The Case for Walmart

December 23, 2010 by

Walton's 5 & 10photo © 2009 Kevin | more info
Walmart is one of the most hated companies in America.  People constantly attack its human resources practices and the leverage it puts on suppliers.  However, Walmart is a company that changed the world.  It revolutionized retail and has earned the top spot on the Fortune 500 list for a reason.

Prices

How did Walmart get to be the biggest company in the world?  Rather than focus on profit margins per item sold, it focused on sales volume.  By leveraging its size to get the best deals on inventory from suppliers, it has been able to pass on the lowest prices around to consumers.

I do enjoy shopping at Target, but I always get a better price at Walmart.  Why should I pay extra for nicer decorations?  I shouldn’t.  I go to Walmart.

Employment

Whether or not you like their employment practices, each Walmart store creates hundreds of jobs.  Its 2.1 million employees make it one of the biggest employers in the country.  While all employees are not based in the United States, if they were it would represent over 2% of the population.

While a Walmart store might lead to the closure of a handful of small businesses when it enters a small town, it creates even more opportunities.

Economic Development

Yes, Walmart does often lead to closures of small businesses.   However, it has taken years to see the long-term impact of a new Walmart.

Most new Walmarts come with the construction of a new shopping center.  Those shopping centers become the homes of new restaurants and specialty retail stores.  That area receives heavy traffic from the surrounding community, which leads to new shopping centers near the Walmart.

In many cases a new Walmart helps nearby businesses.  In others, it is business as usual.  Also, don’t forget that Walmart started as Sam Walton’s 5 and Dime in Bentonville, Arkansas.  Walmart is an entrepreneurship success story.

Just for fun

Check out the People of Walmart.  This is just funny stuff.

Conclusion

Walmart is good.  It helps people save money.  Millions of people around the world rely on Walmart’s low prices to provide for their families.  During tough times with high unemployment rates, people need to save money more than ever.  Why should we hate Walmart for doing that?

Disclaimer: I own shares of WMT in my personal investment portfolio.

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Eric

President and CEO at Narrow Bridge Media
Eric is the founder and editor of Narrow Bridge Finance. He is a financial analyst with an MBA and undergraduate degree in finance.
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  • http://www.krantcents.com krantcents

    Love them or hate them, they are the 800 pound gorilla! When they come into an area, it certainly creates competition. It is impossible to compete with Walmart on price. They have one of the best (if not the best) supply system in retailing. It is that computerized system that allows them to keep their prices very low.
    My recent post What is your New Year’s Resolution

    • Eric – Narrow Bridge

      Do you think companies can compete with them on service? Are people willing to pay more to go elsewhere?
      My recent post The Case for Walmart

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  • http://www.accountantbyday.com Kellen

    I love peopleofwalmart.com. I always bring my camera with me to walmart now haha.
    One night we photographed a limo outside walmart. Were the limo-passengers shopping inside, or did the limo just pull up there to park?
    My recent post Strip Club Investing Opportunities

    • Eric – Narrow Bridge

      I can hardly believe they have enough of those pictures to have a book coming out! Oh wait, yes I can.
      My recent post The Case for Walmart

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  • secondchancefit

    Wal-Mart has also ensured that the quality of merchandise is crap. High-quality manufacturers who have started selling at Wal-Mart have shipped their manufacturing to China so that it's cheaper … and with cheaper comes lower quality, which means that I'm getting lower quality regardless of where I buy it.

    Price is not the only factor in buying.

    (And if you really want to save money, stop buying crap at all, instead of buying it cheap.)

    Yes, they employ a ton of people, but their salaries and benefits are not ones that I would clamor for.

    Yes, their prices are cheaper, but the cost of low prices is not worth it. I have not shopped in a Wal-Mart (or Sam's Club) for seven years, and I don't plan to start again.

    • Eric – Narrow Bridge

      I would not go so far as to say their merchandise is all crap. I get the same razors, shaving cream, and shampoo at Walmart and Target and the local grocery store, but it is cheaper at Walmart. Some things, I agree, are not as good at the Wal, but I buy those select items elsewhere.

      I agree that the the salaries and benefits are not great for most hourly store workers, but they could always leave if they don't like it. The millions of jobs is a huge benefit to the economy.

      It sounds like you have either had a bad experience or already made up your mind on this one. Thanks for stopping in to comment.

      • secondchancefit

        For example: we received Henkle's knives as wedding gifts. Very well-made, durable knives.

        Since Henkle's started selling their knives at Wal-Mart, they moved production from Germany to China. The knives are now much lower quality.

        So if I, as a consumer, would prefer to pay more for a well-made, durable product that I can use forever (instead of a cheaper one that I will need to replace), I am losing that option.

        • Eric – Narrow Bridge

          I can see that in some cases, but I doubt that all products would be impacted by this and many products have been sent to China simply for cost savings, not just because of margin pressures from Walmart. I am sure there are many cases that match yours, but I don't do all of my shopping at Walmart. If a company started making lower quality products, I could always buy from another company.

  • skirnirh

    For having a reputation of inexpensive prices, I visited our new superwalmart and was totally unimpressed. The prices were slightly lower only, in that a competing local store that does double coupons would be cheaper. And they aren't known for low prices. So maybe Walmart's low price reputation isn't so deserved anymore. I have looked at Target too, and Walmart is similar. (Okay, I nearly fainted when I saw some Kmart prices that were higher than the competing grocery store without coupons, etc.)

    • Eric – Narrow Bridge

      I have never been a big coupon guy, so I try to find the lowest of Target or Walmart or Amazon.com and a quick Google search when looking for prices. I could see coupons being a much better deal if you do it right.

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  • http://www.101centavos.com/ Andrew @ 101centavos

    Walmart has its place for certain things.  It’s just a trial and error exercise.  For example, outer clothes are a waste of money buying them at Walmart, they’ll just disintegrate after a few washes.  Under clothes though last as long as any other brand, and cost much less.

    • http://www.narrowbridge.net Eric

      Good point. Other than a t-shirt for a local team, I have never really bought clothes there.

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