Wal-Mart: Love Them or Hate Them?

No one seems to be in the middle ground when it comes to Wal-mart. People either love them as the biggest money saver known to mankind and a great stock to own the last two decades or hate them for the way they treat their employees and the dirty conditions in many of their stores. Personally, I've had my ups and downs with them. In the past, I loved Wal-mart both as a price-saving machine as well as a stock (I've owned Wal-mart stock for some time now.) But lately I've had some bad experiences with them, so I'm not so sure about Wally World. Maybe the tide is turning for me personally too.

But that doesn't mean I think Wal-mart is evil or ruthless. Maybe it will cease to become a place where I shop (or shop as much) but I still think of it in positive terms. Why? Consider this from Smart Money:

It should go without saying that poor and lower-middle-income people are heavily represented among Wal-Mart's customers. Research firm Global Insight estimates these folks have saved hundreds of billions over the years by shopping at Wal-Mart. This is why Jason Furman, a visiting economist at New York University, calls Wal-Mart "a progressive success story."

Not only has Wal-mart saved the poor a ton of money, but it's saved all its shoppers a ton of money. It's even saved money for people who don't shop there -- by making other retailers more aggressive on price in order to compete.

And as far as how Wal-mart treats its employees:

The only barriers to Wal-Mart should be those imposed by markets: Does it pay enough to attract and retain a workforce, does it earn enough to pay its bills, etc. If these tests are met, it is certain that Wal-Mart will be benefiting society — including the benefit to workers who accept employment at Wal-Mart over the alternatives. This is the theory of Adam Smith's Invisible Hand. When each individual is free to make the optimal choice for himself or herself, the result is also optimal for society.

As you might guess, I'm a big believer in free and open markets, so to me, the fact that people work at Wal-mart suggests they are willing to trade their time/work for the pay they get.

And consider this as well:

Indeed, the fact that 1.8 million people work at Wal-Mart is evidence that, for these mostly low-skilled workers, Wal-Mart is better than the alternative. When it opened a new store in Glendale, Ariz., in 2004, even though wages were as low as $6.75 an hour, 15 job applicants turned up for every opening. As Furman observed, applicants to Harvard had a higher chance of success. Nor is Wal-Mart unusually profitable at its workers' expense. It earns about $6,300 per employee, similar to what other retailers make.

So let's get this straight:

1. Wal-mart is saving people a ton of money.

2. Wal-mart is forcing other retailers to raise their game to compete -- something that benefits consumers.

3. Wal-mart seems to be offering wages and benefits that people are willing to work for (otherwise, they could work somewhere else.)

So, while I might shop less at Wal-mart due to my reasons cited previously (like waiting in line a long, long time), I still think the US has benefited by having them around.

What's your take on the situation?

Comments

[Rhea]

I hate Walmart. People work there not because they're willing to trade their time for the lousy salaries but because Walmart is often the only game in town, particularly after Walmart blows into town and puts all the small, independent stores out of business. I do not have to shop at a Walmart because I live in a city. I have a choice. A lot of other people don't. I hate the greed Walmart represents. Sure, they offer low prices, but at what cost? There are some great documentaries and websites that are critical of Walmart.

[cory]

I have never had a good experience at Wal-Mart. Every time I have shopped there, I've been met with ineptitude, shoddy conditions, shoddier merchandise, and rude clientele. It had gotten to the point where I would lose my patience with the store just by going into the parking lot!

I now generally go out of my way to shop anywhere else, but every so often--usually about once a year--I'll tell myself "It cant be that bad" and I'll make an impromptu trip to WalMart to pick something up and I'm always reminded why I never go there.

The one time I used Walmart.com I also had a terrible experience. After placing the order, I got no email confirmation that the order had been placed, though walmart.com did have my order. About a week later, the second day of their estimated delvery window, I got an email saying that my order has been delayed and nothing had been processed at all. Walmart gave no timeframe for processing the order, so I cancelled it. I didnt get a cancellation confirmation for another 2 weeks.

