A gallon-sized jar of whole pickles is something to behold. The jar is the size of a small aquarium. The fat green pickles, floating in swampy juice, look reptilian, their shapes exaggerated by the glass. It weighs 12 pounds, too big to carry with one hand. The gallon jar of pickles is a display of abundance and excess; it is entrancing, and also vaguely unsettling. This is the product that Wal-Mart fell in love with: Vlasic's gallon jar of pickles.
Wal-Mart priced it at $2.97--a year's supply of pickles for less than $3! "They were using it as a 'statement' item," says Pat Hunn, who calls himself the "mad scientist" of Vlasic's gallon jar. "Wal-Mart was putting it before consumers, saying, This represents what Wal-Mart's about. You can buy a stinkin' gallon of pickles for $2.97. And it's the nation's number-one brand."
Therein lies the basic conundrum of doing business with the world's largest retailer. By selling a gallon of kosher dills for less than most grocers sell a quart, Wal-Mart may have provided a ser-vice for its customers. But what did it do for Vlasic? The pickle maker had spent decades convincing customers that they should pay a premium for its brand. Now Wal-Mart was practically giving them away. And the fevered buying spree that resulted distorted every aspect of Vlasic's operations, from farm field to factory to financial statement.
Indeed, as Vlasic discovered, the real story of Wal-Mart, the story that never gets told, is the story of the pressure the biggest retailer relentlessly applies to its suppliers in the name of bringing us "every day low prices." It's the story of what that pressure does to the companies Wal-Mart does business with, to U.S. manufacturing, and to the economy as a whole. That story can be found floating in a gallon jar of pickles at Wal-Mart.
Wal-Mart is not just the world's largest retailer. It's the world's largest company--bigger than ExxonMobil, General Motors, and General Electric. The scale can be hard to absorb. Wal-Mart sold $244.5 billion worth of goods last year. It sells in three months what
number-two retailer Home Depot sells in a year. And in its own category of general merchandise and groceries, Wal-Mart no longer has any real rivals. It does more business than Target, Sears, Kmart, J.C. Penney, Safeway, and Kroger combined. "Clearly," says Edward Fox, head of Southern Methodist University's J.C. Penney Center for Retailing Excellence, "Wal-Mart is more powerful than any retailer has ever been." It is, in fact, so big and so furtively powerful as to have become an entirely different order of corporate being.
Wal-Mart wields its power for just one purpose: to bring the lowest possible prices to its customers. At Wal-Mart, that goal is never reached. The retailer has a clear policy for suppliers: On basic products that don't change, the price Wal-Mart will pay, and will charge shoppers, must drop year after year. But what almost no one outside the world of Wal-Mart and its 21,000 suppliers knows is the high cost of those low prices. Wal-Mart has the power to squeeze profit-killing concessions from vendors. To survive in the face of its pricing demands, makers of everything from bras to bicycles to blue jeans have had to lay off employees and close U.S. plants in favor of outsourcing products from overseas.
Of course, U.S. companies have been moving jobs offshore for decades, long before Wal-Mart was a retailing power. But there is no question that the chain is helping accelerate the loss of American jobs to low-wage countries such as China. Wal-Mart, which in the late 1980s and early 1990s trumpeted its claim to "Buy American," has doubled its imports from China in the past five years alone, buying some $12 billion in merchandise in 2002. That's nearly 10% of all Chinese exports to the United States.
One way to think of Wal-Mart is as a vast pipeline that gives non-U.S. companies direct access to the American market. "One of the things that limits or slows the growth of imports is the cost of establishing connections and networks," says Paul Krugman, the Princeton University economist. "Wal-Mart is so big and so centralized that it can all at once hook Chinese and other suppliers into its digital system. So--wham!--you have a large switch to overseas sourcing in a period quicker than under the old rules of retailing."
Steve Dobbins has been bearing the brunt of that switch. He's president and CEO of Carolina Mills, a 75-year-old North Carolina company that supplies thread, yarn, and textile finishing to apparel makers--half of which supply Wal-Mart. Carolina Mills grew steadily until 2000. But in the past three years, as its customers have gone either overseas or out of business, it has shrunk from 17 factories to 7, and from 2,600 employees to 1,200. Dobbins's customers have begun to face imported clothing sold so cheaply to Wal-Mart that they could not compete even if they paid their workers nothing.
"People ask, 'How can it be bad for things to come into the U.S. cheaply? How can it be bad to have a bargain at Wal-Mart?' Sure, it's held inflation down, and it's great to have bargains," says Dobbins. "But you can't buy anything if you're not employed. We are shopping ourselves out of jobs."
