the conveniently low prices of products when they are being sold at Wal-Mart destroy the net worth of companies, while keeping the brand name popular versus the same product being sold a smaller chain or mom and pops store where the company is able to make a larger profit, but rely more on advertising and the actual quality of a product in order remain a household name. Wal-Mart’s price also force companies to Outsource jobs to foreign companies, or downsize factories in order to stay afloat. Once a company begins to rely on Wal-Mart as its main retailer they have essentially signed a contract with them because taking their merchandise out of their stores will more than likely kill their entire profit.
Wal-Mart at all costs lives up to its motto of bringing its customers the lowest possible prices. In 2006 Wal-Mart sold $244.6 billion worth of goods. These sales made Wal-Mart the world’s largest retailer. The demand for low prices forces supplier to lower their prices until they are actually only make pennies per item sold. An amazing example is Vlasic. Wal-Mart began selling Vlasic one gallon jars of pickles which gave the company strong sales and growth in numbers, but slashing its profits by millions of dollars. Wal-Mart which is partnered with Sam's club knew that Americans love deals and pricing a one gallon jar of pickles at under three dollars would catch peoples attention. People were buying the jars faster than they could eat them. This was killing valsic in the profit department because pickle companies make their money on hamber chips, and spears; which people were not buying anymore. When Vlasic tried to increase the price on the one gallon jars Wal-Mart refused, saying that they would stop buying all of the products they getting from Vlasic if they insisted on raising the prices. They were in a catch 22. If Vlasic raised the prices they would have to move their products somewhere else, and if they kept them at Wal-Mart they would continue nit making any profit. Vlasic knew that the minuet they removed their product from Wal-Mart stores there would be other companies willing to sell their pickles at the lowest possible prices. After a Wal-Mart executive was quoted saying "we've done to pickles what we did to orange juice, we've killed it" they gave Vlasic a break selling half gallon jars of pickles for $2.79. Not long after Vlasic filed for bankrupcy, although some believe the Wal-Mart extravaganza had nothing to do with it. Something like this would never happen in a smaller mom and pops store, they don’t have enough clout to put a large corporation in a "choke hold". Smaller stores just want to carry brand name product and be able to sell them at a price that is affordable for the community that they serve and still be able to make a profit and keep their businesses open.
One could argue that the easy thing to do would be taking your products out of Wal-Mart stores all together, but that is easier said than done. In 2006 7.5 cent of every dollar spent in any store excluding auto part stores went to the retailer. Dial corp. dose 28% of its business with Wal-Mart, if they lost their business they would have to double sales in nine other accounts to break even. scenarios similar to this are true for many other companies, most of the business they do is with Wal-Mart because ideally the partnership is great until Wal-Mart begins redesigning the supplying companies anywhere from packaging, computer systems and monitoring private financial records all to “establish a collaborative and mutually beneficial relationship with suppliers” say Melissa Berryhill a Wal-Mart spokesperson. Smaller stores would never rearrange the way a supplying company dose business, they really don’t enough leverage to do something that drastic because they usually need the suppliers as much as the supplier needs them. Unlike Wal-Mart smaller chain stores are more willing to negotiate the price at which they sale and pay for their products.
Outsourcing has been going on since before the smiling face of Wal-Mart has been rolling back prices, but since those prices have become a must have the number of outsourced job as increased. Wal-Mart in 2002 bought $12 billion in outsourced merchandise; nearly 10% of all Chinese exports to the United States. The low prices that you can pay other countries for good and services make it almost impossible for Americans companies to compete. an over 75 year old company Carolina Mills that "supplies thread, yarn, and textile finishing to apparel maker half of which supply Wal-Mart" was forced to downsize from 17 factories to 7, and from 2,600 employees to 1,200 due to outsourcing. Carolina Mills would not have been able to compete with Chinese companies to stock Wal-Mart shelves even if they paid their employees nothing.
Rolling back prices at any cost seems to be what Wal-Mart is doing. There appears to be no regard for what the low prices are doing to American companies even in this time of economic depression. Wal-Mart seems more concerned with making money, maybe they should consider switching their motto to rolling back profits.
