Posted by Brian at 12:42 AM
How does Wal-Mart do it?
Apparently, they don't really have lower prices, at least not across the board the way they seem to suggest they do.
A mid-size Wal-Mart supercenter may offer for sale 100,000 separate items, or stock-keeping units (skus). Wal-Mart and other major retailers believe that the general public knows the going price of only 1 to 2 percent of these items. Therefore, each Wal-Mart store shops for the prices of only about 1,500 items in their competitors' stores. If it is ever found that a competitor has a lower price on one of these items than Wal-Mart, the store manager will immediately lower his or her price to be the lowest in the area....So to a certain extent, Wal-mart does it with a little sleight-of-hand--they show you the low price up front and you start to think that they have it cheaper everywhere. Add in that even if you have your doubts about the value, you figure you'll pay for the convenience of all-in-one shopping. Factor in the efficiency with which Wal-Mart controls inventory and it's easy to see how they've become as dominant as they have.
Price-sensitive merchandise is displayed in prominent places such as the kiosk at the entrance to the store, as well as on end caps, in dump bins, and in gondolas down the main aisles. Consequently, when Wal-Mart customers see the items of which they know the price, the ones always priced lower in Wal-Mart, they start assuming that everything else is also priced lower than at competing stores. This assumption is simply not true.
My barber has offered me a simple example. He sells a nonbreakable pocket comb for 25 cents that he procures from his vendor for eight cents. Wal-Mart sells a lower-quality comb for 98 cents, and one would assume that Wal-Mart pays less for it than the barber does. People keep buying Wal-Mart combs, however, because the average person does not know the going price of a pocket comb, and it is automatically assumed that the Wal-Mart price is the lowest.
Which is why it pisses me off so badly that Wal-Mart refuses to pay a living wage to their workers--trolls, spare me the recent statement by Wal-Mart officials where they claim the average wage is somewhere around ten bucks an hour. That number includes the CEO's pay, which makes the number artificially high.
The biggest reason Wal-mart is able to treat their workers the way they do is because there's no threat of unionization. Wal-mart has already demonstrated, more than once, the lengths to which they'll go to avoid letting a union into their industry. In one case, they shuttered a store in Quebec; in another, they completely changed the way they sold meat, all to avoid negotiation with a union. Why? It certainly isn't profit margin--Wal-mart makes so much money that even Hoffa couldn't have put a dent in their bottom line. No--it's part of their corporate ideology, and I don't fully understand it. Part of it is historical--Sam Walton was as anti-union as you could find, and to a certain extent, his legacy lives on.
But the more I think about this, the more I believe it comes down to this simple point--they're selfish bastards, and they're insatiable. They won't be satisfied until they have it all, which is why I appreciated this past Sunday's Boondocks so much.