Wal-Mart and the Middle Class

Tuesday, November 25, 2003
I don't normally like to touch on similar topics relatively close together but I read several articles about Wal-Mart in the past week and it made me do some thinking. The first article, by Fast Company, is a nice, albeit long, article about Wal-Mart's tactics in the Market Place. The Los Angeles Times did a three part story where it too addressed Wal-Mart's tactics but also touched on its Global influence as well as it's Global Image.

Here is the topic of the day. Why do people who should know better shop at Wal-Mart and what should be a middle-class job?

Wal-Mart is a behemoth. It is the largest company in the world. Notice I didn't say "largest retailer", it is the largest company period. Bigger than Microsoft, bigger than GM, even bigger than GE. It's revenue tops $245 Billion a year.

The only way it does this is through pure volume. That means a lot of people are shopping at Wal-Mart. Even though I have given up shopping at Wal-Mart I don't hold it against anybody if they do because you can't argue that they don't have lower prices. My problem is that I don't think people realize what they are doing. Or maybe they do but they just don't care. I don't shop at Wal-Mart, partly out of deference for Sergio, but partly because I have problems with some of their practices. The economist in me thinks its great, they eliminate waste at every turn, but I realize that there is a human cost to that.

American's are funny. We want high-quality products. We want them to be environmentally friendly. We want them to be humanely produced. We want a good lifestyle. However when push comes to shove we will forgo some of these things for a great bargain. I don't think people realize that cheap prices have a cost. Something has to give and with Wal-Mart they push so hard for quality that it almost inevitably comes from someone's lifestyle, the worker who produced the good. They not only use cheap labor in their stores but they basically force their suppliers to have cheap labors in their plants. Its a double-edged sword. Wal-Mart has such low prices that people will shop there to stretch out their dollar more. This in effect makes them "wealthier" because they have money for other things. However, everything is interconnected so eventually to sustain these low prices cost must be reduced at the supplier level which eventually leads to lower wages. Of course this makes shopping at Wal-Mart even more of a necessity and the cycle continues.

Not everyone has the luxury I do in that I can choose to pay slightly more for products by not shopping at Wal-Mart. I'm sure some people think that there small little purchases won't make a difference. Well let me tell you something, it does. That's how Wal-Mart gets you, Billions and Billions of small little purchases.

Like I have said, I don't really have a problem with Wal-Mart, at least not like some people do. I kind of agree with them that if you can do it for less than you should. If someone is willing to do the same job for less money why shouldn't an employer hire the other person? Don't argue that the quality of the work won't be the same because if that were the case the consumer wouldn't buy the product, the consumer has the loudest voice of all, their money.

One of their VPs, Robert S. McAdam, said "If we have an advantage,it's that we are offering what people want." I couldn't agree with him more. In the end it is the consumer which decides what will and will not work. The basic point of this rather long blog is this. What is a middle class job? Is packing groceries deserving of a middle-class income? How about a check out clerk? If Americans believe that these are then they would need to make that decision and be willing to pay more for their groceries and other sundry items. However, I think America is speaking loud and clear, they want what is best for themselves RIGHT NOW, and that means the low low Wal-Mart prices. I think the middle-class is about to get a lot smaller.