Walmart, Penny Wise Dollar Foolish

Walmart has announced a plan to trim worker costs at their facilities. Seems since Sam died, the magic of Walmart might be in its sunset phase.

It is hard to argue with success. Walmart has been successful. But it is important to note that most of the success within Walmart was due to Sam. Successes past his death might only be explained due to the momentum that was built up while he was alive.

(See here) an MSNBC piece that reports on worker unrest within the Walmart empire due to the latest cost cutting moves.

I doubt Walmart will be facing something like an organized union explosion, though this is a possibility. However Walmart can not turn its back on reality. If organized labor is not in Walmart's future due to current cost cutting measures, loss of good employees is in that future. Good employees are going to find other employment. What is going to hurt Walmart most is the loss of good middle management employees who find it impossible to meet Walmart's expectations under the new cost cutting measures. Middle management is going to find it impossible to meet Walmart's expectations (think also customer expectations) with the new work force they are going to be cultivating. Anyone who is motivated to work to support a family is now going to find it impossible to meet these needs by working at Walmart. Sam would be shaking his head. While Sam was alive such things didn't happen.

Perhaps it is a good time to invest in Target?


Blogger Lethal_Poison said...

In fact, Sam Walton was a huge proponent of Union busting and non living wages....


Walton was busting unions and paying less then minimum wage since at least 1970.

Sam Walton was an evil, selfish man, and its a mistake to paint him as anything but such.

10/18/2006 02:45:00 PM  
Blogger Little David said...

Well, I am not exactly pro union myself.

What I was trying to say is that Walmart can only stretch the rubber band so far. It is either going to snap back at them, in the form of union organization, or it is going to break in that they will have very few quality employees left that will put up with the nonsense.

By the way, where do you shop?

10/18/2006 04:07:00 PM  
Blogger Lethal_Poison said...

You claimed that the current conditions of Walmart would not be so if Sam Walton at the helm, I contest that they certainly would. The leadership of Walmart has carried on Sams "vision" to a T.

As far as where I shop, Im economically forced to shop at Walmart. Unfortunatley, Walmart contributes to that by lowering the prevailing wages of the surrounding community. Its an endless cycle.

Trust me, if I could afford to shop anywhere else, I would.

I believe in most cases, people dont shop there out of choice, they shop there out of neccessity. I doubt youd ever see Michael Jordan or Bill Gates in the isles of Walmart. As a matter of fact, Id bet you any amount of money the overwhelming majority of people shopping at The World have a gross annual household income that is lower then the national median household income. I also bet you about 85% of Walmart workers shop pretty much exclusively at Walmart.

10/19/2006 09:33:00 AM  
Blogger Little David said...

I am not sure Sam would endorse the Walmart's current wage cost cutting measures. Such measures only invite the possibility of union activity, and I think Sam would realized that such steps empower the union organizers.

Sam himself did not drive around in a Ferrarri or a Porsche after he became fabulously wealthy. As he made his personal inspection tours of his stores around the nation he would travel in an old pickup truck. Perhaps this was in a effort to not rub the noses of his workers in the fact that while he was fabulously wealthy he was asking them to work for substandard wages.

I think Sam would have been smart enough to see the current cost cutting steps as a threat to the success of his empire. Walmart is going to find it increasingly difficult to fight union activity. As the article you provided the URL to points out, Walmarts success in fighting union organization has been, along with coercive steps, to convince workers that the company cares more about "the Associates" then the union would.

Actions speak louder then words. Current steps by Walmart will prove to good workers that Walmart is more worried about profits then they are about the welfare of the "Associates".

I think it is going to be harder for Walmart to battle against union organization activity. Even coercive steps to stifle union organization efforts because the "Associates" will now have less to lose even if Walmart fires them.

I think Sam would have been intelligent enough to have figured this all out.

As for your assessment of who the majority of customers are at Walmart, then you will at least concede that Walmart's "Everday low prices" are of value to low income wage earners that are not employed by Walmart?

