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The Wal-Mart Effect: How the World's Most Powerful Company Really Works--and How It's Transforming the American Economy
The Wal-Mart Effect: How the World's Most Powerful Company Really Works--and How It's Transforming the American Economy
The Wal-Mart Effect: How the World's Most Powerful Company Really Works--and How It's Transforming the American Economy
Audiobook10 hours

The Wal-Mart Effect: How the World's Most Powerful Company Really Works--and How It's Transforming the American Economy

Written by Charles Fishman

Narrated by Charles Fishman and Alan Sklar

Rating: 4 out of 5 stars

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About this audiobook

The Wal-Mart Effect: The overwhelming impact of the world's largest company-due to its relentless pursuit of low prices-on retailers and manufacturers, wages and jobs, the culture of shopping, the shape of our communities, and the environment; a global force of unprecedented nature. Wal-Mart is not only the world's largest company; it is also the largest company in the history of the world. Americans spend $26 million every hour at Wal-Mart, twenty-four hours of every day, every day of the year. Is the company a good thing or a bad thing? On the one hand, market guru Warren Buffett estimates that the company's low prices save American consumers $10 billion a year. On the other, the behemoth is the number-one employer in thirty-seven of the fifty states yet has never let a union in the door.

Though 70 percent of Americans now live within a fifteen-minute drive of a Wal-Mart store, we have not even begun to understand the true power of the company and the many ways it is shaping American life. We know about the lawsuits and the labor protests, but what we don't know is how profoundly the "Wal-Mart effect" is shaping our lives.

Fast Company senior editor Charles Fishman takes us on an unprecedented behind-the-scenes investigative expedition deep inside the many worlds of Wal-Mart. He reveals the radical ways in which the company is transforming America's economy, our workforce, our communities, and our environment. Fishman penetrated the secrecy of Wal-Mart headquarters, interviewing twenty-five high-level former executives; he entered into the world of a host of Wal-Mart's suppliers to uncover how the company strong-arms even the most established brands; and journeyed to the ports and factories, the fields and forests where Wal-Mart's power is warping the very structure of the world's market for goods. Wal-Mart is not just a retailer anymore, Fishman argues. It has become a kind of economic ecosystem, and anyone who wants to understand the forces shaping our world today must understand the company's hidden reach.
LanguageEnglish
Release dateFeb 15, 2006
ISBN9781400172238
The Wal-Mart Effect: How the World's Most Powerful Company Really Works--and How It's Transforming the American Economy
Author

Charles Fishman

Charles Fishman is the acclaimed author of the New York Times bestseller One Giant Leap, A Curious Mind (with Brian Grazer), The Wal-Mart Effect, and The Big Thirst. He is a three-time winner of the Gerald Loeb Award, the most prestigious prize in business journalism.

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  • Rating: 3 out of 5 stars
    3/5
    At first, I thought The Wal-Mart Effect: How the World's Most Powerful Company Really Works--and How It's Transforming the American Economy was going to be a puff piece on Wal-Mart, but that's not the case. You can see various reviews of the book on the book's website and see it's mostly been praised for its even-handedness. It's simply an attempt to get one's head around Wal-Mart's policies, particularly in regards to their supply chain, and their consequences. Fishman sees Wal-Mart as a "reflection of our money." Wal-Mart is democratic in the sense that we vote with our dollars and it does exactly according to what we vote for.

    Fishman (2006) starts at the early beginnings of the company, but doesn't go in-depth. Sam Walton, the richest man in the world, used to drive around in a beat up old car with no hubcaps. He would borrow a car if he was visiting one Wal-Mart store in driving distance of another. Wal-Mart executives were compensated for meals while traveling, but only up to a 10% tip. That attitude permeates everything Wal-Mart does: Always low prices.

    Many anecdotes are famous about Wal-Mart, but Fishman tries to find stories from Wal-Mart suppliers or former suppliers, and employees of those companies. Suppliers live "in fear" of Wal-Mart, refusing to publicly comment on the company's practices. Wal-Mart is a monopsony determined to hold down price. Suppliers who do business with it will see their profits whittled down (as confirmed by economic studies) by inflation in their own inputs while Wal-Mart is determined not to pass that inflation along to consumers. A company who does more than 20% of its sales with Wal-Mart tends to end up in bankruptcy more often than those who only rely on Wal-Mart a smaller percentage of the business.

    Fishman's look at Snapper mowers is insightful-- Snapper ended its relationship with Wal-Mart after the company pushed Snapper too low on price, and suggested it create a cheaper, lower-quality, line of mowers just for Wal-Mart. You can read that chapter published as an article for Fast Company.