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Recent Comments | 14 Total
May 28, 2008 at 6:19pm by Ben Koshkin
I remember this, now why doesn't Walmart get into the Gas business
benkoshkin.info
August 3, 2008 at 12:28pm by Gail Phillips
October 10, 2008 at 3:15pm by Megan DaGata
I have witnessed a large corporation go nearly bankrupt by bending to Wal-Marts whims. When is the corporate evironment going to stop?! Isn't there a threshhold that you finally have to say enough is enough?! I wish my friends at the business I spoke of could just pull their merchandise from Wal-Mart and still make enough to stay afloat.
November 15, 2008 at 9:13pm by G. Boston Rhynes
TO: American Veterans Administration (VA), Former Terminated Wal-Mart Associates, Wide World Web!
As a former Department Manager at Store 2615 in Valdosta, Georgia. I no longer shop at any of Wal-Mart Stores Inc.; this is due to Wal-Mart ill treatment of their Associates, Department Managers, and Assistant Managers that I have observed along with others who cannot get even a courteous reply from this company. Associates are treated as inferior, terminated, and fired without any recourse.
It is even more sickening when Wal-Mart CEO Mr. Lee Scott, Board of Directors, and others refuses to provide even a courteous reply to associates many of whom are Disabled American Veterans who have written the home office along with myself but to no avail. (Names available upon request).
Wal-Mart praises itself about their open door policy, associates are family members, their workers don’t need a union, claim they have great benefits, that hundreds of people just are waiting to be hired at Wal-Mart, and if you don’t like it here find somewhere else to work. Moreover because Wal-Mart Associates live in fear they will not complain. They believe complaining will hinder their future employment opportunities with other companies.
It seem that Wal-Mart stores in Valdosta, Georgia can treat associates as they please, under Georgia sick “At will to work law” a law wherein Georgia Workers have no rights and companies like Wal-Mart can fire workers without telling them why or providing them with even a courteous reply.
As a Retired Military Veteran of over twenty-one years, I had no idea that American citizens had to endure these inhuman, unpatriotic, and disgraceful working conditions here in the homeland. Even more shocking is why the State of Georgia Elected Officials would pass a law that takes away veterans rights in this fashion. It is a moral disgrace for Wal-Mart and other companies to treat American Veterans in this fashion, and without even a courteous reply
It took my unjust termination from Wal-Mart Stores in Valdosta at Store 2615, to understand how Georgia citizens were being treated in the work place. On many occasions I had witnessed Wal-Mart Associates walking out of the facility with their heads down and crying like a little baby. Little did I know the manner in which associates were being treated, coached, and terminated without any recourse by Wal-Mart Executives?
For over eight months I have tried to get a response from anyone at Wal-Mart Stores Inc., concerning my ill firing and this includes Wal-Mart CEO, Mr. Lee Scott, Board of Directors, and Georgia General Assembly------but to no avail. I have now learned from other terminated Wal-Mart Associates, that this is routine procedure in the State of Georgia for associates who are fired from Wal-Mart Stores in Georgia, under their ill “at will to work law.” How say?
I will not give up on my situation until Wal-Mart Stores Inc., addresses my individual concern, and that the State of Georgia addresses the ill manner, in which American Veterans are treated, and terminated by Wal-Mart and other companies in the State of Georgia under this ill “At Will To Work Law.” There is no good reason why Georgia Veterans, and other workers should be treated as EMPLOYEES IN CHINA OR SOMEOTHER THIRD WORLD NATION. But even more importantly Wal-Mart and other companies should not treat American Veterans as if they NEVER PLACED their life on the line to protect our BELOVED NATION.
Lastly! This problem will not just fade into the sunset but is a movement that is growing and people are sick, tired, and uniting even against politicians who are not for workers rights in Georgia. IN TRUTH, I HAD NO IDEA OF HOW MANY PEOPLE HAD BEEN PREVIOUSLY MISTREATED BY WAL-MART AND OTHER COMPANINES IN THE STATE OF GEORGIA UNTIL I WAS TERMINATED FOR NO REAL REASON. In truth, my termination was an eye awakening experience, and will be beneficial to many other Americans. So please, add this letter to other veterans who have complained about ill working conditions, unjustified termination of American Veterans within the State of Georgia and our beloved nation. Something must, and will be done to help veterans and American Workers! Peace!