[Lord]

Poor people need to shop somewhere. While not enamored of their merchandise, I respect what they have done to retail. Small independent businesses have to adapt or go out of business which is the name of game. They also pressure producers margins but this is largely unavoidable as well. Walmart shouldn't be the scapegoat for government policies other than the ones they themselves advance. Change those if you want Walmart to change.

[Lord]

On the other hand, as a large company I think they can and should take a more positive role in policy. I think they may be starting in this direction, but they have a long way to go.

[john collins]

What a load of crud!! Wal-Mart havent done poor people any favours, in fact all they have done is provided a whole load of goods at low prices we dont really need just to part us from our hard earned cash. Come on, lets face it most of the stuff is at best "ok" from a real value point of view, (who needs to have the range of carboard box food they produce really?)but the pressure on 3rd world countries to provide Wal-Mart with these goods we dont need means that they and us loose out!!

[john collins]

What a load of crud!! Wal-Mart havent done poor people any favours, in fact all they have done is provided a whole load of goods at low prices we dont really need just to part us from our hard earned cash. Come on, lets face it most of the stuff is at best "ok" from a real value point of view, (who needs to have the range of carboard box food they produce really?)but the pressure on 3rd world countries to provide Wal-Mart with these goods we dont need means that they and us loose out!!

[Brad]

I don't like shopping there. It's crowded, often dirty, and the lines are terrible. But I do think the anti-Wal-Mart campaign is comical.

They don't pay living wages? Don't offer benefits? Use ruthless tactics with suppliers? Fine. Don't work there and don't shop there.

There's no where but Wal-Mart to work/shop in your town? Fine. Move. That's what the "reduce consumption" people tell me when I tell them I must drive to shop because my city is spread out.

Wal-Mart is a business like any other, subject to market forces. If they were no good (as an employer or a retailer) they would have been gone a long time ago.

[Matt]

Rhea,

A number of studies have been done showing that the loss of jobs in an area due to the presence of a Wal-Mart is more than offset by the reduction in price of goods, particularly for the poorer consumer. Now you may notconsider this a social good (i.e you would rather have people making more money and paying higher prices than making less money and paying lower prices) but the economic data is pretty strong.

People shop at Wal-Mart for a reason. It has low prices. People also choose not to shop at Wal-Mart for other reasons (customer service, selection, etc.). If a small business wants to compete with Wal-Mart, it simply needs to pick one of these other areas and compete on it. The small sporting goods store I worked for in high school was making record profits in 2001 and 2002 (the recession) even though most of the products we sold could be found cheaper at big-boxes or on the Internet. We competed on customer service and it paid off. For too long, small-businesses (particularly in small markets) have not had to compete on either price or customer service. Now they do. Some businesses will close and some will find a new niche. It happens.

Also, it amuses me when people defend the employment practices of Wal-Mart relative to small-businesses. In my experience, Wal-Mart almost always paid better than small businesses and had better benefits (I didn't work there but I had several friends who did).

And finally, why do people knock Wal-Mart when they try to build a store in an impovershed area that doesn't have any local businesses (like the stores Wal-Mart has been trying to build in Chicago)? Most companies and small-business owners aren't willing to set up in lousy neighborhoods. This requires the poor to either travel long distances to make their purchases (a study in Denver found that many inner city neighborhoods had no grocery stores for several miles in any direction) or buy things at high markup from convenience stores. How is this good?

[Matt]

As a sidenote, I don't shop at Wal-Mart very often ( largely because the traffic around their store sucks) so don't take my defense of them to mean that I think they are the best store in the world.

[Rick]

I guess the readers of this blog are on the "Hate 'em" side.

Personally, I love Walmart. For most things, it's the only place I shop. You have to remember, too, that Walmart has nearly 4000 stores. So just because you had a bad experience at one store, that doesn't mean that Walmart in general is the same way. The store I shop at is clean, (usually) well-stocked, and (most of) the employees actually care.

And yes. Walmart is a business. So I would expect them to cut costs where they can, etc. They do need to make a profit. Regarding the comment above, "all they have done is provide a whole load of goods just to part us from our hard earned cash" -- of course! Pretty much any store you go into sells things you don't really need. It's part of the consumerism culture in America, not just Walmart. I sure hope you have the self control to only buy things you need, and not just anything shoved at you in the checkout lines.