I know I am impressed that Walmart is at least willing to share some of the savings of cost cutting measures with the customers. I can point to other retail establishments who do not pay an more then Walmart but who's prices are 50 to 100% more then Walmart. The profits from these higher prices are not going to the employees.

10/19/2006 01:07:00 PM  
Blogger Lethal_Poison said...

As for your assessment of who the majority of customers are at Walmart, then you will at least concede that Walmart's "Everday low prices" are of value to low income wage earners that are not employed by Walmart?

Reply- They are of course of value, but one of the reasons why they are of value, is because Walmart itself has helped create a captive demographic that depends on those prices to exist.

There are probably millions of people who would rather shop anywhere else, but cant afford the 5-10% markup on equivalent goods over Walmarts prices, BECAUSE Walmart as a major employer, and others like them, have driven wages into the dirt, and do everything in their power to keep them there.

10/19/2006 01:11:00 PM  
Blogger Little David said...

Look, anyone who thinks they can do a better job of it is free to form a Walmart of their own. Perhaps they could outdue Sam Walton, or those whom Sam left behind after he died, by offering employee ownership or something. Sam drove the previously dominant Kmart into the ground, so it would not be impossible for Walmart to suffer a similiar fate.

Difficult, yes. Impossible, no.

10/19/2006 01:55:00 PM  
Blogger Lethal_Poison said...

Walmart negotiating power and world domination is impossible to dethrown by any start up.

There is no way a company can reduce their costs in any way lower the Walmart has, and unfortunatley price is pretty much the sole motivator behind everyone who shops at Walmart, so such intangible things as customer service, which Mom and Pops have traditionally held over big box retailers, is not enough to lure customers away.

10/19/2006 02:03:00 PM  
Blogger Little David said...

Back in my day, I wanted a Kmart to come to my local town and looked at "settling" for a Walmart to be settling for second best.

How wrong I was.

Today Target competes successfully with Walmart, although as a truckdriver, I will say Target needs to learn a little bit from Walmart.

Back when Sam Walton started out, I would imagine everyone tried to tell him he couldn't compete with Kmart.

10/19/2006 03:25:00 PM  
Blogger Lethal_Poison said...

Target doesnt "compete" with Walmart, it fills a higher end niche in the market.

10/19/2006 03:33:00 PM  
Blogger Little David said...

Target is a discount store. It does not compete with Macy's.

Target competes with Walmart. It too is a discount store.

If Target fills a niche market higher then Walmart it is not much higher. I doubt Bill Gates shops at Target either.

10/19/2006 04:19:00 PM  
Blogger Lethal_Poison said...

Ok, I did a whole entire report about Target in school. Their goal as a company was to seperate away from stores like Walmart and Kmart by offering "upscale" merchandise.

This is why they brought in such brands as Mossimo.

No, they arent "Macys" or "JC Penney", but they arent exactly Walmart either. Their target consumer demographic does overlap with Walmart, but is not the same as Walmarts.

That is how Target has stayed succesful, while direct Walmart competitors like Kmart have went down in flames. You cant directly compete with Walmart, youll lose, period. You have to fill some niche around them.

10/19/2006 04:32:00 PM  
Blogger Little David said...

And that is what they said about Kmart until Sam Walton came around.

10/19/2006 05:03:00 PM  
Blogger Lethal_Poison said...

Wrong. Kmart was poorly run, and left the door wide open for Walmart....


(see the section on "Trouble for Kmart")

Walmart is probably the most efficiently run business that ever existed. There isnt an inch you can squeeze in on them. Their technology is top level, prices unbeatable, their supply chain is renound. It goes on and on.

10/20/2006 09:42:00 AM  
Blogger Little David said...

But Walmart is trying to squeeze the labor market too hard.

Perhaps after Walmart becomes unionized and the unions demand excessive compensation...


Perhaps after Walmart continues to be successful in stifling labor organization efforts but is unsuccessful in retaining quality employees and is no longer able to keep the customers happy...

