Wal-Mart, Friend or Foe?

Macleans wrote a very interesting article about Wal-Mart which I encourage all to read here.

I am not a Wal-Mart supporter, I believe Wal-Mart to be a small town killer, and not a small town supporter. Don’t get me wrong, I am a capitalist to the core, and I would love to meet Sam Walton to shake the man’s hand. He had a vision and he followed through with it. Good for him.

A brief lesson on the Wal-Mart infrastructure. Wal-Mart is not a retail giant. They are the world’s largest Warehouser…

Think about that. Wal-Mart does not PAY for anything in its stores, they don’t pay for stock. Everything they sell is on consignment. EVERYTHING. Wal-Mart pays for the product when it is rung through the till.

This provides a large advantage for Wal-Mart. It does not ever need to “blow out inventory” nor does it matter if they have copious amount of stock, because none of their money is tied up in inventory. Cash flow does not present as much of a problem to Wal-Mart as it does smaller retailers.

As the world’s largest warehouser, Wal-Mart has a tremendous buying power. The prices are driven low because they are the largest buying group in the world. They have ability to supply one product over another, and get phenomenal margins of profit with extremely low retail prices.

Ironically, I agree with Carol. She wants to support her town, but not at the expense of the savings she gets by filling her car up with gas and taking a road trip into Moncton to buy groceries. Why should she jeopardize her potential savings just to spend money in her town? If they can’t match the prices of the warehouser giant, then that’s not her problem.

But what exactly is she saving? Oooh, I feel a math lesson coming on…

It is 95 miles between Miramichi and Moncton. If Carol is driving a typical family wagon, she will get roughly 15 miles to the gallon. On a round trip, she will burn about 12.6 gallons of Gasoline, which equates to 50.64 litres of fuel. And as of today, the price of gas in Miramichi was 98.9 cents/litre. So Carol spends approximately $52.00 just to go to Moncton for the day to save at Wal-Mart. As she says in the article, “the prices were just too good to pass up.”

Now these prices she speaks of… I would venture a guess that in general the savings between a regular retail store and Wal-Mart is between 5% & 25%. The average family spends approximately $500/month on groceries, and approximately $100/month on household goods. So, let’s say that $600/month or $150/week is spent at Wal-Mart. Taking the extreme end of the spectrum, let’s say that Wal-Mart has saved Carol 25%, which equates to roughly $38/week in savings. (and remember, this is very high end, I don’t believe Walmart reduces their prices that much, but I haven’t compared recently). These savings haven’t paid for her gas yet.

But… Carol will answer, we can make an outing of it. So, they go to a movie, the have dinner, and do other miscellaneous shopping. Whoopee. More money to spend.

I have a better idea. Why not spend the extra money, the $38 that would have been spent in Miramichi and save the money in gas. This way, you can save $14 / week, which if multiplied by 52 weeks in a year, equates to $728 / year. Then you can have a nicer outing rather than having some McDonalds in Moncton…

But this is a moot point because the Wal-Mart is already built in Miramichi. So, now there is no reason to buy at the local store when you can still support the town and buy product at the Wal-Mart. Oh, wait. Is this supporting the local economy?

I live in a town with a Wal-Mart. They do absolutely little to NO donating to local charity funcations in town. I’m not saying that they are not charitable, but they do not support the town nearly to the extent that other local smaller retailers do. Giving the money to a Wal-Mart does not give money to the community directly. Yes, I can agree that the Wal-Mart brings in the population and facilitates more money in the local economy in other stores. But the money that is spent at the Wal-Mart does not circulate in the town, it helps pay 5 of the top riches people in North America and helps pay for the purchasing of their pro teams.

I fully agree with Carol Foote’s opinion about Wal-Mart. Its prices are just too good for people to pass up, the retailers in town just charge too much for their product.

Or do they? What does Wal-Mart lack in the retail world? What did Sam Walton leave out in his master plan? It’s in a little 7 letter word called:

Service.

Have you ever tried returning something to a Wal-Mart? Have you ever tried to get help looking for a particular item in a Wal-Mart? Never mine that, have you ever tried to find one of those elusive sales associates? Once you find that blue vested buddy of yours, he or she rarely knows what it is you’re looking for.

When you deal at the local hardware store, or grocery store, you are given a very warm and fuzzy feeling by the owner. He comes up to you, remembers your name, and gets what you want and if you have a genuine complaint, he is there to listen. He’s there to listen to the illegitimate complaints too! His major concern is pleasing the customer, and that my friend is what Wal-Mart is how you beat Wal-Mart.

Small business owners are trying to compete where they can’t compete. They will never be bigger than Wal-Mart, they won’t ever have its buying power. They put themselves out of business by lowering their prices and decreasing their margins. Give the customer Ridiculous service so that they will never want to go to Wal-Mart again. Give the customer a warm fuzzy feeling so they aren't concerned about the price.