Finally, if you have a problem with your particular Walmart store, ask to see a manager. Present your case to them. Walmart's managers do listen. And money talks. If you politely and reasonably present your case and tell them that you like to shop at Walmart, but because of [this issue or that issue] you may have to take your business elsewhere, I'm quite sure they'll do what they can to accomdate you.

[A Tentative Personal Finance Blog]

It's funny, I just wrote a post on Why I love Walmart a few days ago.

[cami]

I personally dislike Walmart, but I do understand that there are times and places when they are useful. For example, when I needed a tarp at 8 o'clock at night on a weekend in Western New Mexico; if it weren't for Walmart, my mattresses would have gotten soaked. That said, I make it a point not to shop their on a regular basis (I also avoid other Big Box Stores as well).

I agree with John Collins, Walmart does not really do poor people a lot of favors. They may go in to buy a few things, but come out with a load of junk (much of it, non-biodegradable plastic trinkets). If people are really going there and spending less on comparably priced items (of similar quality) that they need, than I guess it could be an advantage. Personally, I know very few people who fit this description.

[Brad]

Cami,

Being unable to go to a store and get what you need without coming out with a "load of junk" is a discipline problem . . . it has nothing whatsoever to do with Wal-Mart.

[Brent]

I'm on both sides of the fence on this one. Pro: Unheard of prices. Cons: Long lines (not so bad); the people that go there (major problem!) I have two wal marts within 5 minutes of where I live, both are plagued by the rudest customers on the planet. Running in for one item I can expect to a) nearly get run over by at least two people b) have to walk about 5 times longer than the path to the area I want to go to due to swarms of people stopping in the middle of the aisles (including the main artery aisles!) c) have one kid jump in front of my carriage so I almost run him over d) witness at least one domestic dispute inside the store and e) have to park at least a two minute walk away, because that walk takes less time than it takes to maneuver the spots close to the store and dodge pedestrians, not to mention not park next to someone who is going to smash my car on their way out.

For me the pro still outweighs the cons. I go to wal mart once every two weeks with a few things in mind: don't look at anyone, don't talk to anyone, get only what is on my list, get in and out as quickly as possible. I literally power walk through the whole store just to get out of there as fast as I can.

[john collins]

Hey Cami, thanks for your comments, I'm living in the far east and seeing the effect Wal-Mart is having on the companies who are constantly pushed for lower prices to accomodate the wests need for "things" Its a no win situation in that the poor in the west dont understand "disipline" as mentioned by Brad, hell, they use Wal-Mart as an "outing" cause they really need a break from the reality of having nothing and no-one caring a toss. Of course we could say Wal-Mart are doing everyone as they "provide " for the poor in the West (sure, but they are still poor) and the poor in the east (providing jobs!! what a joke, they put so much pressure on manufacturing costs they kill real development. So the next time you pick up that piece of plastic or that cheap tee shirt etc. remember that there is some poor sucker in the far east way poorer than the people in the west working even harder with less money to come up with the goods.

[Chris]

I would say they work at Walmart because any other retailer would fire them for having such bad attitudes and being so clueless about their store and products, and for an apparent inability to straighten items on the shelves or clean up trash in the aisles.

Even the greeters, whose only job is to say hello to customers walking in the door, seem to be too preoccupied chatting with other employees to do anything productive.

[Daniel]

Point three relies on some pretty weak economics. Assuming that an outcome is Pareto optimal just because it transpires wouldn't get you past the first quiz in an Econ 101 class. All negative externalities are instances of non-optimal outcomes freely chosen by individual actors. The logic you quote suggests that the 1929 crash was optimal because it was the result of actors freely choosing strategies based on what they thought was best for them. The logic also makes the mistake of equating outcome to preferences. People might willingly work for Wal-Mart, but that doesn't mean they prefer so to do. They might be working for Wal-Mart because the mom & pop they used to work at for higher pay and better benefits got put out of business by Wal-Mart and the "tyranny of small decisions" effect.