    "Wier had determined to lead Snapper to focus on quality, and through quality, on cachet. Not every car is a Honda Accord or a Toyota Camry; there is more than enough business to support Audi and BMW and Lexus. And so it is with lawn mowers, Wier hoped. Still, perhaps the most remarkable thing is that the Wal-Mart effect is so pervasive that it sets the metabolism even of companies that purposefully do no business with Wal-Mart."


    Interestingly, as of 2013 Wal-Mart is again selling Snapper mowers, which is now owned by Briggs & Stratton. Snapper dealers appear to have mixed feelings, similar to how they felt in 2005.

    Most interesting to me are the economic impact studies. The book was published in 2006, when a 2005 study by Baker was prominent. David Neumark has done an updated study with a correction for what he sees as errors in Baker's instrumentation. Neumark finds that Wal-Mart opens stores where it sees potential economic growth, so one has to control for that growth and see if Wal-Mart increases employment beyond that or actually brings it down. (Neumark is generally considered "conservative" as he's written strongly against the minimum wage lately.) While Baker found that employment in a county, overall, increased by 30 jobs five years after Wal-Mart opened (which Wal-Mart was eager to tout), Neumark et al find:

    The employment results indicate that aWal-Mart store opening reduces county-level retail employment by about 150 workers, implying that each Wal-Mart worker replaces approximately 1.4 retail workers. This represents a 2.7 percent reduction in average retail employment. The payroll results indicate that Wal-Mart store openings lead to declines in county-level retail earnings of about $1.4 million, or 1.5 percent (emphases mine).





    Wal-Mart makes a big overall impact on prices in America, which went unrecorded by the Bureau of Labor Statistics who intentionally leave Wal-Mart out of their price surveys. If properly measured, it would have lowered the rate of inflation in the U.S. dramatically.

    Our estimates are that the BLS CPI-U food at home inflation is too high by about 0.32 to 0.42 percentage points, which leads to an upward bias in the estimated inflation rate of about 15% per year.




    Other studies have found Wal-Mart increases poverty. However, if you factor in the CPI bias above, prices in those areas are improperly measured and would have fallen-- meaning one can argue the income effect is not quite as bad. Jason Furman, President Obama's current CEA chair, put it like this in 2008:

    The lower prices at Wal-Mart are staggering. They are eight to 40 percent lower than what people would pay elsewhere. The total annual savings in one recent study...for consumers are $263 billion. That’s $2,300 for every household in America. They’re very few public policies that I’ve advocated in my life that would make as big a difference as that.

    Compare that to estimates of wage suppression by Wal-Mart... $5 billion a year in lower wages due to Wal-Mart. $5 billion, $263 billion – it’s just an enormous differential. Because of that I called my paper, and also to be a little bit provocative maybe, "Wal-Mart: A Progressive Success Story," and part of it is the progressive benefits that Wal-Mart has delivered. ...

    Wal-Mart, even if we didn’t do anything, would be a force where the good vastly outweighs the bad. But the good isn’t good enough and we need to do a lot more, and Wal-Mart should act in what it claims it’s interested in doing on behalf of its stakeholders and work with all of us to do things like expand Medicaid, food stamps, EITC, raise the minimum wage, which Wal-Mart has finally come around to supporting.


    One recent study found a new store opening causes an increase in local home prices.

    By in large, there is no environmental impact mentioned in the book. But when one considers that Wal-Mart makes it cheaper to buy things like mowers every year or two rather than repair the broken one, the result in our landfills should be measurable.

    Fishman ends with a look at a Wal-Mart supplier from the view of employees who were laid off as manufacturing was shipped abroad. While earlier in the book he contends that we should really laud this globalization, gains from efficiency and competition, and lower prices he uses his last chapter as a way to (in my view) stoke racist (ie: "the Chinese") nationalist sentiment. But his broader point is worthy: What kind of society and economy do we want? Do we want a vibrant downtown with small specialty shops, or big box stores that deliver lower prices on the outskirts of town that require infrastructure to support driving to them? Our nation has voted with its dollars and feet for the sprawl. Fishman correctly contends that it's important we think about the consequences of this.

