With more than 10,000 stores operating over a 27-country region and annual sales at about $444 billion, Wal-mart is the undisputed heavyweight retailer in the world. When Wal-mart speaks, vendors and manufacturers listen.
And with 200 million customers per week roaming the isles, Wal-mart shelf space is some of the most sought-after territory on the planet. If you need proof the champ is still hungry and agile, consider their Get On The Shelf contest—an image-building program that portrays the giant as willing to lend a hand-up to the little guy (and a sure-fire rocket to stardom for the lucky winner).
Like the proverb says, though, when you pick up one end of the sick, you’re also lifting the other: getting the nod to join the Wal-mart harem of suppliers not only bestows certain benefits on the selected brand, but requires ongoing attention to protocol. Take the issue of increased competition, for instance.
In early 2009, Wal-mart launched “Project Impact”, an initiative aimed at focusing customers on the most popular items and clearing the shelves of less appealing products. There are two sides to the “what is appealing” formula, though. One is about what sells. The other is about profitability. Already squeezed by Wal-mart’s relentless drive to lower costs, manufacturers were forced by Project Impact to tighten the belt even more—or face loss of shelf space, an unthinkable fate.
Perhaps 15% of existing brands were asked to leave the store as a result of Project Impact. Wal-mart called it, “Fast, friendly, clean,” a way of making sure customers find what they want and don’t have to sort through what they don’t want in order to get it. But that was just a beginning.
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That same summer, another plan—this one potentially earth-shaking—was unveiled: the Sustainability Index, a program Wal-mart says “involves examining the entire lifespan of the product.”
Consequently, suppliers came under increased pressure to consider the environmental impact of their goods—to concentrate formulas so one bottle (of laundry detergent, for instance) could deliver as many loads as two of the previous containers—a move, by the way, that not only reduces the carbon footprint (half as many plastic bottles needed), but also frees up much-coveted shelf space, allowing Wal-mart to realize more income from the same square footage.
Who benefits and who suffers?
For Walmart’s sellers, the choice is adapt or be gone. Forced to put more product into the same package, yet keep prices down, the manufacturers pass on the requirements to their ingredient formulators and suppliers. The suppliers, in turn, are expected to deliver less expensive ingredients (read that “cheaper ingredients.”)
So who finally ends up with the sharp end of the stick? Two groups: consumers and workers. Wages are kept down in order to deliver Wal-mart’s famous low prices. And the quality of ingredients (thus the quality of the products) is reduced in order to meet the finely tuned price point.
So the next time you wonder why your clothes don’t quite look or smell like those in the commercial you saw on television, and the next time you meet a hardworking Wal-mart couple struggling to live off their paycheck(s) and having to turn to public support to provide medical care for their children, take a look back up the trail.
You demanded lower prices. You got them.
It’s a big job, this “saving the world” idea. Wal-mart seems to think it’s their job to make a difference—and the ethics of corporate responsibility say that is true.
There is another huge factor in the equation, though. In the end, commercials and special programs aside, it is the consumer (you and me) who decides what to buy and where to shop. We have tremendous power for world changing.
When consumers figure that out, prices will come down AND quality will increase.
Think about it.(Public domain photo from Wikimedia Commons)