The Best Possible Deal
February 2004
A few days before Christmas and despite this prosperous shopping period, newspapers were reporting on how a retailer, unable to withstand the Wal-Mart onslaught in the toy department, was throwing in the towel. Another victim of the mega store, no more, no less. Alas, this isn’t the first time we’ve seen a traditional merchant give way to the Goliath of superstores. As for consumers, they want more: Wal-Mart helps them save money. And depending on the type of relationship you may or may not have with this retail giant, you either love it … or you hate it.

One thing is certain, the Wal-Mart phenomenon leaves no one indifferent. We love using it as an example, first because it is the ultimate embodiment of the ‘low price commercial strategy’ and second, because it affects the market as a whole. In fact, La Presse published an article on December 13 entitled “Pour ou contre Wal-Mart?” (For or against Wal-Mart?). The article introduced arguments from Wal-Mart sympathizers stating that ‘by forcing vendors to be more efficient, the chain can then pass on the savings to the consumer by offering low prices’. “Wal-Mart is […] the future of our society’s economy, a society that values the best deal possible above all else”, explains Robert B. Reich, former American Secretary of Labour. The argument gained favour when economists emphasized the fact that low prices are especially beneficial to those less financially fortunate who could, thanks to Wal-Mart, purchase essential goods for less.

However, other economists have reservations regarding this notion of “best possible deal”. They stress that these low prices don’t necessarily correspond to the best possible deal. They indicate that on the whole, prices are not a measure of the global effectiveness of economic activity. Other values regarding society’s well-being must be taken into account, such as job quality or the distribution of wealth, plus there are other values attesting to the consumers’ well-being, such as product quality or store proximity.

Although difficult to evaluate, there are in fact non-negligible side effects to Wal-Mart’s strategy. By doing a little research on the company, I’ve learned that half of its 1.4 million employees earn less than what the American government has established as being at the poverty level for a family of three. Moreover, employees don’t benefit from any health insurance. And, let’s not forget that union activities are firmly discouraged. In fact, the company is facing legal action in this respect. It is also being investigated regarding the employment of illegal workers. Also note that Sam Walton’s policy of buying locally is no longer applicable: the company’s buying office is now located in China, where it won the title of largest importer. Moreover, to establish its superstores where it won’t cost them too much, Wal-Mart sets up shop outside the downtown core forcing consumers to travel longer distances for the opportunity to shop their outlets. And last but not least: it’s been said that Wal-Mart demands and gets certain privileges from cities where it intends to locate. In other words, we as consumers are unknowingly subsidizing Wal-Mart!

In another perspective, an American study has revealed that generally speaking, when a multinational establishes itself in a community it gives back an average of 15% of its revenues, while on average, local companies give back 45%. These are significant numbers and provide us with a better understanding of what economists mean when they talk about the global effectiveness of economic activity. In short, whether it’s Wal-Mart or any other super sized retailer, there’s reason to think that in the more or less long term, the best possible deal may not be what we think ... This is something to think about when we feel that our cooperative or local merchant isn’t offering as good a deal as the mega store next door!

Colette Lebel, agr.
Director of Cooperative Affairs
La Coop fédérée
Fax: (514) 858-2025


Copyright © 2014 La Coop fédérée | Tous droits réservés