In the post-Keynesian era we reject overly simplistic economic arguments that assume what people do naturally and perfectly follows from what they want. We also reject economic ideas that have demonstrated their capacity to lead to sub-optimal outcomes on the global scale such as a blind trust in the "invisible hand."

[FMF]

Daniel -- What? I think you've been reading too much from my grad-school econ book.

I'm not saying that people prefer to work for Wal-mart given any scenario -- I'm sure they prefer to do no work at all and be paid millions of dollars to boot -- but the fact that they've chosen to work for Wal-mart is an indication that it's the best option for them given the variety of choices they currently have.

The difference? A perfect world versus reality.

[Jo]

I personally avoid Walmart as much as I can. I never-rarely go there for personal items. I used to shop there all the time, but then me and some family had some problems with service at the local store, I heard about the company's ethics and practices, many of their products are poorer quality, customer service was and still is terrible (it got worse with the Super Walmart), and frankly I liked other stores better. Also, the prices really are not that much lower. I had to do some comparison shopping for work and most of the items I was looking at were about the same price, if an item was cheaper it was only pennies cheaper. I have gone there for work on occassion, becuase I feel it is important for me to be fiscally responsible to my work budget.

When our town got a Super Walmart, I know many long-time Walmart advocates stopped going becuase they were either a) Disgusted by the fact that the perfectly good old building was just demolished instead of refurbished and/or b) it is so huge that it is impossible to find anything or make a quick trip.

I do know a number of people that have worked there for awhile, it seems if you can be full-time and in management that you do fine.

[john collins]

Hey FMF, give Daniel a break, the basics of what he is saying is 100%. We all are different and some of us express ourselves in differtent ways but lets try and be open to other peoples views regardless of how they are expressed, isnt that how the USA became what it is today?

[Minimum Wage]

Wal-Mart is great for poor and working class Americans in the short run. Selling out our economic future toi China and paying Why Pay More wages is not so good for poor and working class Americans in the long run.

So Wal-Mart is great if you're into instant gratification.

[Jay]

I've had my ups and downs with Waltons World. Wal Mart is the true American Success story. You love them for what the accomlished - you hate them for how they
did it.

Like Sears before them, they do appear to use the strong arm practices on the suppliers. But thats OK. The suppliers are well informed about what they are getting into when they do business with Wal Wart.

What bothers and disturbs me, is the unfair treatment of their employees. I agree with the original story line that the employees have made choices and chosen their optimal employement option. In an open market place thats how things are suppose to work. However, when they unfairly make people work over time and not pay them, did not give them adequate breaks, etc, etc, etc. Then they are violating the basic rules and gone beyond what we as a Society have agreed is fair in our open market place.

I have my own small business and truly believe in free market system and low government regulation. But those systems still need to balanced by fair play.

To Wal Marts defense regarding health benefits - Don't blame Wal Mart for a failed national healthcare policy. Niether the Dems or Repubs have been able to fix that problem.

My Wal Mart dollar votes have declined in recent years because of some of the employee harassment issues. But, I still get a lot of bang for my buck when I do shop there - dirty floors and long lines included.

[Daniel]

Again, economics just aren't that simple. (Two minutes in that grad school econ text you mentioned will suggest that! And I'm not even an econ grad student.) You just cannot assume that people do what they do because they're happy with it. They often do what they do because they don't have better alternatives. Wal-Mart has demonstrated it's capacity to destroy those better options in small-town economies.

Then there's the point that was brought up before and after my post - spending money at Wal-Mart has significant downstream economic effects. It's not good for small-town America now, and it's not good for big-town America down the road.

Your finance advice is great, and I love to read your defense of tithing, but the invisible hand just isn't a good normative guide for policy and it isn't a good positive guide for describing the economy.

[FMF]

Daniel --

Ahhhhhh. Just as I suspected. We're talking the difference between "possibilities" and "reality." You say:

"They often do what they do because they don't have better alternatives."

Ok, so I can agree that the COULD be better options, but that's not the real-world we've been dealt. So I look at what actually exists and what is happening under those conditions.