    3.5 stars out of 5.
  • Rating: 2 out of 5 stars
    2/5
    Wal-Mart is the world's biggest retailer. By far. Add up the sales of the next 9 retailers and Wal-Mart is still bigger. Wow. It's also the world's largest private employer. 1.6 million employees. Wow. But Wal-Mart holds tight to its sales/financial/marketing information. They wouldn't even give an interview to the author--until after the book came out.Fishman looks at every aspect of "the Wal-Mart" effect starting with some very good things--forcing companies to reduce packaging, streamlining distribution, low prices (their raison d'etre). But Fishman contends that Wal-Mart has taken this "always low prices" so far that it has very broad detrimental effects: forcing companies to always lower their prices so that they skimp on quality and send jobs to overseas sweatshops, reshaping local shopping habits to close viable local businesses, creating low-wage jobs with miserly benefits and no future, creating environmental disasters with the volume of demand for some products, and on and on.But people love to shop at Wal-Mart! Even those who people who are "conflicted" about Wal-Mart go there more than once a week. Even if you don't shop there, Wal-Mart affects you: in the crappy quality on brand names that have Wal-Mart as their major customer. Wal-Mart says it's done nothing wrong. But just as the Industrial Revolution made the US take a look at its laws regarding monopolies, Fishman contends we need to take a look at how a busines this big, this influential affects us all. And do something about it.Great interviews with previous employees, some suppliers. Great anecdote about Atlantic salmon being farmed in Chile (yes, Chile is on the Pacific)and supplied to Wal-Mart (damn the environmental and human impacts).Non-fiction is sometimes ponderous but this book is not.
  • Rating: 4 out of 5 stars
    4/5
    There isn't a Wal-Mart in my town. I occasionally shop in them other places, but mainly for low quality, low consequence things; t-shirts, shampoo, kitchen stuff. I had no idea that the prices there are as low as this book says they are.The book uses many examples to illustrate how Wal-mart has improved products and sales, eliminating waste. Wal-mart gives its vendors full access to its sales information in return for them cutting their margin and holding the inventory. The book shows how this may be good for the immediate customer, but bad in the long run for many small businesses and ultimately society as a whole.I'll never look at deodorant, pickles or salmon the same way again! Thanks Monica for this excellent book.
  • Rating: 5 out of 5 stars
    5/5
    This is, as the title promises, Fishman’s effort to mine the depths of Wal-Mart’s business model and explain how, over the course of 44 years, this model has transformed the world’s manufacturing, delivery, and retailing structure. I feel the author admirably delivers this narrative without the vitriolic hyperbole of Bill Quinn (who’s book on the subject I also enjoyed). Additionally, this effort seems quite comprehensive despite working around the veil of secrecy obscuring the Bentonville beast’s operations. In a nutshell, Fishman positions the seemingly positive trait of providing the customer with the lowest price possible Always (or, from my intentionally limited experience, often) as the zero-sum game of closing US factories, annihilating product quality, exploiting labor here and abroad, killing “mom and pop” competition, absorbing taxpayer subsidies, all in addition the disquieting experience of shopping in one of their stores. Of course these are the oft-mentioned results of Wal-Mart’s “effect.” Importantly, Fishman readily acknowledges that there is a conspicuous dearth of real research analyzing these aspects. Shockingly, even the government’s Consumer Price Index (CPI) ignores Wal-Mart in its tabulations! That’s a bit absurd as this is the largest retailer in any number of merchandise designations – including groceries. This oblivion is aided by, if not substantially caused by, Wal-Mart’s resistance to releasing information – in one request, even the date of store openings. So we get what seems to be a reasonable estimate in the book (because the numbers are explained) of what Wal-Mart saved the average US family in 2004 - $270 – pitted against Wal-Mart’s latest commercial which gloats that, no matter where they shop, the average US family saves $3,100 a year? Well that’s a bit of discrepancy. Yes there’s a four year difference, but one might argue that 2004 lacked the shitty economy of 2008 where the decision to impulse purchase yet another microwave Makin Bacon ™ device might be critically evaluated. Let’s run some numbers shall we? So the US Census says the average family size in 2008 was 3.09 persons, the total population over 293 million. Therefore Wal-Mart had to have saved US families more than $310 billion last year (much more because many of us presumably got screwed by only shopping at Stop-n-Shop and Tarjay in 2008)! As Wal-Mart’s total sales…WORLDWIDE was under $375 billion, then they’re utilizing some fuzzy math. Perhaps they’re dividing by last names instead of actual families? Perhaps they assume a family is 30+ persons because that’s the only way to make rent on Wal-Mart wages? Beats me.But I digress. I would argue that this is a fairly written book. I wonder if Fishman visited a HomeGoods store like I did last week. Talk about a place that reeks of Third World sweatshop labor producing useless, garish crap that shouldn’t be produced! Ever seen a 12” tall ceramic bobble-chicken? Ceramic Tweety Bird vendors at the Tijuana border would cringe! At least Wal-Mart sells batteries and Doritos ™.
  • Rating: 4 out of 5 stars
    4/5