I sense an opening for an upstart. Perhaps it will not be a new upstart. Perhaps Target will be successful in siphoning off some of the market share from Walmart.

I am simply saying the current cost cutting measures by Walmart are stupid. Smart competitors should be able to take advantage of this instance where Walmart has shot itself in the foot.

Think of it. Target could run adds that state: We might not pay our employees much more then Walmart, but we allow them to earn some seniority and still allow them 40 hours a week, unlike our competition over at Walmart. Since we can keep quality employees, our aisles are cleaner, our shelves are better stocked, and our check out lines are shorter.

The advertisement would close with: Shop at Walmart, and deal with the headaches. Or shop at Target where shopping is still a pleasure.

Walmart is getting anal with their cost cutting measures. Eventually, these demands for cost cutting are going to start affecting the quality of the services and products offered.

10/20/2006 11:55:00 AM  
Blogger Lethal_Poison said...

I had a whole reply typed out, but this site doesnt seem to be working well right now and ate it so....

Bottom line, Target doesnt have to run advertisements to point out Walmarts downfalls, these are widely known. People dont care though, because they are there for the price.

10/20/2006 01:36:00 PM  
Blogger Little David said...

Until the long checkout lines, dirty aisles and frustration from finding the shelves unstocked forces them to go otherwhere.

10/20/2006 04:39:00 PM  
Blogger Lethal_Poison said...

They havent as of yet, what makes you think all the sudden they will in the future?

Trust me, if you are poor, and trying to make a buck stretch, you will gladly stand in raw sewage to get 3 for $5 instead of $1.99 a piece. I can personally tell you that, when you are shopping sale to sale, you go for the prices, it doesnt matter what store name is on the building. It just happens that most of the time, Walmart is that name. This is the mindset of a thrifty poor person. Im sure Im not telling you anything you dont know, you were an enlisted sailor at one point, and Im sure you and or your wife did the same sorts of things when trying to stretch the last buck. It didnt matter if it was Kmart, or Food Lion, or Bills Bag and Shop, if hamburger was on sale for .99 a pound, thats where you were shopping.

I know when I was small, my dad worked hard, but we werent wealthy by any stretch of the imagination, but our mother made a lot of our clothes, and when we did go shopping at the store, everything we got was on sale, and we bought groceries in bulk, and participated in every other imaginable cost cutting measure with price in mind, not customer service, or isle width.

As Ive pointed out in previous posts, Im still not wealthy, and that thriftiness has followed me, and I still only get things on sale. I still dont really care about customer service or isle width.

Walmart takes advantage of this brand of thought, and even largely contributes to creating a "Walmart" society, where they keep their staff so poor, and drop the prevailing surrounding wage so much, that they pretty much create a captive shopping demographic.

Price is king for the thrifty, especially the thrifty poor. Sam Walton knew that, and thats why each Walton has 20 billion in their pockets, and thousands of Mom and Pops, and even huge retail chains like Kmart were nugged out.

10/23/2006 10:24:00 AM  
Blogger Little David said...

I'm saying that Walmart is starting to get anal and that employees are not going to put up with it. Will all of them leave? Perhaps not, but enough probably will vote with their feet to make staffing a headache for store management.

Walmart is squeezing the labor force in an effort to further increase profits. Part of the profits are due to market share. One of the figures closely looked at are "existing store" profits to differentiate from profits due to opening new stores. If only 10 or 15% of Walmart's customers at existing stores decide to shop at Target because Walmart can no longer keep the shelves stocked, it is going to be disastrous for Walmart.

What would be even worse for Walmart would be if enough employees now became more receptive to union organization efforts.

Sam Walton might have been a miser, but he was not stupid and he was not anal.

10/28/2006 09:14:00 AM  
Blogger Lethal_Poison said...

I will agree with you that Sam Walton was not stupid by any imagineable stretch of the imagination, but Im not so sure about not being "anal".

From all accounts Ive read, he was obsessed with many things, including finding the best buys and reducing costs, including labor, and union busting.

11/01/2006 02:42:00 PM  

Post a Comment

<< Home