Wal-Mart: Always Low Prices (and Low Wages) Always Chapter 39 Wal-Mart: Always Low Prices (and Low Wages) Always

Chapter Outline The Market Form Who Is Affected

The Market Form Small Towns Everywhere else Oligopoly or Monopoly Monopolistic Competition Competitors Supers (Wal-Mart, Target, K-Mart) National Chains (Kroger, Safeway) Regional Chains (Wegmans, Winn-Dixie, Publix) Locals IGA affiliated Independent

Top Ten Grocery Store Chains Rank Company Annual Sales (billions) % of Total Grocery Sales ($755b) % Top Ten Grocery Sales ($566) 1 Wal-Mart Stores $284 36.65% 50.19% 2 Kroger Company $56 7.25% 9.93% 3 Costco Wholesale Corp. $47 6.09% 8.34% 4 Target 6.04% 8.27% 5 Albertsons $40 5.12% 7.02% 6 Safeway $36 4.62% 6.33% 7 Ahold USA Retail $27 3.54% 4.84% 8 Supervalu $20 2.52% 3.45% 9 Publix Super Markets $19 2.40% 3.29% 10 Delhaize America $16 2.04% 2.79%

Store Locations

Monopsony Concerns Wal-Mart is the biggest wholesale buyer for many companies’ products. Wal-Mart (often) dictates the price will is willing to pay. This forces companies to outsource production. cut costs (including wages and benefits)

Who is Affected? Consumers For consumers who switch to Wal-Mart the gain is b/w $11.25 million and $27.5 million per store Wal-Mart’s prices are 15-22% lower than national averages. An average Wal-Mart sells $75-$125 million in goods. For consumers who like their old store, but it closes. Consumers “reveal” their preferences by paying higher prices at smaller IGA stores. These consumers are worse off if the store closes. Nearly all economists consider this a net win for consumers.

Who is Affected? Workers Wal-Mart’s pay and benefit package is $5-$10 lower than their competitors. Competitors are unionized have retirees New Wal-Marts hire b/w 450 and 500 workers (375-400 FTE) Many/most of the new Wal-Mart jobs are displaced elsewhere. Productivity rises.

Who is Affected? Taxpayers Most (b/w 70% and 80%) of a new Wal-Mart’s sales displace sales elsewhere in the community. Sales taxes would not necessary be affected because Food is rarely taxed The increase in sales is mostly from people in the state (or taxing district.)

Who is Affected? Other Businesses Hurt Competitors that try to “out Wal-Mart Wal-Mart” Unaffected Competitors that sell goods Wal-Mart does not Helped Complementary stores and restaurants that surround the Wal-Mart

Who is Affected? Community Sociologists have noted that Wal-Mart damages the non-economic fabric of communities. Displaced business owners tend to be Church leaders School Board members Community leaders

What is the Net? Winners Losers Most Consumers Complementary Businesses Losers Workers Competing Businesses Economists generally view the net as positive