1. Chapter 42 Wal-Mart: Always Low Prices (and Low Wages)— Always Copyright © 2010 by The McGraw-Hill Companies, Inc. All rights reserved.McGraw-Hill/Irwin

2. 42-2 Chapter Outline The Market Form Who Is Affected

3. 42-3 You Are Here

4. 42-4 The Market Form Small Towns –Oligopoly or Monopoly Everywhere else –Monopolistic Competition Competitors –Supers (Wal-Mart, Target, K-Mart) –National Chains (Kroger, Safeway) –Regional Chains (Wegmans, Winn-Dixie, Publix) –Locals »IGA affiliated »Independent

5. 42-5 Top Ten Grocery Store Chains RankCompany Annual Sales (billions) % of Total Grocery Sales ($893b) % of Top 10 Grocery Sales ($613b) 1 Wal-Mart Stores $258.528.9%42.2% 2 Kroger Co. $77.28.6%12.6% 3 Costco Wholesale Corp. $72.58.1%11.8% 4 Supervalu $45.05.0%7.3% 5 Safeway $44.85.0%7.3% 6 Loblaw Cos. $31.53.5%5.1% 7 Publix Super Markets $24.02.7%3.9% 8 Ahold USA $21.82.4%3.6% 9 Delhaize America $19.22.2%3.1% 10 C&S Wholesale Grocers $19.02.1%3.1%

6. 42-6 Store Locations

7. 42-7 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)

8. 42-8 Who is Affected? Consumers For consumers who switch to Wal-Mart the gain is b/w $15 million and $33 million per store –Wal-Mart’s prices are 15-22% lower than national averages. –An average Wal-Mart sells $100-$150 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.

9. 42-9 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? Workers

10. 42-10 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? Taxpayers

11. 42-11 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? Other Businesses

12. 42-12 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 Who is Affected? Community

13. 42-13 What is the Net? Winners –Most Consumers –Complementary Businesses Losers –Workers –Competing Businesses Economists generally view the net as positive