1. Wal-Mart: Always Low Prices (and Low Wages) Always
Chapter 39
Wal-Mart: Always Low Prices (and Low Wages) Always

2. Chapter Outline
The Market Form
Who Is Affected

3. The Market Form Small Towns Everywhere else Oligopoly or Monopoly
Monopolistic Competition
Competitors
Supers (Wal-Mart, Target, K-Mart)
National Chains (Kroger, Safeway)
Regional Chains (Wegmans, Winn-Dixie, Publix)
Locals
IGA affiliated
Independent

4. Top Ten Grocery Store Chains
Rank
Company
Annual Sales (billions)
% of Total Grocery Sales ($755b)
% Top Ten Grocery Sales ($566) 1
Wal-Mart Stores
$284
36.65%
50.19% 2
Kroger Company
$56
7.25%
9.93% 3
Costco Wholesale Corp.
$47
6.09%
8.34% 4
Target
6.04%
8.27% 5
Albertsons
$40
5.12%
7.02% 6
Safeway
$36
4.62%
6.33% 7
Ahold USA Retail
$27
3.54%
4.84% 8
Supervalu
$20
2.52%
3.45% 9
Publix Super Markets
$19
2.40%
3.29% 10
Delhaize America
$16
2.04%
2.79%

5. Store Locations

6. Monopsony Concerns
Wal-Mart is the biggest wholesale buyer for many companies’ products.
Wal-Mart (often) dictates the price will is willing to pay.
This forces companies to
outsource production.
cut costs (including wages and benefits)

7. Who is Affected? Consumers
For consumers who switch to Wal-Mart the gain is b/w $11.25 million and $27.5 million per store
Wal-Mart’s prices are 15-22% lower than national averages.
An average Wal-Mart sells $75-$125 million in goods.
For consumers who like their old store, but it closes.
Consumers “reveal” their preferences by paying higher prices at smaller IGA stores.
These consumers are worse off if the store closes.
Nearly all economists consider this a net win for consumers.

8. Who is Affected? Workers
Wal-Mart’s pay and benefit package is $5-$10 lower than their competitors.
Competitors are
unionized
have retirees
New Wal-Marts hire b/w 450 and 500 workers ( FTE)
Many/most of the new Wal-Mart jobs are displaced elsewhere.
Productivity rises.

9. Who is Affected? Taxpayers
Most (b/w 70% and 80%) of a new Wal-Mart’s sales displace sales elsewhere in the community.
Sales taxes would not necessary be affected because
Food is rarely taxed
The increase in sales is mostly from people in the state (or taxing district.)

10. Who is Affected? Other Businesses
Hurt
Competitors that try to “out Wal-Mart Wal-Mart”
Unaffected
Competitors that sell goods Wal-Mart does not
Helped
Complementary stores and restaurants that surround the Wal-Mart

11. Who is Affected? Community
Sociologists have noted that Wal-Mart damages the non-economic fabric of communities.
Displaced business owners tend to be
Church leaders
School Board members
Community leaders

12. What is the Net? Winners Losers
Most Consumers
Complementary Businesses
Losers
Workers
Competing Businesses
Economists generally view the net as positive