An Idea That Could Topple Wal-Mart

While reading a Wall Street Journal editorial (Dec. 3, 2005) on whether or not Wal*Mart is good for America, I got to thinking about the anti-Wal*Mart movement.

So far, the anti-Wal*Mart movement is focusing its attention on educating consumers about the high cost of low prices and on trying to unionize current Wal*Mart workers. Their efforts seem to be having an impact as more and more of us are asking if Wal*Mart is good business or bad business. However, Wal*Mart is still proceeding at warp speed opening up more stores and going through significant measures to bring the lowest possible prices to market.

What if the anti-Wal*Mart movement started focusing on dissuading people from ever becoming a Wal*Mart employee? When you think about it … Wal*Mart needs employees more than it needs customers. For a new Wal*Mart to be in business, it needs to hire new staff. And if Wal*Mart is unable to hire a staff, it can’t really open new stores. Hmm ...

Could this be the stone that topples the Goliath Wal*Mart?

Comments

[Jason Yip]

It would be more socially useful and probably more effective to provide a better alternative to Walmart as an employer. But I'm not sure why "bringing the lowest possible price to market" is something to rally against?

[Mike]

I'm in !

I promise to never work for WallyWorld.

I also have data to prove they're bad for America. How ?

Think about it. Where else could the fat ugly people of the world get oversized T-shirts and Spandex tights ?

We'd be a more beautiful society without WM !

They're ruining America with cheap clothes and cheap goods.

We now have to buy 3 toasters a year because the manufacturer can't afford to make them well.

Coffee makers used to last for years, now they're a monthly purchase.

We used to be in the Coffee of the Month Club, now we're in the Coffee Maker of the Month Club.

Cheaper and better don't go together. They don't even talk to each other.

Better makes us a better nation. Pride in workmanship, not pride in getting a manufacturer to sell it to them for a 1% markup.

Damn, brother, do you think they got to be the richest family in America by selling it to you for a 1% mark up ?

Hell, no ! They beat the seller down and keep them from being able to pay a living wage to their employees and/or give them benefits.

Just as they don't want to pay benefits or a livable wage.

[Stephen Macklin]

Mike,

As an employee of company that is a seller to Wal-Mart I can inform you that you are wrong. I make good enough money to live in one of the most expensive areas of the country and have a generous benefits package.

The choice is simple. If you don't like Wal-Mart don't shop there. Don't work there. If you think you can do it better - shut up and start opening stores.

And here's something to consider from the supplier's side. There are reasons they don't object too strongly to WM whittling away at their margins and forcing them to drive down manufacturing costs and perhaps quality. First, a consumer product probably cannot survive in the current market if it's not at WM (I know for a fact that whole product lines have been dropped or revamped before launch due to WM objections). Second that same toaster they are selling to WM for 1% margin after they have squeezed every penny out of production costs possible, they are selling to every other retailer at full margin.

[Mike Smock]

"dissuading people from becoming Wal*Mart employees"? John, do you really mean this? The anti-Wal*Mart folks are primarily unions. Are you suggesting union intimidation tactics?

[johnmoore (from Brand Autopsy)]

Mike ... no, I am not suggesting union intimidation tatics. I am suggesting that Wal*Mart detractors could potentially see more gains by focusing their efforts more on changing people's job selection approach and less on changing consumer buying habits. The crux of my point is that Wal*Mart needs new employees to grow just as much or maybe more than they need new customers.

Not sure I can agree with your opinion that anti-Wal*Mart folks are primarily unions. Yes, the majority of union people are not pro-Wal*Mart. But there seems to be a lot of non-union advocates who are not fans of Wal*Mart.

[Shea Gunther]

They get 6 applications for every job they have open. Good luck with that one.

:)

[Mike]

Hey Stephen,

Is that your blog you linked to..the one with the sub-title that says:

" If the FEC makes rules that limit my First Ammendnent right to express my opinion.....I will not obey those rules. "

Hard for me to belive someone with that on top of their blog would tell someone expressing their opinion to shut up. Kind of invalidates your comment AND your opinion AND your blog.

As for don't shop there...I don't.

As for don't work there, I wouldn't.

As for working for a supplier, I did. Millstone Coffee. We sold to Sam's and WM. They were hard to work with, had brainwashed employees and didn't pay well enough to keep doing business with them.

If a manufacturer can't operate without selling at WM, they don't deserve to be in business anyway. It's a helluva lot easier to make $1,000,000 by selling a $2o product 50,000 times than it is to sell if for $10 100,000 times.

As more companies learn this, the more WM has to go across the world and find junk products to sell to the great unwashed that shop there.

I can't even believe you said 'perhaps' in relation to their quality. You've swallowed their kool-aid and it will slowly kill you.

Sqeezing every penny out of costs always, repeat always, leads to loss of employee benefits and a salary that doesn't keep up with the cost of living.

I consult for a manufacturer every day. Why would they, with a limited amount of production, want to sell items at WM for a 10% mark-up, when they could sell them to other resellers for a 35% mark-up ?

If it hasn't gotten you yet, it will. Save your money while you can, Mr. Elite, they'll get you eventually.

Get out while you can. The Walton family didn't get to be the richest in the nation by buying at a fair price.

It ain't what you sell it for that makes you money, it's what you buy it for before you sell it.

They ain't doing this for their health.

Don't want to believe me, read the NY Times & the WSJ and all the other people who deride WM's practices and how they treat their suppliers.

Live long & prosper. I'm really on your side.

Except for the shut up part.

You never know when the six degress of separation will bring someone back into your life. Be more careful in your commenting and posting. Or don't and wait for it to find you.

[johnmoore (from Brand Autopsy)]

Mike and Stephen ... while I appreciate your spirited banter, let's not make this personal. If you two wanna make it personal, please exchange blows over email. Okay?

[johnmoore (from Brand Autopsy)]

Shea ... interesting statistic on job applicants per Wal*Mart positions. Is that stat representative of store-level positions AND corporate positions?

[johnmoore (from Brand Autopsy)]

For those interested in the WSJ take on Wal-Mart as published in its WEEKEND JOURNAL (12/4), click here to download a PDF of the articles.

[Mike]

Sorry to muddy up your blog.

My apologies.

Thanks for the PDF's.

[Tom]

John - The only thing I've seen as far as job statistics was this article a while back:

http://www.sfgate.com/cgi-bin/article.cgi?file=/c/a/2005/08/17/MNGDPE91AH1.DTL

Not exactly 6-to-1 but nothing to sneeze at either. Anyway, this is store positions and since I'd assume there are a lot more people going for corporate positions. Maybe 6-to-1 is the average of the two?

[Tom]

heh...when I re-read the link it turns out the number was 11,000 applicants vs. 400 jobs...guess 6-to-1 is a low estimate...

[christien]

interesting idea, but i think the fallacy in the ideas is that most of the people that are looking for employment at walmart probably could care less about the greater cause. the typical American worker is just looking to make ends meet. i worked at starbucks for a while. no one ever spoke of a mutiny against the company. they spoke about how they wish they could nab more hours a week.

also, going back to Yip's comment. what's wrong with what they're doing? sometimes i wonder if people just get pissed they didn't come up with the next 'great' idea so they want to take it out on the company. guess everyone has a purpose.

[Rob]

I find it interesting that Walmart is criticized for doing very well the things that a business should do--namely, reduce prices, attract customers, provide jobs (and training) for entry level workers, and provide a decent return to investors. Walmart's business is focused on delivering a terrific value (measured by price, not necessarily quality) to its customers. No one is forced to shop there, but millions do because they they "get" the brand position. No one is forced to work there, but over 1 million do because the company provides training, benefits, and opportunity (see the WSJ article referenced above) that these employess need or value. No suppliers are forced to place their products in Walmart, but thousands do because there is some value for being on WalMart's shelves. When the value goes away, so will the customers, employees, suppliers, and investors.

Personally, I don't enjoy the WalMart shopping experience--it's not for me. But I still have a difficult time understanding the critics who fault WalMart for being the best at what they do. Why shouldn't they use their influence to drive down prices, attract more customers, and sell more products? Isn't that what businesses do?

[johnmoore (from Brand Autopsy)]

Okay … I feel the urge to jump in here and clarify my take on Wal*Mart.

Ain’t no doubt about it -- Wal*Mart is the epitome of being operationally efficient. I commend them for being masterful at bringing low prices to market. Heck, any business professional has to respect the fact Wal-Mart has become so successful that the company alone accounts for 2.5% of the annual US GDP. And, Wal-Mart has played a significant role is keeping inflation in check as studies have shown Wal-Mart’s low prices reduce consumer prices and in 2004, Wal*Mart’s low prices saved consumers $263,000,000,000. Yowza!

I bemoan Wal*Mart because they are the poster child for commoditization and low price marketing strategies. Seth Godin said it best when he wrote, “Cheap is a lazy way out of the battle for the Purple Cow [being remarkable]. Cheap is the last refuge of a product developer or marketer who is out of great ideas.”

To this marketer, the marketing strategy of low prices is dreadfully boring to me. And that is my beef with Wal*Mart.

The turning point for my thinking about Wal*Mart came after reading Charles Fishman’s “The Wal-Mart You Don’t Know: Why Low Prices Have a High Cost” article in Fast Company.

Charles sheds light on how Wal-Mart wields tremendous power over their vendor suppliers. To do business with Wal-Mart means that a vendor needs to be just as operationally efficient as Wal-Mart is. That means Wal-Mart vendors need to have a maniacal focus on lowering their costs and to do that ... most organizations need to overhaul their entire business operation from procurement to design to distribution to marketing to shave off any excess fat in order to protect their margins.

Here’s an illuminating cut/paste snippet from Charles’ article about Vlasic’s vendor relationship with Wal*Mart.

”A gallon-sized jar of whole pickles is something to behold. The jar is the size of a small aquarium. The fat green pickles, floating in swampy juice, look reptilian, their shapes exaggerated by the glass. It weighs 12 pounds, too big to carry with one hand. The gallon jar of pickles is a display of abundance and excess; it is entrancing, and also vaguely unsettling. This is the product that Wal-Mart fell in love with: Vlasic's gallon jar of pickles.

Wal-Mart priced it at $2.97--a year's supply of pickles for less than $3! "They were using it as a 'statement' item," says Pat Hunn, who calls himself the "mad scientist" of Vlasic's gallon jar. "Wal-Mart was putting it before consumers, saying, This represents what Wal-Mart's about. You can buy a stinkin' gallon of pickles for $2.97. And it's the nation's number-one brand."

Therein lies the basic conundrum of doing business with the world's largest retailer. By selling a gallon of kosher dills for less than most grocers sell a quart, Wal-Mart may have provided a ser-vice for its customers. But what did it do for Vlasic? The pickle maker had spent decades convincing customers that they should pay a premium for its brand. Now Wal-Mart was practically giving them away. And the fevered buying spree that resulted distorted every aspect of Vlasic's operations, from farm field to factory to financial statement.

Indeed, as Vlasic discovered, the real story of Wal-Mart, the story that never gets told, is the story of the pressure the biggest retailer relentlessly applies to its suppliers in the name of bringing us "every day low prices." It's the story of what that pressure does to the companies Wal-Mart does business with, to U.S. manufacturing, and to the economy as a whole. That story can be found floating in a gallon jar of pickles at Wal-Mart."

****************

"At some point in the late 1990s, a Wal-Mart buyer saw Vlasic's gallon jar and started talking to Pat Hunn about it. Hunn, who has also since left Vlasic, was then head of Vlasic's Wal-Mart sales team, based in Dallas. The gallon intrigued the buyer. In sales tests, priced somewhere over $3, "the gallon sold like crazy," says Hunn, "surprising us all." The Wal-Mart buyer had a brainstorm: What would happen to the gallon if they offered it nationwide and got it below $3? Hunn was skeptical, but his job was to look for ways to sell pickles at Wal-Mart. Why not?

And so Vlasic's gallon jar of pickles went into every Wal-Mart, some 3,000 stores, at $2.97, a price so low that Vlasic and Wal-Mart were making only a penny or two on a jar, if that. It was showcased on big pallets near the front of stores. It was an abundance of abundance. "It was selling 80 jars a week, on average, in every store," says Young. Doesn't sound like much, until you do the math: That's 240,000 gallons of pickles, just in gallon jars, just at Wal-Mart, every week. Whole fields of cucumbers were heading out the door.

For Vlasic, the gallon jar of pickles became what might be called a devastating success. "Quickly, it started cannibalizing our non-Wal-Mart business," says Young. "We saw consumers who used to buy the spears and the chips in supermarkets buying the Wal-Mart gallons. They'd eat a quarter of a jar and throw the thing away when they got moldy. A family can't eat them fast enough."

The gallon jar reshaped Vlasic's pickle business: It chewed up the profit margin of the business with Wal-Mart, and of pickles generally. Procurement had to scramble to find enough pickles to fill the gallons, but the volume gave Vlasic strong sales numbers, strong growth numbers, and a powerful place in the world of pickles at Wal-Mart. Which accounted for 30% of Vlasic's business. But the company's profits from pickles had shriveled 25% or more, Young says--millions of dollars.

The gallon was hoisting Vlasic and hurting it at the same time.

Young remembers begging Wal-Mart for relief. "They said, 'No way,' " says Young. "We said we'll increase the price"--even $3.49 would have helped tremendously--"and they said, 'If you do that, all the other products of yours we buy, we'll stop buying.' It was a clear threat." Hunn recalls things a little differently, if just as ominously: "They said, 'We want the $2.97 gallon of pickles. If you don't do it, we'll see if someone else might.' I knew our competitors were saying to Wal-Mart, 'We'll do the $2.97 gallons if you give us your other business.' " Wal-Mart's business was so indispensable to Vlasic, and the gallon so central to the Wal-Mart relationship, that decisions about the future of the gallon were made at the CEO level.

Finally, Wal-Mart let Vlasic up for air. "The Wal-Mart guy's response was classic," Young recalls. "He said, 'Well, we've done to pickles what we did to orange juice. We've killed it. We can back off.' " Vlasic got to take it down to just over half a gallon of pickles, for $2.79. Not long after that, in January 2001, Vlasic filed for bankruptcy--although the gallon jar of pickles, everyone agrees, wasn't a critical factor."

[Michael Wagner]

Why not reflect on how to compete with Wal-Mart with branding?

Some time ago I read about James "Jungle Jim" Bonaminio (at www.reveries.com). His business is a 280,000 square foot grocery store sandwiched between two Wal*Marts ten miles apart just north of Cincinnati. He is doing battle, so to speak, with a brand strategy.

I value Brand Autopsy; it is a great blog - but this posting seems a bit off subject. But it's cold and I live in Iowa, so I might be mixed up. Grin.

[johnmoore (from Brand Autopsy)]

Michael … sorry you feel this is off-topic for Brand Autopsy. It’s not like I haven’t ever talked marketing-related stuff about Wal-Mart. I have. Many times …

Advertisers Want Their Wal-Mart TV
Wal*Mart’s 460 Terabytes of Data
Wal*Mart Just Doesn’t Get It
The Wallop Wal*Mart 16
Feel Good Wal*Mart Stories
Another Wal*Mart Feel Good Story

Plus, I’ve written about the marketing/branding implications of low price strategies on numerous occasions citing Wal-Mart many times. This posting, while not 100% marketing-related, is still related to marketing – the marketing of how anti-Wal*Mart activists could potentially better target their message for better results. I’m not saying the idea of dissuading potential new hires at Wal*Mart is the best idea to "thwart" Wal*Mart. However, it is an idea that could have an impact because as I noted earlier … Wal*Mart needs new employees to grow just as much or maybe more than they need new customers.

[Stephen Macklin]

My apologies to Mike and Brand Autopsy. I didn't mean "shut up" personally or literally. It was intended as a challenge to suggest something better. Sort of a poor version of stop complaining about the weather and do something about it.

Where I work, WM is a blessing and a curse. In large part our company is taylor made for a retailer like WM. What they want is what we do. However it is not without resentment that sometimes it feels like they are running our company.

[Patrick]

Of all the Walmarts I know...the people who work there truly need the job. I don't think this will topple them. As bad as the PR is that they get, the people who work there and the majority of those who shop there go for the deals and think nothing of ethics, or whatever they're being blame of these days....

Good idea though...

[Rob]

John-I agree wholeheartedly with you and Seth that competing on price is lazy. And it's a great way to destroy a good brand, with possibly one exception—brands like WalMart built entirely on a low price position.

I too rethought my position on WalMart after reading the Fast Company piece. But blaming WalMart for decisions made by its suppliers seems a little too convenient. Suppliers need to consider the ramifications to their businesses (and brands) when they provide WalMart with products and volume discounts. Many have sacrificed brand value in the short-sighted pursuit of marketshare. If suppliers offered mom-and-pop stores the same discounts they offer large chains, companies like WalMart would lose much of the power they hold over their suppliers.

I suspect the real threat to WalMart won't be unions or protesters. And it won't be a lack of employees. It will be another, faster-moving company (like Target, Costco, or another not yet on the radar) that offers a better value (though not necesarily a lower price) for the customer's money. In order to compete, they will have to be smarter marketers, develop a better brand, a better story, and innovate in ways that WalMart can't or won't.

[Andy Havens]

Competing on price is lazy? Competing on price is easy? Er...

Before I wade in, I'd like to wave my liberal flag and let the gang know that I'm a caring individual and super-neat-o guy... the kinda guy you'd love to have date your sister (well, er... if I weren't already married), teach your Sunday school class or help clean your basement in return for a pizza and some good coffee (it's cold here in Columbus, today). I love "big government" social programs (you know... education, healh-care... all that crazy, bleeding-heart stuff) and think we should be paying teachers twice what we do and focusing on our educational programs with twice the fervor we spend on the War on Terror.