For instance, a potential worker in any given city has options on where to work, Wal-mart being one of those. In a free society, he can decide to spend his time wherever he likes -- as long as the business hires him. He may have a choice of working at Wal-mart, Pizza Hut, the local dry cleaners, for a painting company, etc. The list goes on and on.

And yet for some reason, he selects working at Wal-mart. Why is this? Is it because Wal-mart is the worst alternative for him out of all the options? No, to the contrary, it's because Wal-mart represents the best otption for him based on his personal criteria (which may include pay, hours, commuting distance, benefits, co-workers, and a whole list of items.)

Would you disagree with this?

Now I can agree that working at Wal-mart might not be the best option if there were other (currently non-existent) alternatives. But there aren't. There may be in the future and at that point our worker may switch jobs. But at this given point in time, Wal-mart is the best option he has among the possibilities.

My point #3 above -- the one you disagree with -- is as follows:

"Wal-mart seems to be offering wages and benefits that people are willing to work for (otherwise, they could work somewhere else.)"

In a free society, if people aren't willing to work for Wal-mart, why do they? It's certainly not that they are forced to as slaves. It may be because they have no other alternatives, but if this is the case it proves my point exactly -- that Wal-mart is the best alternative for them of the alternatives that currently exist.

I'm sure there are a whole host of situations that aren't "optimal" from an economist point of view. Wal-mart may be one of them. The war in Iraq may be another. The way the government spends money is likely another. That said, those are realities today. Wal-mart is a legal business in the US. There is a war. And the government is spending money. Are there better alternatives to these? Probably -- in an ideal world. But I'm talking about reality -- what currently exists. As you know from reading this blog, I'm big on reality and don't think much of theory. Theory is great, but the practical aspect of the situation is where people lives there lives -- what really impacts them. That's why I lean this way.

There's an old joke that asks something like "How does an economist open a can of beans?" The answer: "He starts with 'first, let's assume I had a can opener.'" In other words, you can make a whole lot of assumptions that will make life and choices a lot better but they often aren't realistic (such as wishing Wal-mart away.) So then you need to deal with the situation as it is.

All this blabbering said, maybe I'm just missing the point somehow of what you're trying to say. But I am trying, honestly. But from my take of what we're talking about, you thoughts deal mostly with "what could be" while I'm looking at it from "what is." Am I wrong in seeing it this way?

So, I'm willing to listen to any thoughts you have that can explain the situation of why someone would work at Wal-mart and yet it not be the best option for them from the set of existing alternatives. But make sure they are simple enough that even I can understand them. ;-)

The rest of your points about Wal-mart are fine with me -- that's why I wrote this post -- to hear the pros and cons about the company. Personally, I like a variety of opinions on this subject as it makes for a long list of comments and discussion. Thanks for adding your thoughts.

And, for the record, I've now sold my Wal-mart stock. Not because I think they are bad or no longer a good investment, but they just aren't needed in my portfolio. I just wanted to bring up that point since I mention in the piece that I own their stock. This said, I do own a portion of them indirectly through the index funds I'm invested in.

[Teri]

PErsonally I always thought Wal-Mart was treated pretty unfairly in the public ring. Every complaint I have heard about Wal-Mart I can see at most any major corporation, but people like to beat up on Wal-Mart. I always thought it was kind of silly. Yeah, Wal-Mart doesn't pay a ton or have benefits. Yeah, like any of the retailers do for part-time jobs? I certainly had no benefits when I was working full-time jobs minimum wage a few years back. Hiring illegals? Sounds awfully familiar all around. Every complaint about Wal-Mart I can pretty much apply to every minimum wage job I had ever worked as an unskilled worker, except maybe getting locked in and forced to work overtime with no pay. That was a little over the edge, but I wouldn't put it past a lot of people I worked for as a young kid either. I have complaints miles wide working at the local amusement park but no ones speaking about the same practices there, or even over at the local Target.

I don't really feel strongly either way but I just always cringe when I hear the negative Wal-Mart. To me it is a crappy store that I refuse to shop at because it is always WAY too crowded. It seems to have success in some regard. They seem to get an awfully bad wrap for a company that has plenty of employees and shoppers.