January 18, 2009 at 9:28pm by Robert L
Corporate America could care less about how their actions affect the common American. They have one single word on their mind; Money. Once a Corporation has joined the stock exchange, any thing that matters to you and me, no longer matters to them.
March 11, 2009 at 6:56pm by Gwen Edenfield
one should not need any more reasons NOT to shop at Wal-Mart! UGH!!!
March 21, 2009 at 9:10am by James Waits
I stumbled upon Mr. Fishmans' story several years ago while doing research for an Economics course where I had a choice of writing about GM, or Wal*Mart. I just re-read the story and throughly enjoyed it again. Mr. Fishman may remember our correspondence, then again maybe not. Irregardless, He writes GREAT articles!
--
James D. Waits
April 18, 2009 at 3:30pm by Joseph George
Nice point there. A sort of monopolization going around there. A great point there but there are gong to be millions who are not going to be affected and they will of course champion Wal Mart's low prices. Don't believe the government is going to do anything about this. ANd the fact that with the cap and trade coming into place there is going to be more jobs lost overseas to China and India who dont give a dime about the environment. http://fishingformoney.blogspot.com/2009/03/how-does-big-guys-keep-makin...
May 8, 2009 at 5:39pm by Jim Fitzgerald
Its this kind of reporting that is driving subscriptions down at Fast Company and many of the other so called "business" mags. Who's pointing the gun at the heads of these companies? Does Walmart send Luca Brazzi out to recruit new vendors? No-one is forced to do business with Walmart. There are planes flying into Bentonville every day full of people dying to do business with these guys. Their eyes are wide open, if they can do it profitably, great, if not, they find other channels. Every dollar Walmart takes out out of their process creates more buying power for the US consumer. It also forces other business to sharpen their own skills to remain competitive. Get a clue, Capitalism wins, every time.
June 28, 2009 at 2:29pm by Bom Trown
Americans are losing jobs. Wal Mart is acclerating that process. Capitalism wins every time? Hmmmmmm. Well, someone has to lose every time then too. Here's the model:
Wal Mart buys foreign goods and sells them for cheap.
American businesses (commercial and industrial) can't or don't want to compete. American businesses (commercial and industrial) go out of business. Without jobs, all the low prices in the world won't make a difference. Eventually it will just be Wal Mart executives buying from and selling things to each other!
Temorary buying power for U.S. consumers is actually hurting them in the long run because it is eroding the American industry and thus eating away at the middle class.
So let's see how Capitalism wins this time.
June 28, 2009 at 5:26pm by ken blank
I'm fully aware of all the walmart horror stories. But other than the fact that Walmart uses cheap labor overseas, [take a look at the auto industry, Microsoft], I'd say for the most part Walmart does what's needed. They've put a lid on greed. There still are anti - monopoly laws, which would control Walmart from raising prices beyond what's sane. As a lot of things already are. 'It costs $0.50 to make, and sells for $5.00.] With Walmart that sort of greed has been reined in to a sensible profit for all. It's something I've believed in for a long time. Maybe you can sell 1 item for $100.00, But which is better ? Sell 1000 items at $10.00 or 1 item at $100 ?.
It reduces profit all around and passes the savings on to the public.
It only hurts when there's no profit for anyone. At that point the marketer should move on to another company to sell it's wares. Walmart is big, but not a monopoly yet. ie: I can't stand the taste of Pringles potato chips, and dumping the prices to less than $1.00 a can hasn't made them any more tasty. I still buy Winn Dixie tato chips.
June 28, 2009 at 6:07pm by ken blank
You dig deep enough, Walmart most likely has as much to do with high gas prices as the shieks in Saudi.
With Walmart being the company the size it is, it has a major distribution chain. It wouldn't surprise me if 100% of the walmart diesels all shop for diesel from the same stations with the same low price gas cards that the rest of the country is paying for.
But Walmart isn't large enough [yet] to have it's own gas stations, and still not large enough to barter with a Saudi shiek.
July 2, 2009 at 7:02am by Mark Markwee
Target, Sears, Kmart, J.C. Penney, Safeway, and Kroger combined. "Clearly," says Edward Fox, head of Southern Methodist University's J.C. Penney Center for Retailing Excellence, "Wal-Mart is more powerful than any retailer has ever been." It is, in fact, so big and so furtively powerful as to have become an entirely different order of corporate being.
Assignment Help AND Coursework AND Custom Thesis
July 2, 2009 at 7:03am by Mark Markwee
Walmart isn't large enough [yet] to have it's own gas stations, and still not large enough to barter with a Saudi shie
Persuasive Essay AND College Essay