The Therapy Sessions
Saturday, December 06, 2003
Wal-Mart Invades, and Mexico Gladly Surrenders
The company that ate America is now swallowing Mexico.
Wal-Mart, the biggest corporation in the United States, is already the biggest private employer in Mexico, with 100,164 workers on its payroll here as of last week. Last year, when it gained its No. 1 status in employment, it created about 8,000 new positions Â nearly half the permanent new jobs in this struggling country.
Wal-Mart's power is changing Mexico in the same way it changed the economic landscape of the United States, and with the same formula: cut prices relentlessly, pump up productivity, pay low wages, ban unions, give suppliers the tightest possible profit margins and sell everything under the sun for less than the guy next door.
Don't the Mexicans understand how EVIL Wal-Mart is?
The New York Times knows.
In truth, I'm a big - though skeptical - fan of Wal-Mart. Whenever anyone tells me that Wal-Mart is competing unfairly by undercutting the little guy, I remind them that this is exactly what they were saying about Sears in 1920.
Capitalism is wonderful because no one stays king of the hill for long. Sears - once the biggest retailer in America - has now been driven to distant fourth, and it may face bankruptcy.
And Wal-Mart itself - the invincible - is showing signs of vulnerability. More focused retailers are eating its lunch by offering more variety in key areas.
If you want to do home repairs, you don't go to Wal-Mart, you go to Home Depot. If you want cookware, you go to Bed, Bath and Beyond. If you want stereo equipment, you go to Best Buy.
Wal-Mart can't compete on variety with more specialized retailers. And it knows it. After all, shelf space is finite - even in a Super Store.
So they have to provide goods that are cheaper than the competition. But the competition is matching Wal-Mart's prices on the high end stuff. Wal-Mart is forced to go low end.
But, at a certain point, you get what you pay for. Customers don't like sacrifice quality to get a lower price.
Am I the only one who has noticed that the qulaity of Wal-Mart's merchandise has been dropping? The clothes are even trashier than usual, the housewares are low end and the electronics are low quality.
Wal-Mart is still a great place to stock up on toilet paper, but for more expensive things, I go elsewhere.
I believe eventually that Wal-Mart will follow K-Mart's lead.In the early eighties, "K-Mart" became synonymous with "cheap." Its fate was sealed.
I think Wal-Mart will find it hard to avoid the same fate.