Meenakshi temple at Madurai or the Taj mahal at Agra), extremely aggressive stance against labour unions and very poor employee treatment [13], environmental degradation it causes due to its world span of supply chain and its packaging of every single item [14] etc.. Most of them are well substantiated and corroborated with evidence. When walmart can indulge in so many not so ethical practices in the west where rules and regulations are reasonably well implemented, I can only imagine what they will do in places like India where enforcement of rules and regulations is lax. More so, in places like India, where money can absolve you of any guilt whatsoever, walmart will only be doubly at ease in carrying on many of its totally unethical practices.
Anyone who has shopped at walmart will attest to the fact that it is extremely difficult to purchase only the stuff that you had originally intended to purchase. By placing related products together and by placing products at strategic locations, walmart literally forces people to buy more and more. This unnecessarily increases consumption and brings with itself a plethora of problems. The most easiest one of them to fathom is the amount of garbage that this will result in. Every single item is packed with cardboard and plastic. All of them end up in the garbage and as a result the amount of waste produced by a city increases manifold. A large percentage of such waste is non-biodegradable. With waste collection and disposal being at such wonderfully efficient levels in Indian cities, the problem of waste can only be terribly exasperated.
All these facts and statistics will have no meaning if one does not visualize them. If you are from chennai, try and visualize a walmart in Pondy Bazar. The very thought makes me shudder. Thousands of people make their living directly by selling stuff there on the streets and in some of those big shops (which will become puny in front of walmart). Their supply chain consists of many more people. I am pretty confident that all of them will go home almost empty handed once walmart establishes itself in Pondy Bazar. Think what Saravana stores (Chennais own mini walmart) does to all the other shop owners in Pondy Bazar. This single shop attracts half of all visitors to pondy bazars and the whole of the market gets the other half. With walmart, which is known for a ruthlessness that far outweighs Saravans stores' and a pocket that is as deep as the mariana trench, one can expect an absolute carnage of the retailers wherever they go.
It is almost impossible to stop the juggernaut called walmart given the wonderful leaders we have in the government and the culture of greed that has descended amongst us. But there is hope and it comes from the most unexpected quarters. Sam walton, the founder of walmart, claims in his book [15] that the customer is the boss and that he can fire everyone including the CEO from the company by deciding to spend his money somewhere else. Rings a bell in me.
References
[1] Pro walmart article
[2] Pro walmart study - 1
[3] Pro walmart study - 2
[4] Anti walmart article
[5] Anti walmart study - 1
[6] Anti walmart study - 2
[7] Walmart squeeze
[8] Criticism of walmart - article on wikipedia
[9] Walmart Inc vs American Drugs Inc
[10] Walmart settles predatory pricing charge
[11] German high court convicts walmart of predatory pricing
[12] Walmart next to mexican pyramids
[13] Walmart and labour union at Quebec, Canada
[14] Walmart watch
[15] Made in America by Sam Walton
[16] Walmart report on rediff
[17] Walmart: high cost of low price - trailer on youtube
[18] Sauroposeidon article on bbc
PS: I've been at this for more than 2 hours now. Though I had done a lot of study on this over the past one week, I just cant seem to end. So, fatigued by this effort, I stop at this point. Please bear with me if some paragraphs look/feel half baked.
4 comments:
xfkvI am not so sure if we have to boo down walmart for its business strategy (there might be other issues which should be condemned). It, finally is a strategy, competitors should try and develop an alternative strategy to beat it.
I believe that bargaining for a cheaper price is no big deal. After all the vendor has the freedom to not deal with walmart.
If the small shops of India run out of business then they will only have themselves to blame. A packet of curd which is supposed to be sold at a MRP of rs.4, is sold at rs.5. Many other items are priced a rupee or 50p more like this. But people still buy in these shops. I am sure you can imagine the kind of profit percentage that these guys would make selling things at a price higher than the mrp.
Despite this, the small shops still flourish. Not that we donot have any supermarkets now. Even now, places like food world and other retail shops sell the same items at their MRP.(cheaper than the rates at small shops).
The other aspect is that, we always bargain when we have to buy something. We are never satisfied when we buy something at the quoted price. When a retail store prices things lower without a bargain, is that bad?
Why do you go to walmart? I am sure you can answer that. But you always have a choice. You need not go to walmart to buy toothpaste and end up buying a combo pack of toothpaste, toothbrush and shampoo. You are free to buy what you want but you cannot force shops to sell what you want.
Walmart is booed down primarily because its the symbol of unbridled capitalism that can spell ruin to thousands of people while their CEO's make 7 figure salaries. A country, an economy, a society exists so as to make life better for the maximum number of people. This fundamental founding principle of a society is destroyed by Walmart. All its executives will make money but that is less than 0.01% of the population. The small scale shopkeepers, their vendors, all their employees and associated workers form a far huge number when compared with that. Sacrificing their livelihoods is not a good thing for the society.
Selling more than the MRP is not something to be condoned. But, if Walmart is around, even if these small shopkeepers sell less than the MRP, they will run out of business. They will be mercilessly routed. Asking an ant to compete with a dinosaur is ridiculous.
All arguments to and fro this point ultimately hinges on one's view on unbridled capitalism. I strongly feel (and its been well supported with evidence) that unbridled capitalism is utterly and totally devastating on the society and nature. There has never been and will never be an exception to this.
Finally, what does the first word in ur comment, xfkvl, mean?
No cryptic message there. I just typed the word verification by mistake.
I suggest you read some Ayn Rand.
i know about ayn rand but have not read her books.. will do so..
may be u should try and get ur hands on Ishamel by Daniel Quinn :)
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