Wal-Mart: The Innovation That Had the Greatest Impact On the American Economy

Wal-Mart and its unique style of retail sales is arguably the innovation that has had the greatest impact on the American Economy.  Wal-Mart has created an innovative system in which consumers can buy goods at incredibly low prices (a box of a certain cereal at Wal-Mart costs only 56% of what it would cost at one of Wal-Mart’s competitors).  Wal-Mart displays its impact on the economy with the mind-boggling amount of business it actually does, and by the various positive and negative influences that economists have studies that have been caused by Wal-Mart.

To begin with, Wal-Mart is the world’s largest retailer and largest private employer with global workforce of 1.3 million people, doing more than business than most of its competitors combined.  Not only does it do more actual business, Wal-Mart makes more money, earning more through sales ($245 billion) than the entire GDP of the country of Switzerland.  To show just how much business this actually is, consider this:  Wal-Mart earns more in three months than the number two retailer (Home Depot) sells in an entire year.  Not only that, Wal-Mart associates with over 21,000 suppliers who have come to depend on Wal-Mart’s valuable business, since every week approximately 138 million shoppers visit Wal-Mart.  These impressive figures can only hint at the sheer amount of business that Wal-Mart conducts every single day.

It is safe to assume that any corporation that does the amount of business that Wal-Mart does would have a tremendous positive impact on the economy of America.    In fact, economists believe that Wal-Mart is at least partly responsible for the low inflation rate and “a McKinsey & Co. study concluded that about 12% of the economy's productivity gains in the second half of the 1990s could be traced to Wal-Mart alone.” In its never ending search for savings to pass on to the consumer, Wal-Mart is also responsible for 10% of the nation’s ($12 billion) imports from China.  Many supporters of Wal-Mart even advocate Wal-Mart’s harsh treatment on inferior suppliers, citing that such tough treatment results in more efficient suppliers that have increased their competency to levels that had previously been unimaginable.  Most of all, Wal-Mart allows consumers to get more for their money and allows them to worry less about possible economic recessions. 

Of course, low prices can be a double-edged sword that can cause serious negative effects to the American Economy.  Wal-Mart’s quest for “everyday low prices” cause them to take competitive pricing to a whole new level.  Many of their suppliers are forced to lay off thousands of workers in order to make ends meet and out-source to places with cheap labor, such as China.  The irony of it is that the suppliers’ own workers who were laid off could very well have been the cause of their unemployment simply by showing their support of Wal-Mart’s methods of obtaining low prices by shopping there to get “bargains”.  Wal-Mart has the power to squeeze suppliers until they are making only a cent or two of profit for each individual profit sold, which is a real blow to suppliers.  Nor will this trend cease, since each year Wal-Mart strives to lower prices to cater to consumer demands.  Since Wal-Mart has such a vast quantity of suppliers from which to choose, if one supplier fails to meet demands, it would be child’s play for Wal-Mart to find one who would.  According to Fast Company, “Wal-Mart is legendary for forcing its suppliers to redesign everything from their packaging to their computer systems. It is also legendary for quite straightforwardly telling them what it will pay for their goods.”  Not only can Wal-Mart be (albeit indirectly) blaimed for unemployment, it refuses to be unionized, a fact which many economists and buisness reporters often focus on.  The average Wal-Mart employee recieves a scant $8.23 an hour (below the federal poverty line for a family of three) while unionized employees of similar stores receive about $10.35.  Such wages may be done deliberatly by Wal-Mart,  with such low wages, the employees can ONLY afford to shop at Wal-Mart.  Wal-Mart squeezes profit from every single area it is able, particularly employee benefits.  Wal-Mart spends 30% less than its competitors on health care of its employees.  Of course, since many people consider a position at Wal-Mart as temporary rather than a career, perhaps it would be only fair to add that one can hardly expect such perks for being a bagger or other such position. 

     Wal-Mart has affected the economy more than any single other innovation ever.   Although the effects can be construed as both negatively and positively, no one can argue the sheer impact Wal-Mart has had on America, and the entire world.   Whether you love them, or hate them you cannot dispute their entirely new way of doing business that has affected the economy more than any other innovation.  Although some people tend to blame Wal-Mart for everything from the demise of K-Mart to the growing trend to out-source American manufacturing, it is important to realize that Wal-Mart is only responding to the demands of consumers, who clamor for “more for less”.  We, the consumers, made Wal-Mart what it is today, and we must take responsibility for our actions. 

References

Fishman, Charles. Fast Company. May 2003
<http://www.fastcompany.com/magazine/77/walmart.html>.

Gross, Daniel. Don't Blame Wal-Mart for the Wal-Mart Economy. MSN. 08 Oct. 2003
<http://slate.msn.com/id/2089532/>.

Moyers, Bill. NOW with Bill Moyers. 19 Dec. 2003.
<http://www.pbs.org/now/politics/walmart.html>.