Is Wal-Mart Good for the United States (The Manufacturers Perspective)

As we discussed last time the Wal-Mart model has these big box retailers telling manufacturers what they are willing to pay for a product. It is then up to the manufacturers to meet these requirements or lose their contract with the big box retailer in question.

Manufacturers say this pressure is what has led them to shutting down plants in the United States and moving these jobs overseas. In fact some manufacturers say that they have been told specifically by Wal-Mart to make this move in order to help keep their manufacturing costs down.

These manufacturers argue that the Wal-Mart method and the fact that there are very limited restrictions on what is being imported is why so many manufacturing jobs are leaving the United States and in essence hurting the middle class blue collar core that has been the heart of the U.S. economy for so long. They would then argue that the Wal-Mart market system is bad for the United States because these jobs are important to the United States.

This market system has also put a lot of U.S. manufacturers at risk. When they are unable to keep their costs down and lose contracts with the big box retailers. One example is Rubbermaid who got bought out a few years back after their manufacturing costs shot up, due to raw material costs, and they lost contracts with Wal-Mart.

The manufacturers argue that being bullied by a few large retailers to keep their prices down is an unrealistic model for maintaining a solid market system. They believe in the older model which is one where the manufacturers in essence push the price of the products being sold on the market.

In the next installment we will look at how all of this plays out in reality and who is affected by it. All we've seen so far is how this model has helped to make the big box retailers more money and how the manufacturers have made adjustments, according to them, to keep up with the big box retailers demands. I hope that by doing a case study we can better determine how this is playing out.

Is Wal-Mart Good for the United States (The Retailers Perspective)

Wal-Mart sees the key to their success being that they offer people quality goods at a low price. The same can be said for Target, Lowes, Home Depot, Best Buy any of the big box retailers. This was especially true back in the early days of Wal-Mart. I can remember going to our local Wal-Mart with my dad who was going to buy a case of Charmin toilet paper or Clorox bleach which they would have on sale for some unbelievably low price. They would literally have cases of it stacked up with no limits, so there was never an issue as to whether they would have the product on sale. Of course after we were there dad would wander around and shop for other things and soon Wal-Mart became his store of choice for almost anything.

Another thing that Wal-Mart brought to retail like no one before was number crunching. They were one of the first retailers to start crunching numbers at all of their stores to determine best prices, which times of year certain items sold more, etc. This helped them with keeping good inventory and knowing when were good times to put certain items on sale. This number crunching is also one of the keys to the effect Wal-Mart has had on our market system so remember it for later on.

Wal-Mart was growing and sitting well ahead of all other retailers in 2002, but something happened that year that would spark a dramatic change in the way Wal-Mart did business. Their numbers were lagging one quarter when they decided to bring in a lot of cheap products from China. The idea was to mark these up say 40% instead of the usual 20% on products made in the United States and help their numbers out. The plan worked to perfection, and from that point on Wal-Mart turned their focus to how much they could mark up a product and still keep a low cost for the consumer.

Since they were the largest retailer way ahead of anyone they carried a certain level of power that they started using in earnest. They began to tell companies what they would be willing to pay for a product in order for that product to be sold in Wal-Mart stores. If the manufacturer couldn't meet their price that company wouldn't sell their product in Wal-Mart.

This all goes back to the number crunching that Wal-Mart was doing. Through their numbers they knew what customers were willing to pay for certain products. They could then take this number, calculate in a 40% mark up and tell the manufacturer this is what they were willing to pay. Because Wal-Mart was so big it was hard for manufacturers to turn them down and once other big box retailers caught onto this, they began to follow suit.

The big box mentality is that this allows them to provide products to their customers at a very low price and still make solid profits for their stockholders. In essence everyone is happy. The U.S. customers get a higher standard of living because it doesn't cost as much to buy things like large screen televisions, clothing, kitchenwares, etc.

Wal-Mart and the other big box retailers would argue that in essence they are good for the United States because they are helping us all reach a standard of living that we could have never achieved without their help.

Is Wal Mart Good for the United States (Intro)

I watched this episode of Frontline last night and found it very interesting. Ever since I finished watching it I've been thinking about the question and so it seems the only real answer it so walk through how this all works.

Now the key to this is to understand that this show is not talking specifically about Wal Mart, but rather the Wal Mart approach that has overtaken our market system. Before Wal Mart it was manufacturers that drove the prices and products on the market, since Wal Mart it is the large box retailers who control price and products coming to market.

