Monday, August 17, 2009

The Wal-Mart Effect

How the World's Most Powerful Company Really Works and How It's Transforming the American Economy
By Charles Fishman

Some of you may remember a while ago when I posted a collection of articles from various sources on the destruction of such American institutions as Vlassic, Levi's, etc. I had linked them in the past and my stats page said it was one of my more popular searched pages but the links almost always got moved and quit working. I fixed them several times but the end result always ended up with dead links so I decided to just copy the articles instead of the links. I was surprised however when one of the authors of several of the articles commented asking me to link to a different site which I promptly did. He also mentioned his book on the subject and so here is my review of the book which I finished somewhere above 30,000 feet in southeast California.

I was expecting a rather dry book with lots of facts and figures but found myself completely enthralled with the way Fishman wrote the book in a captivating way and yet presented a wealth of information. In fact, the first chapter alone would have been easier to simply highlight the things not of interest as every sentence made me want to scribble something down in my notebook. Case in point, the first sentence a quote from Sam Walton read, "I'm probably not the best negotiator in the world; I lack the ability to squeeze the last dollar." It certainly was not something I expected from my perceived notions of Sam Walton. In fact, my views of Sam Walton have completely changed from the kindly man who would be terrified at what his company has become to a man who would probably only be surprised that his ideas had come along so far. Sam planted the seeds of almost everything that makes Wal-Mart what it is today.

Fishman does a masterful job of explaining the groundwork of how Wal-Mart grew into what it is today and how it affects the world. He describes the 'Wal-Mart effect' as the, "whole range of impacts resulting from Wal-Mart's way of doing business." Fishman also goes on to say, "Wal-Mart isn't just a store, or a huge company, or a phenomenon anymore. Wal-Mart shapes where we shop, the products we buy, and the prices we pay - even for those of us who never shop there." After reading the book and the supporting evidence, I am certainly a believer.

I thought my long standing hatred of the Wal-Mart experience and general boycott of their stores would exempt me from their effects but Fishman has shown that I still benefit from Wal-Mart whether I like it or not. He used that stick of deodorant that I buy without any packaging other than its own hard plastic container as an example since Wal-Mart was instrumental in eliminating the cardboard packaging that they used to come in. Wal-Mart's effect has caused even those of us who buy deodorant at our local employee owned grocery store to benefit since the manufacturer of the deodorant has eliminated the extra packaging for everyone.

Before reading this book, I wondered if Fishman would change my views on the evilness of Wal-Mart and after reading it, the answer is no. In fact, it reinforced my views on Wal-Mart. It isn't because of one-sided journalism by Fishman because he laid out both sides very well. He has written a book that is neutral on the issue, laying out the facts and thus allowing me to support my views while still getting a better sense of why some people like Wal-Mart and why some have no choice but to shop there. In one chapter, Fishman describes a study that showed households with a baby and a pet are likely to defect to Wal-Mart along with those shoppers who buy store brand stuff. The former set of shoppers buy large volumes and thus go with the one-stop cheaper shopping. The latter set of shoppers already buys cheap stuff anyway so switching over to Wal-Mart is not a big difference. Those likely to not shop at Wal-Mart are households who spend a large portion of their grocery expenditures on fresh produce, seafood and read to eat meals. Something that surprised me is that location made no difference in where a person shopped.

One of the things that I always wondered about since I have seen it both ways was whether Wal-Mart's touting of all the new jobs they create when opening a new store was true. Fishman presented various studies that show that although they do create on average 30 new jobs over a five-year period, a typical plus-sized Wal-Mart can employ up to 500 employees and thus they drain upwards of 470 people from the surrounding area. Another study showed how Wal-Mart raised family poverty rates in a county after building a new store. Yet another study that showed that companies that did a majority of business with Wal-Mart (>25%) had half the profit margin than those companies that did 10% of their total business or less with Wal-Mart. Frightening stuff, yet Wal-Mart has undeniably brought down prices not only at their stores but retailers and even manufactures across the nation.

Probably the only good feeling I got from this book is that Wal-Mart seems to be so addicted to their cutting of costs that they are slowly pricing themselves out of profit. I would still guess that Wal-Mart will still be around in twenty years but this book makes me feel as if it won't be around in the same form as it is now. Fishman also laid out some more good news about how companies can and are successfully competing with Wal-Mart despite all the horror stories of other companies that have literally been run into the ground and shipped over seas. Perhaps in the end, Wal-Mart is its own greatest enemy.

