Bill Gates clone buys first X-box?

[GuyOnTilt]

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If GoT thinks its all "anti-Walmart propaganda [censored]," well, there is nothing anyone can do if he doesn't understand economics

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Okay dude, fine. I may not have time to respond tonight but I'm sure others will. Briefly outline for me some reasons Walmart is "evil" for economic reasons.

GoT

[InchoateHand]

If you want a more sophisticated analysis, I'll be happy to provide you with one over the thanksgiving holidays, and post it in politics. In fact, a number of scholars have already examined various facets of Walmarts influence.

So in lieu of that analysis, I'll give you a couple points to ponder. The first concerns the frequently alleged "predatory pricing," whereby Walmart prices out local competition. For all the deleterious effects to regional economies (and home equities) when Walmart moves in, this alone is "good competition," and in theory I agree.

Thats why looking at the retail end is, at least initially, the wrong path to take in the Walmart case. Far more interesting is its purchasing power--it is the largest consumer of Disney products, Proctor & Gamble products, etc. etc. etc. What this clout means, and this has been substantiated, is that price discrimination occurs--whereby Walmart can leverage below-market prices from suppliers. The market fails here, because aside from the increidble reach of Walmart and the luxury in pricing its scale provides, other retailers (and suppliers) are excluded from the free exchange of goods as a result of discriminatory pricing. Interestingly, almost all US antitrust legislation covers predatory pricing---there is very little recourse when the pressure is exerted so heavily on suppliers.

But wait, you say, isn't this still good for the consumers? Aren't they getting EVEN cheaper goods? Perhaps, this is actually a very interesting question, and I can't, in this venue, give you a short answer. I would argue, and will do so at length at a later point, that there is a net loss for consumers in the long-term aggregate, certainly as a monopoly is solidified.
For instance, stipulated in their contract, no seller to Walmart may engage in direct sales over the internet, and hence the enormous investment in walmart.com. The purchasing power of Walmart allows it to strike anti-competitive deals with its suppliers, adding friction to the exchange of goods and services.

Okay, I'm actually really exhausted, so like I said, I'll do this in detail later, but its a remarkably easy case to make, and has been made many times before, even if never on the op-ed pages of the Wall Street Journal.

[IggyWH]

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I'll do this in detail later

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All I can say is WOW... you don't need to go into more detail later. If people can't understand why Wal-Mart is bad from what you just said, they'll never understand.

Just to state my position, I'm not a Wal-Mart "hater" other than the fact that I hate going there because their lines are always a mile long and I don't really think they are that much cheaper.

[MEbenhoe]

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If GoT thinks its all "anti-Walmart propaganda [censored]," well, there is nothing anyone can do if he doesn't understand economics, social policy, corporate ethics, or myriad other concerns.

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awww, this statement is so ironic its kinda cute.

[InchoateHand]

Wow, you are like a regular Alanis Morisette, only a little dimmer.

[scotty34]

There is a net gain for consumers, however it results in a net loss for society. Any introductory econ text will display this nicely with consumer and producer surplus graphs, and dead weight social loss resulting from different types of price discrimination.

[Evan]

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predatory pricing

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Is this illegal? Is it even unethical from any perspective other than the biased, less efficient business it replaces? If you ran a company and could make $X by pricing your products at $Y or make >$X by pricing your products at <$Y, why wouldn't you cut your prices to make more?

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looking at the retail end is, at least initially, the wrong path to take in the Walmart case

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I haven't read past this line yet, but I'm very suspect of it. You're going to have to make a good case to convince me that I should not be looking at the retail side to analyze the largest retailer in the world.

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Far more interesting is its purchasing power

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You may also want to go into Wal-Mart's ability to essentially change trade credit into interest free long term debt. Wal-Mart's account payable turnover is orders of magnitude lower than any other retailer. I'm still not sure how this makes them evil, though.

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What this clout means, and this has been substantiated, is that price discrimination occurs--whereby Walmart can leverage below-market prices from suppliers.

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I feel like you went out of your way to make a really obvious point sound more important and ground-breaking than it is. Of course it leverages its size to negotiate cheaper prices, shouldn't it? When you go to the grocery store and save $1 cause you bought 5 apples or whatever, do you ever offer to pay that extra $1? That is no different from anything Wal-Mart does. I can't understand why you think they should pay more for goods than they have to. If it's hurting P&G or Unilever, well, that's really their problems, not Wal-Mart's.

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I would argue, and will do so at length at a later point, that there is a net loss for consumers in the long-term aggregate

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Your argument becomes much harder when you consider the markets that Wal-Mart thrives in (poor parts of middle America). Wal-Mart isn't coming into places like NYC or LA and killing the economy with supply shocks, but many critics will attempt to make it seem that way.

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The purchasing power of Walmart allows it to strike anti-competitive deals with its suppliers, adding friction to the exchange of goods and services.


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This is certainly true to some extent.

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its a remarkably easy case to make

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That is absurd.

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and has been made many times before

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This is as untrue as the previous line was absurd. You make it sound as though there is definitive proof that Wal-Mart is bad or evil or whatever. There is not. The case has been argued before, but to say that it has been "made" implies something far more certain than what actually exists.


One thing it seems like everyone neglects to mention when bashing Wal-Mart is the tremendous amount of wealth they've created. Here's a 30something year chart of Wal-Mart, Berkshire Hathaway, Coca Cola, the DJIA and the S&P500: