Wal-Mart Squeezing Record Labels to Cut CD Prices

Raindance writes "RollingStone.com has a revealing article detailing how retail giant Wal-Mart is making loud noises about throwing its weight around in order to get significantly better bulk prices on CDs. Says one industry executive, 'This wasn't framed as a gentle negotiation, it's a line in the sand -- you don't do this, then the threat is [your product is dropped].' This is the first time a big player has attempted this sort of hardball move on the labels, and the labels may be forced to deal, as Wal-Mart sells 1 out of every 5 retail CDs. Monopoly one, meet monopoly two."

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Monopoly powers evening each other out...

[aicrules]

Capitalism can work if the big boys are greedy enough to turn on each other!

Unfortunately, someone is going to try to do this to Microsoft and when the dust settles, Bill Gates will still be there smiling.

You'd think the 5 major countries that use the most oil could form a bargaining voice powerful enough to counter OPEC in this same way....speaking of dangerous challenges.

Monopolies throwing their weight around is bad

[Anonymous Coward]

This is the first time a big player has attempted this sort of hardball move on the labels, and the labels may be forced to deal, as Wal-Mart sells 1 out of every 5 retail CDs.

It scares me just how big Walmart is. What happens when Walmart succeeds? You think the record labels are simply going to drop the prices across the board? Of course not, they are only going to do it or Walmart. And then more people will buy CDs at Walmart because they are cheaper than elsewhere, making Walmart even more powerful.

The sole reason why the record labels are so powerful is because they are fundamentally a monopoly. It doesn't matter if you can buy music from an indie record label if your favourite band is signed with a major record label. There is no competition. It's even worse because the major record labels have formed a cartel.

What I would like to see is a shortening of the copyright term to something realistic like 14 years. Then people could legitimately make money and compete with the major labels by selling public domain works. Right now, for music that the public actually want to listen to, the public domain is practically nonexistent. And don't give me any crap about the RIAA training us to like Britney Spears. I like lots of artists signed to major record labels.

Barring that (hey, with Disney's deep pockets, no music will ever enter the public domain again), I would like to see regulation of these monopolies. The artist should keep the copyright, and be forbidden from signing exclusive contracts with the record companies. That way, if a record company has excessively high profit margins, another record company can come in and sign up their artists and undercut them. The free market in action - this is how it is supposed to work, competition is good for the public. If the government insists on screwing it up with copyright, then the best they can do is offset the negative effects with regulation.

Oh, and one last thing:

Wal-Mart sells 1 out of every 5 retail CDs.

Bullshit. Perhaps they sell one in five retail CDs in the USA, but not worldwide.

Walmart could kill the music industry

[Anita Coney]

If Walmart truly sells every 1 out of 5 CDs sold, it should simply start signing major artists directly. That way Walmart could keep even more of the profits.

Re:My eyes are filling with tears for the labels..

[Alzheimers]

It depends on what part of the country you're from. Here in the North-East, we're not as affected by the Walmart monopoly. But I've got relatives that live in Florida, and they don't say "Store" or "Supermarket" anymore.

They say, "Oh, we're out of soda ... I need to run to the Walmart". "Oh, we need a new TV ... I need to head up to the Walmart."

Walmart is ubiqitious in some parts of the country. They're the second highest employer in the country, behind the government. Frankly, I'm surprised it's not a higher ratio.

Re:As my mummy always said...

[overbyj]

As much as I would like to rub the RIAA face in the dirt with this one, the issue is really much much bigger than just the RIAA. Wal-Mart is a ruthless competitor that rivals, if not surpasses, that ruthless competitor in Redmond. They have such retailing clout that when they make you an offer, you have no choice but to take or suffer the perilous consequences.

Vlasic pickles is one fine example of their ruthlessness. Wal-Mart basically forced Vlasic to make the big size containers with more pickles in them than most humans should eat within a reasonable amount of time. Wal-Mart basically forced a price structure on them too with this giant jar of pickles. As a result, you the consumer have a choice. Pay for the giant jar and end up throwing away the vast majority of the pickles, or buy the more expensive jar in the grocery store. Joe Consumer buys the giant jar with the rockbottom price. As a result, Wal-Mart has now forced Vlasic to cannibalize themselves and they end up having to file bankruptcy.

Wal-Mart has a well-established policy of forcing sellers to sell their products for cheaper prices year after year if the product does not change. Wal-Mart argues that if your product does not change, then production costs level off and you should then be able to bring your product to them for a lower cost. Ever notice how many gazillion different kinds of toothpaste and toothbrushes there are at Wal-Mart? That industry has figured that they cannot afford to not be sold at Wal-Mart but yet they have to maintain a certain price structure. Therefore, they "innovate" with toothpaste and toothbrushes. Now you have cinnamon flavor, cinnamon flavor with whitening, cinnamon flavor with tartar control, cinnamon flavor with whitening and tartar control and so on. This will not stop. What is next? Cinnamon flavor with bladder control???? Wal-Mart forces this "innovation" because of their business tactics.

I could list many more examples and this is to not even mention that it is nearly impossible to actually earn a living working at Wal-Mart. They are basically an American sweatshop except they don't actually produce anything. They just peddle stuff and drive competition away.

So as much as I would like to see the RIAA suffer for their deeds, this issue transcends them.

You are missing the bigger picture...

[cnelzie]

...in recent months there has been a cornucopia of stories detailing how Wal-Mart does business.

Some of those stories details how Wal-Mart abuses its position as the largest, wealthiest and subsequently most powerful retail chain in the world.

They have squeezed their suppliers enough that many suppliers have had no choice but to shut down all manufacturing operations in the United States and move those operations into foreign markets where they can continue to stay in business.

The option is either lose their largest customer and possibly enough revenue to shut down completely or shutdown all US Factories, put anywhere from a few hundred to several thousand American factory workers out of a job and stay in business. Business-wise, they have no choice but to comply with Wal-Mart. Unfortunately, that isn't good for the US workers that just lost their jobs.

You can say things like, "Well, those American workers should have learned to live with earning less money."

It's not all about just the money paid to an hourly worker. It's about the cost of benefits, cost of mandatory operation fees, like licenses, worker's compensation, unemployment office fees and a number of additional aspects that raise the cost of production in the US.

Then, you also have to take into account the minimum wage law. If you can have something produced overseas by workers that are fine with making, over the couse of a single day, the same amount that a highly skilled American manufacturing worker, like a Tool & Die Maker (Which is between $19 and $25 an hour), is paid for one hour. As a business, what are you gonig to do? Stay in business or go out of business?

Wal-Mart has done more to help decrease the number of available manufacturing jobs in the United States then most people think.

Re:Good

[mr_shifty]

Ditto here on buying new CDs.

I've discovered that everything that I want to buy I can usually find USED on Amazon for less than $7-$8 a CD, and most of the time more like $5 or $6. Likewise, I frequent two local used music shops in my area.

Both ways of buying used music have resulted in my ending up with dozens of CDs that are in almost perfect condition, for less than HALF what they cost new, and no additional money is going to the RIAA when I buy them used, so I don't feel bad about buying them.

Re:My eyes are filling with tears for the labels..

[Pxtl]

Yup. The creepiest thing about those places is how they also have meeting centres, photo labs, halls, etc. This is the old Town Hall. The goal is that they become the only store in the community. Not just the only department store, or electronics store, or grocer - but the only store. They become the centre of town. The local Wal-Mart then dwarfs the government in power - they provide access to all goods for a community.

Consider this: you have one company that provides for all of the needs of the citizen in the town, and a lion's share of the citizens work for that company. How is this not a commune? Its like communism's evil twin!

To elaborate more on the way they work

[mindaktiviti]

One way that Wal-Mart makes more money on sales is they do this: 1) What you just described - be the only customer for a product maker. 2) Stop paying when they receive the product, only pay after a short time AFTER the product is sold! 3) During that time that the product is sold, that money goes into short term investments, and only then is it given back to the producers of the goods. On another note, Wal-Mart also has one of the most advanced distribution methods and this is one of the major reasons their products are so cheap.

Re:My eyes are filling with tears for the labels..

[ktandaeo]

"Most independent stores I have gone to shop for music in are charing $16+ for a CD. If you're buying it for $12 and making $4+ a CD I seriously believe that you are gouging us. I don't feel bad for you."

Umm. It's obvious you've never run a business. This markup barely covers overhead and people expenses. What do you expect them to pay their people with? Dorito's?

It's funny listening people complain that the Independent record stores are disappearing and then think those same stores should give their stuff away for free.

Money from heaven I guess.

Re:Walmart is not a monopoly

[copper]

Interesting fact my Torts professor shared with the class: sales at Walmart peak at the beginning and in the middle of every month as their number one customers are those people living paycheck to paycheck. Walmart's extremely low prices are a boon for this working class and thus quite a good thing for a large part of America (especially rural America).

Re:My eyes are filling with tears for the labels..

[nelsonal]

Walmart is only about 1 out of 10 average things (they are about 8-9% of US retail sales. It's no surprise that they are above average in a loss leader catagory though. Size of a company is an odd measure, Walmart is huge in sales they swap with Exxon Mobil for most revenue, but Microsoft consistently makes more money than Walmart (on about 1/4 the revenues). Exxon generally makes more than both.
Keep in mind that the music market has historically operated with small costly stores (in malls and such) that stock a wide variety of albums (to get people in the stores) but make their money on say the top 200 selling albums that turnover (sell through inventory) much more rapidly than the others. Walmart tries to stock only the albums that sell (letting online sellers fulfill the remaining orders) and sells them below cost (also to get people in the store) in order to make money on all the high margin items they are selling. Nearly every business does this they sell certain things cheaply in order to increase sales of higher margin items. Fast food joints give away the burgers to make money on soda and fries. Fancier resturants try to break even on the food and make their money on wine. In software the real money is made on maintenance contracts rather than licensing. What surprises me is how much music Wal-Mart sells when so many titles are edited. Seems kinda pointless for Wal-Mart to even have a rap section, but I guess you never go broke underestimating American smarts.

The hidden cost to the public of Wal-Mart jobs

[paiute]

Hidden Cost Of Wal-Mart Jobs
Use of Safety Net Programs by Wal-Mart Workers in California

Arindrajit Dube
UC Berkeley Institute for Industrial Relations

Ken Jacobs
UC Berkeley Center for Labor Research and Education
from http://www.dsausa.org/lowwage/walmart/2004/walmart %20study.html [dsausa.org]
A Study for the UC Berkeley Labor Center
August 2, 2004

Wal-Mart is the largest employer in the United States, with over one million workers. It is the largest food retailer and the third largest pharmacy in the nation. The company employs approximately 44,000 workers in California, and has plans to expand significantly in the state over the next four years. Wal-Mart workers receive lower wages than other retail workers and are less likely to have health benefits. Other major retailers have begun to scale back wages and benefits in the state, citing their concerns about competition from Wal-Mart.

We estimate that Wal-Mart workers in California earn on average 31 percent less than workers employed in large retail as a whole, receiving an average wage of $9.70 per hour compared to the $14.01 average hourly earnings for employees in large retail (firms with 1,000 or more employees). In addition, 23 percent fewer Wal-Mart workers are covered by employer-sponsored health insurance than large retail workers as a whole. The differences are even greater when Wal-Mart workers are compared to unionized grocery workers. In the San Francisco Bay Area, non-managerial Wal-Mart employees earn on average $9.40 an hour, compared to $15.31 for unionized grocery workers--39 percent less--and are half as likely to have health benefits.

At these low-wages, many Wal-Mart workers rely on public safety net programs-- such as food stamps, Medicare, and subsidized housing--to make ends meet. The presence of Wal-Mart stores in California thus creates a hidden cost to the state's taxpayers.

This study is the first to quantify the fiscal costs of Wal-Mart's substandard wages and benefits on public safety net programs in California. It also explores the potential impact on public programs of Wal-Mart's competitive effect on industry standards.

Main Findings:

* Reliance by Wal-Mart workers on public assistance programs in California comes at a cost to the taxpayers of an estimated $86 million annually; this is comprised of $32 million in health related expenses and $54 million in other assistance.

* The families of Wal-Mart employees in California utilize an estimated 40 percent more in taxpayer-funded health care than the average for families of all large retail employees.

* The families of Wal-Mart employees use an estimated 38 percent more in other (non-health care) public assistance programs (such as food stamps, Earned Income Tax Credit, subsidized school lunches, and subsidized housing) than the average for families of all large retail employees.

* If other large California retailers adopted Wal-Mart's wage and benefits standards, it would cost taxpayers an additional $410 million a year in public assistance to employees.

For the complete study (840 KB pdf file):
http://www.dsausa.org/lowwage/walmart/2004/walmart %20study.pdf [dsausa.org]

Typical Practice

[dcw3]

This is just a typical big business practice for a company to press their suppliers for lower costs. In this case, I don't believe that even Wal-Mart has enough clout to force the RIAA to lower the prices. What could they do if they're told to go to hell?

Just another simple example of what I was pointing out above... My dad owned a specialty box business that created containers for Ford & GM. You'd be amazed at how much insight the big boys want into your business when you're a supplier. They'll tell you how to do it, how much you MUST lower your price, and how much supply you've gotta have on hand. And if you resist, they'll try to take the business to someone else and use the patented processes (my dad had many...you'd be amazed how many ways there are to make a box) that you own...I know there are alot of patent gripes here, but this is a situation where the small business owner is protecting themselves.

Walmart and Low Rate of US Inflation

[Carnage4Life]

I was just talking to some coworkers about how much power Walmart has in the retail world yesterday and one of them pointed out that a recent Fast Company article points out that Walmart is partially responsible for the low rate of US inflation [fastcompany.com]. The entire article is a very eye opening look at the effect of Walmart on local US and the global economy. Many claim it was the catalyst for the rush to offshoring manufacturing in past years.

Walmart is so powerful it's scary.

Re:WALMART: ONLY MARGINALLY PROFITABLE

[jazzer]

Now, while 2 billion bucks is a load of cash, 58 billion was spent in search of it. That's a margin of only 3.3%.

Well if you had a cash inflow of $58billion, you could afford a 3.3% margin? This is all relative. Plus, if you are continually squeezing your competetion out-of-business you will be able to set your profit margin quite readily once you've killed them off, that time is coming. Right now, they are trying to pressure the record labels so that bulk prices are cheaper, the only stores that will benefit out of this are Wal*Mart's. Thus putting a little more pressure on the competetion. That is exactly what Wal*Mart is about, it's not about low prices for the consumer, it's about squeezing the competetion.

Re:Uh?

[_UnderTow_]

I want the unbleeped versions because, if I happen to like a song I want to listen to the thing without having my enjoyment interrupted by a goddamn bleep in the middle of it. If a song has gratuitous profanity, then I'll make the choice to listen or not. When metallica relesed their Garage Inc album, which was a re-release of an EP that has been unavailable in stores for a long time, I picked it up at walmart on the way to work. I was pissed when some of the best songs on the CD's were filled with bleeps, it sounded like morse code in some parts. That metallica would bleep their music to sell more CDs at walmart pissed me off more than the napster thing.

I've stopped buying CD's at walmart becuase of their policy of selling bleeped music, and then refusing to let me return the CD once I realized that it had been ruined.

Re:The hidden cost to the public of Wal-Mart jobs

[Anonymous Coward]

I just want to point out that with

USD 9.7 x 40 x 4 approx USD 1552

it is a managerial salary in some other countries. Hack it is even more than my salary and I am supporting a 3000 employees IT operation from backend to frontend.

Yeah I am from "some other countries"

Walmart is not evil

[ttyp0]

I'm tired of everyone bashing large companies, especially Walmart. Last year Walmart had 258 billion in revenue, paying over 5 billion in taxes. People are always complaining about unemployement.. well just think about how many jobs walmart stores create. Benefits are usually better with larger companies. I work for a small company and health insurance I pay out of my own pocket. Unless you're a communist, capitalism is good for our society. Nobody makes you shop at walmart, so if you don't like them, don't shop there. Personally, I enjoy the lower prices.

Monopsony, not monopoly

[DevolvingSpud]

Wal-Mart's unique position makes them a monopsony [wikipedia.org] rather than a monopoly. Basically, a monopsony exists when there is one buyer in the market. Since Wal-Mart is so colossaly huge, they can effectively set the price points for their suppliers. This is good for the consumers, but bad for the suppliers and their employees.

Anti-trust legislation won't work in this case because they're not harming consumers (at least, not directly).

Some good statistics and links can be found here [marginalrevolution.com].

The artists... oh the artists will suffer... NOT!

[Proudrooster]

The labels have been squeezing artists down to a puny 65 cents per CD or less and now Walmart is squeezing the record labels. I love it! There is justice in the world occasionally. Since the artists cut is already so low the labels will have to absorb this.

I predict people will definately buy more CD's if they are $10 or less. Also, since the CD's will be so cheap, the labels probably won't be able to afford to license copy protection for the CD's. Note to self, sell stock in companies that license CD protection technologies.

The race to the bottom has begun and now the slick record label exec's in their $3000 suits are about to feel the pain. However, the exec's shouldn't worry too much if they should lose their job, George W. Bush is creating jobs that pay $5/hr. or less every day :)

Welcome to the free-market monopoly!!!!

I call this "The Frogurt Imperative"

[LittleGuy]

The RIAA is being told by Someone Big Enough to Stand Up to Them to lower prices -- that's good.

It's Wal-Mart - Home of the Censored and Creatively Limited Music Selection -- that's bad.

Re:My eyes are filling with tears for the labels..

[cens0r]

Wal-Mart does have competition in and around urban centers. I live in seattle, we have targets; sam's, k-marts; kohl's; and all sorts of specialized stores in the area. But I grew up in Oklahoma. In some of the smaller towns in oklahoma the wal-mart moves in, and everything closes. In a smaller population center, there is only room for one super store; and wal-mart almost always wins.

Re:My eyes are filling with tears for the labels..

[An ominous Cow art]

Wandering off topic, but...

What you mention about lack of courtesy does not apply only to Wal-Mart, nor is it a recent phenomenom.

I worked at K-Mart in the mid-80's (highschool and college years) and saw things that just destroyed any sympathy I had for the human race. I'd watch idiots take item A off the shelf, read the label or whatever, then place it back on the shelf a foot away in front of a bunch of item B.

I watched idiots take throw rugs off the rack, put them on the floor, then push their shopping cart over the rug as they walked away, not bothering to put the rug back. By he end of a bad day (weekend) frigging rugs would be stacked 5-6 deep in the aisle.

There are about 5 other things I could write about but don't want to get too worked up :-).

Why does the iTunes Store charge $9.99 per album?

[cameronk]

At the end of the article, the Almighty Institute of Music Retail [almightyretail.com] provides a breakdown of the $15.99 spent on a new album. What surprises me is that when you adjust the underlying model for online music sales, the numbers break down to $9.88, which assumes that the record labels maintain their $4.61 of overhead and profit. This leads me to suspect that, despite their assertations to the contrary, Apple does in fact make some money off the iTunes music store.

0.17 musicians unions
n/a packaging/manufacturing
0.8 publishing royalties
n/a retail profit
0.15 credit card fees
1.6 artists royalties
1.7 label profit
2.4 marketing
2.91 label overhead
0.15 retail overhead
9.88 total

No Monopoly is bigger than WalMart

[Stegano]

WalMart is the biggest monopoly ever, not just because of its number of stores and its corporate influence on justice department/politicians, but because WalMart influences everyones lives. Its a retail chain that sells everything for less, albeit by arm twisting the suppliers to sell for less and in the process killing the local economy. Not that I side with the Labels, they too are monopolistic and cold blooded killers of talent. So its good they are tasting their own medicine. What I would like to see happen is cap the number of stores WalMart can open in a county, cap the quantity of items WalMart can import from China, have a government run complaint cell where these suppliers can complain about arm twisting (that will build enough evidence for Anti Trust lawsuit) and last but not the least break up WalMart into W A L M A R T (thats 7) baby marts. I am not that afraid of the labels, because proliferation of P2P, secure P2Ps, pirated CDs, online music stores are already teaching them a lesson. -stegano

Walmart and gentle negotiation

[slaad]

This wasn't framed as a gentle negotiation, it's a line in the sand -- you don't do this, then the threat is [your product is dropped].'

Does walmart ever conduct a gentle negotiation? They do this kind of thing all the time [google.com]. I've even heard that there have been cases where they just started paying less for the stuff they bought, regardless of what their supplier was "charging" them.

Music stores going out of business

[crath]

First the RIAA complained that people ripping CDs and distributing them was putting music stores out of business. Now, in this article, the RIAA trumpets the closure of music stores in the context of Walmart's price pressure on those businesses. Sounds like another excuse to me. Instead of whining about the changes happening to their business model, they should embrace the change and join the rest of us in the 21st century.

Re:As my mummy always said...

[hackstraw]

They are successful for one reason-they market what consumers want.

They are sucessful for 2 reasons. 1) They stock everything. Many people have the philosophy "If they don't sell it at walmart, you don't need it" 2) They capitalize on poor, younger and middle aged, people and other penny pinchers, by offering them the illusion that "You can get more for less!".

First, I've never ever known someone that has ever "saved" money by paying less for something. All the people that I know that talk all the time about "saving money" are either poor or they act and think they are poor. The only loyal walmart customer that I know recently filed for bankruptcy and saves all the time by buying worthless crap at places like walmart and biglots. They have absolutely no money, owe most of their friends money, borrow money from their parents, but they are square with walmart and are so happy that they have saved so much money on trinkets at walmart while avoiding thier friends.

If people were that concerned with "saving" money, convenience stores would not exist. These places easily have 200% plus markup, and do quite well. If people were that concerned with "saving" money, why do they tip at restaurants or go to restaurants? Why do people pay the outragous prices for snacks and drinks at places like movie theaters and concert venues? Why do they pay ticketmaster at all???

What I am getting at is that there is a difference between value and price. Walmart offers and strives for the lowest price, but what it is actually doing is degrading the value of the product, the people that supply the product, and the walmart employees and the community surrounding walmart stores.

Look at the "after" and "black" market. That is where real value happens. You can get a used car for hundreds of thousands of dollars to practically nothing, and the markup is anywhere from many times the original price to a small fraction of it. Look at illegal goods and services like drugs and prostitution. The hooker on the corner does not have leadin pricing or illusions of being cheaper than the other whore by advertising 24.99 for a blowjob because the others are charging $25.

Don't know where the blojob thing came from...

Re:My eyes are filling with tears for the labels..

[homer_ca]

"The independants can't afford to compete with WalMart on the hits, but can't survive only on non-hits."

They can compete another way. If Walmart even sells Eminem, it would be the censored, clean lyrics version. They're run by Bible-thumping prudes. They wouldn't sell music with explicit lyrics no matter how wildly popular it was. Of course, you still won't have enough customers in a rural area to support an indie record store, but there's always mail order like Amazon or just downloading.

Re:$15.99? You were lucky!

[ickoonite]

Hear hear!

Speaking as a Brit myself, it always amuses me how the Yanks opine RIAA profits and excessive CD prices. It is not uncommon for us to pay £12.99 ($23) or £13.99 ($25) for a CD here, as you note - if prices dropped to more reasonable levels (i.e. £5 or £8), CD sales would skyrocket and remain high for quite some considerable time, I would think.

Of course, it's always been that way in the UK. You can get better prices by using mail [101cd.com] order [cdwow.com], which brings things down to the £7-£8 mark, but you may have to add delivery costs and will certainly have to wait some time for the items to get to you. There is none of the instant gratification of just buying the item there and then in a shop, unless you are prepared to pay twice the price for it.

Same goes for computer bits, of course. In Japan, I could walk into a shop and pay mail order prices and walk out with the product. In England, I have to pay delivery and wait at least until the next day.

Of course, fact is that the British just love to complain. We are incomplete without something to bitch about. If CD prices were lower, we'd bitch about the fact that we can't bitch about the high price of CDs.

iqu :P

Re:semi-OT

[Snotnose]

I listen to http://www.live365.com/ [live365.com] pretty much all the time now. Hundreds of stations, if you're a member then no ads, and I have no trouble finding a station to match my mood.

Re:My eyes are filling with tears for the labels..

[iocat]

They don't have great variety on the low end either. The give such price pressure to manufacturers that they end up making new models, or SKUs, just for Wal-Mart. These are typically far cheaper and worse than what you'd find anywhere else in the country, including discounters like Target or K-Mart.

Re:Well, what do you know?

[pangloss]

People on this list love to hate Wal*Mart, but that fact is that they are good for the economy and for the consumer

I don't know much about Wal-Mart firsthand as I've never lived near one. However, there was the study [berkeley.edu] recently released by the University of California Labor Center which found that Wal-Mart's low-wage and health-insurance strategies actually cost California $86 million. That in essence, the public subsidizes Wal-Mart's labor costs.

So you may get lower prices at checkout but only because you pay taxes to otherwise subsidize Wal-Mart.

If the report is correct (and I admit I've only read the media coverage of the report, not the report itself), that's not true capitalism at all.

No one ever forsaw the kind of capitalism we have

[tentimestwenty]

This is capitalism. It's nice to believe in a rosy utopia where everyone gets what they want, but the reality is that our economy does not support that model.

And there's the problem. Capitalism used to have natural limits based mostly on the speed of delivery and money liquidity. This allowed a lot of leeway for smaller shops to find meaningful ways to compete outside of price and supply.

Now, supply is limitless, money can be exchanged instantly and all sales are computer controlled to automatically maximize profits. As a result, wealth naturally pools up amongst the people who have enough wealth to take advantage of extreme efficiency.

Basically, capitalism is now unbridled and if you were lucky enough to amass enough wealth in the past you can now take over entire markets because there are no functional restraints in either the market or through competition law.

If you read back to the writings of early capitalists and their critics, they never envisioned a world where there was unlimited (for all intents and purposes) supply and near 100% efficiency. In fact, nearly every one of them said that situation would be to the overall detriment of society and would serve only to consolidate wealth in the smallest minority.

Walmart rant

[bonaman_24]

The more posts I read here, the more thin argument s based incorrect on generalizations I see. Many people who shop at Wal-Mart seriously need to cut their expenses and will buy wherever is cheapest in order to get by. It's nice to take a stance that you will shop else where you get that "mom and pop store" feeling; but if you are in that comfortable of a position, you are in the minority. I worked at Wal-mart for six years and found that those cheap-labor jobs tend to attract exactly those cheap-labor mentality employees...but what people blindly refute about those wages is the fact that mom and pop stores aren't exactly paying $15/hour, they are paying minimum wage. Wal-Mart also actively hires elderly and mentally handicapped workers. Wal-Mart would not be debated unless you are first a logical person willing to make logical discussion. Wal-Mart can sell things cheap because they buy in mass quantities, have low overhead costs and low payroll costs. They push smaller stores out primarily due to the fact that small stores don't buy CD's 1,000,000 per purchase order. If you want to pay $50 at another store for a cordless drill or $45 at Wal-Mart; that's your choice; but don't assume you are getting a better product because you paid more...and don't assume that you're doing some sort of justice by spending that extra money for the exact same thing. Wal-Mart sells cheap Levis, for example, under a different name so that Levi Strauss can make money and not tarnish the name of the original jeans. Wal-Mart does not sell real 501 Levi Jeans, so the argument that Wal-Mart ruined the quality of Levis is pure ignorance. Levi Strauss created a line of products to make money, and Wal-Mart is one of the stores that sell them. I find that people who work at Wal-Mart as a career are high-school-level educated and are often people that fit in well in the Wal-Mart culture. The Wal-mart employees can become a second family for many people; something you may get on a much smaller scale in a small store. If you want to complain about the wages; educate yourself, get in shape, and find some initiative, and go get a job doing something you want to do. Some people work at Wal-Mart because that is what suits them best...you aren't helping them any if you triumphantly march to another store to buy your daily goods.

Re:My eyes are filling with tears for the labels..

[demonlapin]

But, what do they have that people buy so much of?
Whatever it is that people buy a lot of, of course.

I don't go to Wal*Mart much because their locations aren't terribly nearby. Every time I do, though, I find that their grocery has managed to undercut Kroger by 5-20% on 95% of the items they sell (and I'm not just buying WM brand). Doesn't sound like much, and isn't worth the drive every time. But then I don't have, say, kids.

When you're buying diapers by the crate, paper towels by the truckload, and food to fill up three teenage boys, that 5% starts to be a LOT of money. So they go to WM.

Besides, think about the median person in life. This isn't something most /.ers ever do. In all likelihood, they've met very few of them in their life. Before I got into health care, I had met very few of them - the people, for example, who gut chickens, package screws, can vegetables. The people who do the millions of boring, repetitive, miserable jobs out there. They don't have a lot of money, and they're not very bright (or they'd be doing something else). They don't have a lot of insight into the future, and though they can follow a train of thought laying out consequences, they can't come up with it on their own. All of these add up to "not a lot of disposable cash". So when they go to WM, they find a large selection of very cheaply priced and surprisingly well-made (really, compared to what they had access to before) items.

There are lots and lots of them. Probably a third of the US population has a life not terribly different from this. It doesn't matter that you don't get much money from each one - there are a hundred million of them. Make $10 off every one of them and you've got a billion.

Re:My eyes are filling with tears for the labels..

[Salgak1]

They also card you for ANYTHING coded "Mature", and will not sell it to anyone under 18. The business model seems to work for them. As for the "developing artists", Wal-Mart isn't a specialty retailer, it's a mass marketer. It's not the kind of merchandise I'd be looking for at a Wal-Mart in the first place: for THAT, I'd be looking online, because the local record stores also shill a slightly-larger number of "established" acts and genre CDs (i.e. Folk, Jazz, Soundtracks, and back catalog items) that don't move as quickly as the latest top 40 trash. . .

Re:Walmart is not a monopoly

[Pendersempai]

I was not and am not trying to "twist" your point or deny the facts behind your post. When I asked whether you were "upset with" Walmart, perhaps I should have asked whether you "had a quarrel with" them instead. You think they did SOMETHING that hurts the working class, and that's what I was trying to isolate. I'm not trying to "prove[] you wrong," I'm trying to assess, for my own peace of mind, whether or not you are wrong. This really isn't meant to be a flame war; I'm just genuinely curious.

My understanding of basic economics (I, too, am an alum of 100-level economics courses) is that a competitive market will force profits exactly as low as the market will bear. In theory, that means no profit at all; in practice, it's a little bit higher.

Even if we stipulate that Walmart is a monopoly (which I don't really accept -- I never shop there, and I could name several chains that are in direct competition), all it has done is force profit margins down. How has it done that? By playing one manufacturer off another.

With goods in competitive markets -- lawn-chairs, for example -- any store could do the same. Find the lawn-chairs that are the cheapest and stock them. If the cheapest is too expensive, make do without lawn-chairs in your store. Each lawn-chair manufacturer will want to be the one that you stock, so each will engage in price wars with the others. Adding a huge chain like Walmart to the mix does add something of a jump to the otherwise continuous demand curve, but in general the same principles apply. The lower profit limit that the market is willing to bear shouldn't change regardless of Walmart's presence.

So it seems to me that whatever moral or pragmatic effect you see pursuant to Walmart's heftiness would come from a competitive market as well.