Wal Mart and others like them argue that this approach is better for the American people because it helps to reduce the cost of consumer goods and thus raises the standard of living for all Americans. Opponents to this say that it puts undue pressure on manufacturers and in turn pushes jobs out of the United States that are being replaced by lower paying service industry jobs, like working at Wal Mart.

In the next installment we will look at things from the retailers point of view and get an understanding of how their system works and why they feel this is better for the American people than the older system.

Speaker Rot

So a while back I was dusting my speakers when I hit the foam trim on the woofer and it crumbled into pieces. The speakers are 22yrs old, but they still sounded great and I was really disturbed by this whole turn of events. Well now the sound has gotten so bad I realize that something has to be done. I started to look into getting the speakers repaired and I found that I can buy a do it myself repair kit for about $25 a pair, or I can send the woofers off to get repaired for about $35 a piece, or I can send the entire speaker to a place that specializes in the particular brand in question.

Well I work with some guys who build specialized electronic instruments for research and I knew that one of them has built in own speakers in the past, so I went to ask him what to do. He honestly didn't seen much difference between me doing the repair myself or sending the woofers off to someplace else. The method that I would use or they would use would be similar and probably get similar results either way. But he warned me that the speakers would never sound the same. When they are setup at the factory they tune the speakers and I could not possibly do this without a lot of knowledge and the place I would send them to would not be able to do this as well. Then I told him of the place that would take in the entire speaker, and that they specialized in this particular brand (in fact they are made up of electrical engineers who use to work for the speaker manufacturer before the company went bankrupt). He felt that sending them the entire speaker would make the most sense, but that cost wise it would probably be better to just go buy new speakers.

But now what to do with the old speakers? Well this is where EBay comes in. I do see these selling on EBay, and though the shipping may cost more than I will get for the speakers it might be a good solution as to what to do with the speakers. I would rather them live on somehow rather than end up in the trash.

Well if I decide to get them repaired or do it myself I'll make a note on here as to the outcome.

The American Dust Bowl

I have to admit I know almost nothing about the dust bowl and so I found this interview with Timothy Egan, author of The Worst Hard Time: The Untold Story of Those Who Survived the Great American Dust Bowl, very interesting.

Gwen Stefani - The Sweet Escape

I was a big fan of Love.Angel.Music.Baby, especially the slick pop songs like "Luxurious." This new album sticks to the formula that worked so well on that first album, but it tones down the 80's art pop that could be found in songs like "What You Waiting For." The interesting thing about Love.Angel.Music.Baby was that rehashing a lot of those 80's dance and art pop sounds into a modern mix worked and provided a unique sound that had some real gotcha moments. Since The Sweet Escape moves away from that odd mix, it feels a bit flat, a bit too packaged, and so is a bit tired. There are times when songs seem to be a simple attempt to build on the back of songs that were hits on the first album, like "Now That You Got It" seems to build off of "Hollaback Girl." It doesn't work because the newer songs sound rehashed where the first album songs sounded experimental and legitimate takes on older themes like "Hollaback Girl" being a fresh take on "Mickey" by Toni Basil or "What You Waiting For" being a take on the Missing Person's sound. In fact you could break down almost every song on L.A.M.B like this. That is the originality and fun of L.A.M.B and all that is missing with this new album.

Despite all of its failures it still works as a pop album and has entertaining moments, but it is a fairly weak effort. It would have been much more interesting to see Stefani gravitating towards something newer, but maybe she's not sure on where to go. She has lead No Doubt through a sound change and rebirth and then her own solo effort went off in an even different direction. She is, in the end, a pop artist and it gets hard to reinvent a new pop sound for each album. But in order for a chosen sound to work time and again you need very strong material, with good hooks and good lyrics. These are simply not that strong on The Sweet Escape.

Skilled Jobs

A story in yesterday's USA Today caught my eye. It talks about problems that companies in the United States are having getting skilled laborers like welders, etc. I personally am not surprised by this since there is such a negative view in our society of such jobs, but it is still an interesting story. It would be nice if the Department of Labor would work with professional societies like welders to get out the word that there are good jobs to be had in this field, much better than working at McDonalds.

Personally I don't buy the unemployment rate. There is something wrong with this number but I'm not sure what it is. I also feel the jobs created numbers are a bit odd, but I'm not sure how they are done or what would be better. I only know that in 2004 Republicans in Alamance County were going around before the election talking about the 2000 jobs created the year before. They didn't talk about the fact that almost all of these jobs were in the service sector, and that there were more jobs lost than created. I'm hoping to make the time over the next few weeks to investigate this stuff and I'll post here what I learn if anything.