Wal-Mart Employees In Cages!

(Originally posted on 2008-02-08 as /archives/137)

101 Dalmations Halloween Costume
101 Dalmations Halloween Costume

Only kidding!  I used to sit on the other side of this contraption.  It’s part of a 101 Dalmatians Halloween Costume, that someone thought was a good idea, but I thought, “It looks like they have those poor office workers working in cages.”

A lot of what you probably think about Wal-Mart is wrong.

My “quotes” (below) are paraphrases of things that I have heard or read recently.

“Those Walton Family members made [insert number here] dollars and they are not giving anything back.”

You see Wal-Mart people giving back to society a lot in Northwest Arkansas.

“But they give nothing back to my state.  All of that money goes out-of-state, and none of it comes back.  There is this guy named [insert name here] that goes around and talks about this.  He holds up a [insert brand name here] sweater and says, ‘This sweater has $0.75 of labor, and $1.00 of materials, and Wal-Mart sells it for $20.00.'”

I don’t know what Wal-Mart’s markup currently is, and if I did, then I couldn’t tell you.  Let me say this though: back when I was training to be an Ames manager (My training store’s picture is on Wikipedia!) I was taught that discount department stores typically shoot for 10% markup in aggregate, and that large chain grocery stores typically shoot for 3% markup in aggregate.  You can bet that Wal-Mart is shooting for the lowest number possible.  The above sweater example isn’t close to either of those numbers.  Also, materials and labor aren’t the only costs of doing business, but all of any given retailer’s costs of doing business are typically covered by a small margin.

“But Wal-Mart is making all those products.  I know, because you can see their name on them in the store.”

They buy the products from all of the same vendors that every other company does.  Each mature industry typically only has a few big players.  That’s where Wal-Mart gets the products from: mature companies in mature industries.  The folks that work in the Wal-Mart distribution centers could probably tell you who those companies are if they weren’t so loyal, and/or didn’t all sign non-disclosure agreements.  And no, store-brand products aren’t lower quality.  It’s not like factory foremen are running around saying, “We gotta do a worse job on this batch of soap: it’s going in a store-brand box!  Do worse work!”

Another aspect of “they buy the products from all of the same vendors that every other company does” is that Wal-Mart is the wrong target for your anger about how things are made.  If you don’t buy a given company’s product at Wal-Mart, then you will probably end up buying it somewhere else, because there are very few large companies in any mature industry.

“But Wal-Mart uses price pressure to force those companies to lower their quality!”

Price pressure begins when a product becomes commoditized.  This happens with, or without, Wal-Mart.  That’s why XBOX 360 games have almost the same exact price at every retailer.  Xbox 360 games are not a commodity.  Yes, I know that Microsoft sets the price of Xbox 360 games, but that just proves my point.

“But companies like Wal-Mart have made it so that manufacturing is moving overseas.”

Wal-Mart cannot have stores overseas, but refuse to purchase products oversea, and yes, Wal-Mart does have stores in China, Mexico, and many other countries.

Besides: manufacturing is not all moving overseas.  In 2005 the U.S.’ share of global manufacturing was still 21.1%.  That’s right: more than 1/5 of manufacturing revenues world-wide go to the U.S.A.  How much does China manufacture?  8%  (source: FP Quiz, Foreign Policy Magazine September/October 2007)

As a matter of fact our trade deficit shrunk by $100 Billion over the past year.  That means that US exports are increasing dramatically relative to imports.

But what about all of those closed textile mills in North Carolina?

The jobs are somewhere else in the U. S. of A.  Obviously: that’s no comfort to the folks that want to stay in their current hometowns.

To be continued: next I will talk about the stock market and how the money made there has nothing to do with any company’s markup: they are two separate and distinct things.

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