All that being said -- so I don't get accused of solely being a Hard Hearted Capitalist Goon -- competing on price is hell of a lot harder than competing on "Purple Cows."

I love Seth Godin. Fun stuff. And I love "good," i.e., clever marketing. My whole blog is about creativity, and I think that creative marketing can clearly provide an edge in any economy, under any circumstances, for any marketer.

But in the nutty marketing world of "the client," where I have spent about 15 years, "good" = "effective." And you measure effective in real units, most of which get boiled down to money. Which makes us clients really similar to those WalMart customers form whom some of the folks on this page clearly have some serious contempt.

So... while the marketing strategy of "low prices" may be boring, the response to that from Mr. Client is: so what? If boring works, it works. Exercize and eating right is boring, but it will keep you alive lots longer than many other more "interesting" pursuits, like skiing, cheating on your Irish wife and absynthe.

Do I like WalMart? Not always. I think they could treat their workers a better. I think that their influence on some communities' economies is bad in the long run. But working at WalMart has become, in many ways, the 21st century equivalent to the blue-collar jobs that have gone the way of the coal mine, auto plant, steel mill, etc. As other commentors have pointed out, there's plenty of competition for these jobs. And there's no lack of customers for the products. And many towns l-l-l-love the tax revenue from a new WalMart.

The march to WalMart has been going on since the mid 1800's. Listen to the lyrics the travelling salesmen sing in "The Music Man:"

It's the Model-T Ford made the trouble
made the people want to go
want to get, want to get, want to get-up-and-go
7-8-9-10-12-14-22-23 miles to the county seat.
Who's gonna patronize a little-bitty
two-by-four kinda store anymore?

It is inevitable. And it is really, really *not* easier to market based on lower price. Because you can't just "decide" to do it. You have to back it up with reality. You can "decide" to have sexier advertising. You can "decide" to shift your mix to new media. You can "decide" to bring in da noise. But if you "decide" to lower prices by 15% across the board, and don't lower costs by at least that much... you're going to have to "decide" how to deal with Chapter 11. Not easy, friends. Not easy at all.

If a guy with a wife and three kids can feed and clothe them and get them Christmas presents for 20% less at WalMart, and that 20% can then go to buy them braces (which he can now also get at WalMart)... I'll pipe in with a metaphorical "shut up." And, no, I'm not against the 1st Ammendment. I'm just against faux-high-minded marketing rhetoric.

What most of us involved in the marketing industries forget is that the economy exists not to create marketing, nor the other way around -- both are "servants" to the lives of consumers. Fun marketing is good, sure. Making money is nice, yeah. But we buy and sell stuff in order to enable productive, happy lives. And for the vast majority of people in this country, saving a few bucks here and there means the difference between "happy" and "pretty much not happy."

And, while we're at it, did somebody refer to some customers -- any customers -- as "the great unwashed?" Nice. Very nice. Very egalitarian; very "un-elite" language.

People are people. Where they shop, what they wear, taste in music, food, movies, books... we're not here to "improve" them with marketing. How hypocritical. Brand serves the goals of our client companies, not our personal agendas. If the client is doing well, the brand is working, and we should feel great. If the brand needs to be revisited or tweaked, that's fine. But to say that it should be changed so that we, the marketers, can have more fun, be less bored, feel like we're engaged with a more "washed" crop of customers... that's just wrong.

We help move soap, people. It ain't rocket science and it ain't curing cancer. It's good, honest, interesting work that I love. But if you want to do a good job, you have to look at reality. And the reality is that WalMart does a really, really good job at a number of really, really hard things. Very few of them have to do with warm, fuzzy, fun, "brand" stuff. Most of them have to do with cold, hard, boring things. Logistics. RFID tags. Warehouses. Trucks. Geography. Building codes. HR regs. International importa and export laws. Which we marketers need to take much more seriously than Purple Cows before we start saying stuff about whether or not a particular brand is "working."

[Dean A. Nash]

Andy, as a former Wal-Mart manager, I concur with your comments. Wal-Mart isn't really the problem, and if someone feels that it is, the freedom to not shop there is the ultimate solution.

Here's the real idea to 'topple Wal-Mart' - BUILD A BETTER MOUSETRAP. It isn't as hard as it might appear, and modern technology is going to be the key. I'll be posting more about this soon.