What Wal-Mart Really Uses Their Money For
Hi-Ho, my friends. Once upon a time, a LONG time ago, long before Aunt Toby set up her cook-tent here at the lake side, I read an article in 2003 (9 years ago) from “Fast Company” about Wal-Mart which was one of those ‘lightbulb moments’ for me. “Indeed, as Vlasic [as in the pickles] discovered, the real story of Wal-Mart, the story that never gets told, is the story of the pressure the biggest retailer relentlessly applies to its suppliers in the name of bringing us “every day low prices.” It’s the story of what that pressure does to the companies Wal-Mart does business with, to U.S. manufacturing, and to the economy as a whole. That story can be found floating in a gallon jar of pickles at Wal-Mart.
Wal-Mart is not just the world’s largest retailer. It’s the world’s largest company–bigger than ExxonMobil, General Motors, and General Electric. The scale can be hard to absorb. Wal-Mart sold $244.5 billion worth of goods last year. It sells in three months what number-two retailer Home Depot sells in a year. And in its own category of general merchandise and groceries, Wal-Mart no longer has any real rivals. It does more business than Target, Sears, Kmart, J.C. Penney, Safeway, and Kroger combined. “Clearly,” says Edward Fox, head of Southern Methodist University’s J.C. Penney Center for Retailing Excellence, “Wal-Mart is more powerful than any retailer has ever been.” It is, in fact, so big and so furtively powerful as to have become an entirely different order of corporate being.”The Wal-Mart You Don’t Know
And in this article, the writers detail what happened to companies that thought that doing business through Wal-Mart was going to be good for them. Like all the clothing and toy and bike manufacturers that were basically price pressured into the position of moving all their manufacturing to China so that they could give Wal-Mart the pricing they demanded. I encourage you to read that article because it really does give you the feel for what a ‘blood sucking vampire squid’ (oh, sorry, that’s someone else…) Wal-Mart is.
Over the years, I have tried to explain to people what a bad deal Wal-Mart is for America and for American workers and what happens to towns and their locally-owned businesses when Wal-Mart comes to town. And many times, people say, “Toby, you are exaggerating; Wal-Mart doesn’t destroy businesses and jobs like that.”
Well, now we have proof. Proof positive (and the commercials used to say) that this is exactly what Wal-Mart does and that it actually is a foundation of their business and is their business model. I give you, Exhibit A: “In September 2005, a senior Wal-Mart lawyer received an alarming e-mail from a former executive at the company’s largest foreign subsidiary, Wal-Mart de Mexico. In the e-mail and follow-up conversations, the former executive described how Wal-Mart de Mexico had orchestrated a campaign of bribery to win market dominance. In its rush to build stores, he said, the company had paid bribes to obtain permits in virtually every corner of the country. ..In the interviews, Mr. Cicero recounted how he had helped organize years of payoffs. He described personally dispatching two trusted outside lawyers to deliver envelopes of cash to government officials. They targeted mayors and city council members, obscure urban planners, low-level bureaucrats who issued permits — anyone with the power to thwart Wal-Mart’s growth. The bribes, he said, bought zoning approvals, reductions in environmental impact fees and the allegiance of neighborhood leaders. ..In an interview with The Times, Mr. Cicero said Mr. Castro-Wright[Eduardo Castro-Wright, Wal-Mart’s CEO of Wal-Mart Mexico] had encouraged the payments for a specific strategic purpose. The idea, he said, was to build hundreds of new stores so fast that competitors would not have time to react. Bribes, he explained, accelerated growth. They got zoning maps changed. They made environmental objections vanish. Permits that typically took months to process magically materialized in days. “What we were buying was time,” he said.
In other words, Wal-Mart’s business model IS anti-competitive and is meant to actually destroy the ability of other companies and chains to compete with them. And if that means that they must pay bribes (call it what you will and the system what you will), then that is what they do.
And by the way, obviously Castro-Wright’s gamble paid off handsomely for him – he became the President of Wal-Mart Stores and is now the current Vice Chairman of Wal-Mart, Inc.
Except for the whole thing about breaking the Foreign Corrupt Practices Act.