Chapter 42 Wal-Mart: Always Low Prices (and Low Wages)—AlwaysChapter OutlineYou Are HereThe Market FormTop Ten Grocery Store ChainsStore LocationsMonopsony ConcernsWho is Affected? ConsumersWho is Affected? WorkersWho is Affected? TaxpayersWho is Affected? Other BusinessesWho is Affected? CommunityWhat is the Net?Chapter 42Wal-Mart: Always Low Prices (and Low Wages)—Always Copyright © 2010 by The McGraw-Hill Companies, Inc. All rights reserved.McGraw-Hill/Irwin42-2Chapter Outline•The Market Form•Who Is Affected42-3You Are Here42-4The Market Form•Small Towns–Oligopoly or Monopoly•Everywhere else–Monopolistic Competition•Competitors–Supers (Wal-Mart, Target, K-Mart)–National Chains (Kroger, Safeway)–Regional Chains (Wegmans, Winn-Dixie, Publix)–Locals»IGA affiliated»Independent42-5Top Ten Grocery Store ChainsRank CompanyAnnual Sales (billions)% of Total Grocery Sales ($893b)% of Top 10 Grocery Sales ($613b)1Wal-Mart Stores$258.5 28.9% 42.2%2Kroger Co.$77.2 8.6% 12.6%3Costco Wholesale Corp.$72.5 8.1% 11.8%4Supervalu$45.0 5.0% 7.3%5Safeway$44.8 5.0% 7.3%6Loblaw Cos.$31.5 3.5% 5.1%7Publix Super Markets$24.0 2.7% 3.9%8Ahold USA$21.8 2.4% 3.6%9Delhaize America$19.2 2.2% 3.1%10C&S Wholesale Grocers$19.0 2.1% 3.1%42-6Store Locations42-7Monopsony 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)42-8Who is Affected?Consumers•For consumers who switch to Wal-Mart the gain is b/w $15 million and $33 million per store–Wal-Mart’s prices are 15-22% lower than national averages. –An average Wal-Mart sells $100-$150 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.42-9•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 (375-400 FTE)–Many/most of the new Wal-Mart jobs are displaced elsewhere.•Productivity rises.Who is Affected?Workers42-10•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.)Who is Affected?Taxpayers42-11•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-MartWho is Affected?Other Businesses42-12•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 leadersWho is Affected?Community42-13What is the Net?•Winners–Most Consumers–Complementary Businesses •Losers–Workers–Competing Businesses•Economists generally view the net as
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