[Daniel]

What you're really tossing up for discussion is a normative question - is good for society that people willingly work for and shop at Wal-Mart despite the fact that working for Wal-Mart and shopping at Wal-Mart destroy better local jobs and put out of business marginally more expensive businesses that provide better products with fewer negative downstream externalities. That's the question you really asked up front, right? Maybe I misread the post.

Economists usually ask two normative questions. The first being whether policies "grow the pie," or are "optimal." The second question is whether policies redistribute income down or up the ladder (down being better than up).

My understanding about Wal-Mart is that it is bad on both counts. The lower and lower-middle class is able to find cheap goods both at Wal-Mart and elsewhere, which grows the pie in the short term. But the long-term effects on the communities and the long-term effects of having to spend more money on replacement goods may not grow the pie.

Then there's the redistributional effect. My understanding is that Wal-Mart has one of the worst entry-level to executive pay ratios in the retail industry, and it actively seeks legislative and regulative protection and actively resists labor organization.

So not only do these fail to redistribute income down the ladder, but worse yet they undermine your point. Workers might choose to work at Wal-Mart, but as soon as they attempt to organize to improve their situation (the economist probably also asks, "Where can I find a can opener?") they're stopped cold by a company more interested in rents than in the free-willed decisions of homo economicus.

[FMF]

No. I'm not asking the question you state above. Let me be clear (and brief) from my comment above -- here's what I'm asking:

"Why [would] someone would work at Wal-mart and yet it not be the best option for them from the set of existing alternatives?"

I don't want thoughts on if Wal-mart is bad for the economy, what negative downstream externalities exist, and the like. I'm just looking to address the question stated above (which is the one point of my piece you objected to in the first place.)

[Livingalmostlarge]

I hate walmart. So busy and overcrowded, terrible. And their business practices.

[Pam]

I worked at Wal-Mart for nearly 8 years. I was the personnel manager for the first 4 years of my employment and did the hiring for the store. The last 4 years I dropped down to part time after landing a career-type job and worked as a clerk in a department. For many people a job at Wal-Mart is their only option - or at least the best option for them at a certain point in their lives. We live in America - nobody is forcing them to work there. If they don't like it, then they can move on to something else. I hear McDonald's is always hiring.

And now ... 12 years later ... I still shop at Wal-Mart almost exclusively for everything from groceries to non-biodegradable plastic trinkets. My main motivation to shop at Wal-Mart is price. Yes, sometimes the customer service is bad, but I consider where I am and how much the person is being paid (above minimum wage, btw). If I wanted an expert on a speciality product, I'd go to a specialty store.

People who "hate" Wal-Mart kind of piss me off. The majority of those haters have never worked at the store, don't really understand the way the management of an individual store works and never bother to offer constructive criticism to a store manager if they see something is wrong. Every store has comment cards at the service desk. Fill it out and send it to the Wal-Mart Home Office in Bentonville, AR --- they really DO get attention.

As for driving small business out of towns. Hogwash! If a business isn't strong enough to stand on its own for its own merit and figure out how to cater to their current client base, then they don't deserve to be in business anyway. Like Matt said about the sporting goods store -- it IS possible to find a niche and keep your loyal customers.

I really hate Wal-Mart haters.
~Pam

[Daniel]

You know, arguing on the internet really is like running in the Special Olympics.

But I do want to point out that, in fact, you were asking whether Wal-Mart was bad for the economy. I believe the specific words were:

"So, while I might shop less at Wal-mart due to my reasons cited previously (like waiting in line a long, long time), I still think the US has benefited by having them around.

What's your take on the situation?"

So, I stand by what I said. Wal-Mart isn't good for the economy, and it deliberately seeks out policies that give it protection against both the market and labor.

lolbertarians.

[FMF]

Daniel --

Yes, I did ask that. But you brought up the issue regarding my point #3. That was the part I was disagreeing with.

I'm still not so sure Wal-mart is good or bad for the economy, but I'm glad you voiced your opinion.