Sunday, July 4, 2010

WALMART - The high cost of low price !!

I was compelled to write this article after watching the documentary "Walmart - The high cost of low price" directed by Robert Greenwald. I believe you must have come across Walmart stories a couple of times before, but it needs to be told yet again. So here you go.

It starts with the then CEO of the company Lee Scott praising the company at a large employee convention. Following is an excerpt from his speech:

"It would be a pleasure for anybody to be the CEO of this company because when you come to this meeting year after year, you get to say we had record sales, we had record earnings, we had record reinvestment back into our company. You know i say all that, but let me tell you my friends, you better be ready to be better because today for whatever reason, whether it's our success or size Wal-mart has created fear if not envy in some circles. And that makes it all the more important that we focus on the right thing and on doing things right, every time. There are two things that we should do. Number one is tell the Wal-Mart story, get the message out and the second thing is stay the course. Wal-Mart is too important to individual families who are stretching the budget, too important to the suppliers who employ millions of people, we are too important to the associates whom we value so much and your company will continue to demonstrate our citizenship as a good employer and the member of the community that we serve so well around this world. Ladies and gentlemen I promise this, we are gonna stay the course and this company will continue to grow"

No one can doubt the success story of Wal-Mart. Founded in 1962 by Sam Walton this company has grown in leaps and bounds to become one of the most valuable American company. Wal-mart's revenues crossed 400 billion dollars in 2009, most by any company around the world. Consumers were never so delighted. They can purchase whatever they need at the lowest possible price from the Wal-Mart stores. Be it grocery items, hardware items, durables and non-durables, it has diversified into all the necessities of human lives. Like you can search on google for any information, you can go to Wal-Mart to buy anything you need. That scale is hard to absorb. But yes this company has proved that "Nothing is Impossible, it's I am possible". And it employs as many as 2.1 million people, largest by any firm in the world. But is Wal-Mart a success for America? Any company is a boon for its nation if it helps improve the overall quality of living of its people. Has Wal-Mart been able to do that?

The giant retailer's low prices often come with a very high cost. Wal-Mart's relentless pressure has crushed the companies it does business with and has forced them to send jobs overseas and the result is unemployment. Not to mention, this giant whale has not only bitten but killed several small fishes, owing to its extremely low prices. The small grocery and hardware stores simply couldn't survive the competition. And thus had to shut their stores down. Family businesses which had been running successfully for over half a century have come to a halt and the people are left unemployed and helpless. All this at the cost of one company. What adds to the agony of these people is that the majority of Wal-mart's products are not even produced in America. They are all imported from China.

Wal-Mart wields its power for just one purpose: to bring the lowest possible prices to its customers. At Wal-Mart, the goal is never reached. The retailer has a clear policy for suppliers: On basic products that don't change, the price Wal-Mart will pay, and will charge shoppers, must drop year after year. But what almost no one outside the world of Wal-Mart and its numerous suppliers knows is the high cost of those low prices. Wal-Mart has the power to squeeze profit-killing concessions from vendors. To survive in the face of its pricing demands, makers of everything from bras to bicycles to blue jeans have had to lay off employees and close U.S. plants in favor of outsourcing products from overseas.

Neither the suppliers nor the Wal-Mart associates are happy with the companies policy. Despite being one of the richest companies they have been frugal while giving it back to their employees. Its expensive health insurance package against low wages has added to the pain of the employees who work really hard and take pride in working for Wal-Mart. And their efforts to form unions to negotiate the wages and insurance policy of the company have been suppressed. Many associates are not happy with what they are getting in return for their arduous work but they have no choice as they need a job to support their family.

This company is shutting down "The Great American Dream" of children earning more than their parents. Is this what Sam Walton visioned when he founded the company in 1962 ?

1 comment:

  1. Walmart has enabled consumers to buy things at much lower prices than would have been the case if the company was not around.