Walmart: Our Soul – Less Money

Corey honored me with a nice little jab on his blog regarding a comment to his post on loving Walmart.

In my opinion, Walmart is soulless – but not a bad business. Corey seems to think it’s because Walmart is SO incredibly big, that they are a target now… That sounds like a whiny excuse to me…

Maybe there is some truth from the driveling masses who might shop there, but Charles Fishman (FastCompany) had a few other ideas about Walmart,

Walmart has also lulled shoppers into ignoring the difference between the price of something and the cost. Its unending focus on price underscores something that Americans are only starting to realize about globalization: Ever-cheaper prices have consequences. Says Steve Dobbins, president of thread maker Carolina Mills: “We want clean air, clear water, good living conditions, the best health care in the world–yet we aren’t willing to pay for anything manufactured under those restrictions.”

Charles writes an extremely compelling argument detailing the simple fact that Walmart has one mission:  “To bring the lowest possible prices to its customers.”

How noble, right? Some might say so. Walmart vendors would credit Walmart as a quick paying account, but one that expects year-over-year pricing decreases for products it commonly sells. If you as a vendor can’t supply the massive quantities they require at the prices they require, they’ll outsource to an overseas supplier who can.

What does that mean for you and I? Well, we get low prices but at what cost? That’s a tough question and one that MasterLock had to answer:

Randall Larrimore, a former CEO of MasterBrand Industries, the parent company of Master Lock, understands that contradiction too well. For years, he says, as manufacturing costs in the United States rose, Master Lock was able to pass them along. But at some point in the 1990s, Asian manufacturers started producing locks for much less. “When the difference is $1, retailers like Walmart would prefer to have the brand-name padlock or faucet or hammer,” Larrimore says. “But as the spread becomes greater, when our padlock was $9, and the import was $6, then they can offer the consumer a real discount by carrying two lines. Ultimately, they may only carry one line.”

In January 1997, Master Lock announced that, after 75 years making locks in Milwaukee, it would begin importing more products from Asia. Not too long after, Master Lock opened a factory of its own in Nogales, Mexico. Today, it makes just 10% to 15% of its locks in Milwaukee–its 300 employees there mostly make parts that are sent to Nogales, where there are now 800 factory workers.

Larrimore did the first manufacturing layoffs at Master Lock. He negotiated with Master Lock’s unions himself. He went to Bentonville. “I loved dealing with Wal-Mart, with Home Depot,” he says. “They are all very rational people. There wasn’t a whole lot of room for negotiation. And they had a good point. Everyone was willing to pay more for a Master Lock. But how much more can they justify? If they can buy a lock that has arguably similar qual-ity, at a cheaper price, well, they can get their consumers a deal.”

It’s Wal-Mart in the role of Adam Smith’s invisible hand. And the Milwaukee employees of Master Lock who shopped at Walmart to save money helped that hand shove their own jobs right to Nogales. Not consciously, not directly, but inevitably. “Do we as consumers appreciate what we’re doing?” Larrimore asks. “I don’t think so. But even if we do, I think we say, Here’s a Master Lock for $9, here’s another lock for $6–let the other guy pay $9.”

Is it wrong to pay less? Is it wrong to ask someone to accept less money than I would take so I can pay less of my money? Not necessarily, but in the end where does this lead? Are we leveraging our soul so we spend less money?

Corey, yes they are big, but is that why they are a target?

Ken Stewart’s blog, ChangeForge.com, focuses on the collision between the constantly changing worlds of business and technology. Ken is also the Director of Technology at Kearns Business Solutions.