    The communists tried to do this and failed. Walmart is a monopoly buyer working for the American poor, bringing them every day low prices with a giant planned system stretching around the world.The irony is that Walmart is American and they really take "working for the people" seriously rather than the communist's formula of empty words.This whole remarkable organization grew out of the work and ethos of Sam Walton that's clear to see in his excellent book "Made in America". Charles Fishman in my opinion takes too much time concentrating on the unintended negative consequences of this success without enough time on the success itself, although he does acknowledge it.Everyone wants a house and garage full of craftsman made quality objects but he knows as well as anyone that they're going to buy the cheapest that does the job.
  • Rating: 5 out of 5 stars
    5/5
    From libraryUpdated version of this very interesting book about Wal-Mart. I was keen on reading this for two reasons, well three. I like a good book on business. Sam Walton was often held up at my last company as a model of efficiency, modesty and prudence, so I wanted to see where that came from. And we've just had an ASDA open on the High Street, which does seem to have had an effect on other businesses.So, there wasn't much about the history of the company, although a fair bit about how the company structure and culture has changed over the years. The business stuff was there, but not overly so - so it was still understandable for the lay reader. And the stuff about how Wal-Mart changes both its local and the global economy was fascinating. It has a knock-on effect even on rivals or companies who don't supply it. Plenty of case studies gave a good feel for what happens on the local scale, and the effect of price lowering has certainly had an effect on a global scale too.There were positives - Wal-Mart is starting to work at monitoring environmental effects and human issues in their supplying factories. But still, when the new ASDA opened here, a local independent mini-market went bust almost immediately, and the other large supermarket in the high street is straining to provide price point offers that are new and sometimes almost ridiculous.I would have liked more on the effect in UK and European communities but I'm sure I'll find another book about that!
  • Rating: 3 out of 5 stars
    3/5
    This is a fascinating book about a fascinating phase of capitalist history, and is an interesting antidote both to the luvvie new-economy out-of-posterior-blowing efforts such as Chris Anderson's The Long Tail: Why the Future of Business Is Selling Less of More and the Stage 1 Pol-Sci anti-capitalist dreck which usually passes for informed criticism of the corporate sector in these enlightened times. Whereas there may be some mileage in the contention that the internet has permanently pushed the threshold of viable business down the Long Tail - thereby creating a virtuous circle of more demand, more choice and more diversity of supply, here is a barnstorming tale of the organisation that seems single-handedly to scotch that argument. If there were much merit in Chris Anderson's general thesis, it would be hard to explain how, in such a transparently open and competitive market as the United States, one retailer - one *low margin* retailer - can have gone from a standing start to a 30% market share of almost any business it has cared to be in, in the last 30 years. For Wal-Mart is the very essence of the Fat Head, that part of the market which is supposed to be fraying and deteriorating before our very visual display units. There is some mileage in the Long Tail, to be sure - for every Wal-Mart, there's an online-retailer-whose-name-shall-not-be-mentioned - and the truth no doubt lies somewhere in the middle. What is fascinating is how Wal-Mart's position as a monopsony (a buy-side monopoly, in other words) has stressed the economy and traditional business models in hitherto unforeseen and unanticipated ways, but has not troubled the carefully framed anitrust laws. Fishman's account is balanced: he has a healthy respect for the brilliance of Wal-Mart's model, the unrelenting execution of its business plan, and the beneficial (and not always quantified) effects it has had on the US domestic economy in the last thirty or more years. But he is no proselyte: for every success story like Makin' Bacon's, a well-managed, successful company has been sent to the (er...) Wall by the monosponist's relentless quest for reduced margin, and Fishman covers these stories - together with some altogether unnerving information about the Wal-Mart effect on the global consumption (and husbandry) of Salmon - in unflinching detail. My hunch is that a true monopsony can't last as a natural state of equilibrium in a market so dynamic and competitive as America's, and Fishman's well developed argument is that, indeed, we may already be seeing the decline of the Walton empire, so perhaps the doomier passages of the book are overstated and in a decade we may wonder what all the fuss was about. Nevertheless, for an incisive, economically literate, and well balanced book about the pros and cons of American style corporate capitalism (wildly superior to, for example, Joel Bakan's simple-minded The Corporation: The Pathological Pursuit of Profit and Power), this book comes well recommended.
  • Rating: 3 out of 5 stars
    3/5
    Though some of the information in this book is dated, having been published in 2006, it is nevertheless a fascinating and informative look at Wal-Mart, megastore extraordinaire. Wal-Mart affects not only people who work and shop at Wal-Mart but also nearly everyone else who gets caught up in its maelstrom. This book may not change your mind – or your shopping habits – about Wal-Mart, but at least you will be better equipped and able to justify your decision and your feelings about the world’s leading retailer.
  • Rating: 5 out of 5 stars
    5/5
    This book does an excellent job of presenting both sides of the ongoing dispute between the Walmart supporters and detractors. There are some really important positive things provided by the world's largest retailer, but there is so much more that we should be concerned. This is the definitive reference to use.