If you read this book and I highly recommend it, I doubt that you will change your opinions on Wal-Mart. But you will most definitely understand Wal-Mart more than you do today and understand how shopping at Wal-Mart is changing the very fabric of our lives, good and bad. I will continue my long-standing boycott of Wal-Mart and hopefully will live long enough to see the beast burn itself out. Until then, I will encourage others to read the Wal-Mart Effect.


edifice rex said...

Sounds very interesting; I'll have to see if our library has that one. I'm a long-time Wal-Mart hater.

Ed Abbey said...

Edifice Rex - It is well worth a read. I would loan you my copy but I already have it loaned out and promised out beyond that.

R. Sherman said...

I'm not a Wal-mart fan and I never shop there except for my prescriptions, but I don't loathe it completely either. There are very few places where high school graduates without other skills can get jobs these days. I recall a plaintiff in a case I defended who went to work of a Supercenter after H.S. His wife worked there, too and together the two of them were making around 60K with benefits and 401(k) with profit sharing. It's not going to buy a condo on the beach, but it's enough to have a pretty decent life.


malor said...

Like you, I used to have a negative view of WalMart -- after watching a PBS special about it, actually. However when my father came here in this country, the only company that would hire him is WalMart. I don't know why other "locally" owned stores would not even give him a chance. He is an excellent worker and a talented cook. But thank God for WalMArt, my parents are able to live self-sufficiently in this country.

WalMart is an American institution. It changed the way we do business. If it goes down, we will all be affected. Surely, the stock market will be and most of us has stake in the stock market. Please don't hate it too much.

Oh by the way, they offer medical insurance, 401K and profit sharing.

Ed Abbey said...

R. Sherman - If Wal-Mart didn't have a several acre parking lot and lots of people standing in line waiting to check out at all hours of the day, I might detest Wal-Mart less and actually shop there now and then despite what I now know. But I hate shopping so much that if it isn't quick, I'd rather have teeth pulled.

Malor - Welcome to my blog and glad that you stopped by. It rare that I get a Filipino and even rarer, someone that lives nearby. My wife is currently working just down the road from you in Des Moines but we live southeast of you by about 100 miles. There is a very large group of Filipinos in this area. Drop me a line if you are interested in meeting them. My email address is linked in my sidebar.

Don't worry about my dislike of Wal-Mart because I know I am in a small minority of people. I think Wal-Mart will be around for a long time but I also think that other companies will be able to compete against them in a healthy way.

geri said...

Ed, I will definitely borrow this book from the library and if they don't have it I'll put in a request. I don't shop that often at Walmart because it's far from my place and Target is nearer, but our Target is bad at restocking and when they don't have things we need I would make a special trip to Walmart esp for electric appliances since other stores sell them for much higher price. Maybe this book will help change my habit, make me not feel too bad for paying a few dollars more at other stores, hard to do for a bargain hunter like me that goes with being a filipino :)

Woody said...

Can I get a copy at Walmart?

Ed Abbey said...

Geri - My wife still occasionally shops at Wal-Mart but when she does, I stay at home or in the car. But she doesn't do that very often.

Woody - I seem to remember Fishman saying that his book wasn't sold at Wal-Mart. He actually got invited to their headquarters after initially being denied and got a tour of the place and gave a speech. He writes about that experience in one of the chapters towards the end of the book.

Charles Fishman said...

Ed Abbey & Co. —

I'm impressed that having posted that original run of stories on Wal-Mart, you went out and found 'The Wal-Mart Effect.' Thanks for reading it, thanks for such a thoughtful review.

Wal-Mart is now embarked on an ambitious environmental push — solar energy for its stores, organic produce, doubling gas mileage of its trucks, among other things.

Real or PR?

It doesn't really matter: If they actually do what they are talking about, they'll change the world again as profoundly as they did with pushing down prices, by pushing for energy efficiency and more sustainably sourced products. There will undoubtedly be some unexpected consequences, as there have been with prices.

Can Wal-Mart be a "green" leader? It may seem laughable. But worth watching. Here's one recent New York Times story.

Appreciate the (rare) thoughtful conversation about Wal-Mart.

/Charles Fishman
Author, 'The Wal-Mart Effect'

Ed Abbey said...

Charles Fishman - Once again I am honored that you stopped by my blog and commented. If you hadn't, I would never have heard and thus read your book. It is one that will stay in my library for some time to come.