In 1992, Sam Walton, the founder of Wal-Mart died and the company's stock took a huge nose dive. With sales declining, the company decided to try a new approach. They began importing goods from overseas and the margins on these items were anywhere from 60-80% compared to about 20% from American manufactured goods. Towards the late 1990's Wal-Mart became dependent on low cost Asian imports. China is the largest exporter to the American economy in consumer goods categories and Wal-Mart imports around 15 billion dollars a year of Chinese goods. Frontline asked a Wal-Mart VP about why they have become to dependent on China, to which he responded, "For us to remain a viable company in the future, we have to be able to compete."
The dirt cheap manufacturing costs in China put American manufacturers in a squeeze. Wal-Mart started demanded cheaper good from American manufacturers, with prices on par with Asian goods. However, many times these companies just don't have the resources to produce at a lower price point. In the special report, many American manufacturers express that when Wal-Mart buys from suppliers, there is no negotiation. In fact, one of them states that Wal-Mart's motto is "If you want to do business with us, if you want to stay in business, you better do it our way."
A dramatic example of Wal-Mart's influence over the success and failure of its suppliers occurred in the small town of Circeville, Ohio. The town is home to a Thomson Consumer Electronics Plant, a manufacturer of TV sets. In its prime around 1999, it produced about 10 million units a year. However, in 2003, they lost a huge amount of orders from Sanyo. That's because Wal-Mart told Sanyo that they were only going to pay certain amount for a TV and then Sanya had to go back to their suppliers to look for price compromises. However, manufacturers could not reduce their prices and Sanyo had to turn to China to compete. In fact, manufactures such as Thomson could buy glass for TV components from their Chinese competitors for cheaper than they could produce it. As a consequence of this, Thomson had to shut down its plant and 1,000 workers lost their jobs.
Wal-Mart has gained the ability to literally destroy other business. People have coined the term "destructive capitalism" to describe Wal-Mart. In Ruth L. Ozeki's My Year of Meats, the issue with regards to destruction of American business and culture is addressed several times. As Jane, the main character travels around and witnesses that Wal-Mart has taken over low-income, small towns. Just like Wal-Mart has done to the suppliers, they make the members of the small community dependent on Wal-Mart by putting nearby shops out of business. Jane even goes on to express how each person living a small town spends their days at Wal-Mart.
Nowadays, American consumerism has grown synonymous with the cultural phenomenon of American consumerism. In fact, Jane even states that "To a Japanese person, Wal-Mart is awesome, the capitalist equivalent of the wide-open spaces and endless horizons of the American geographical frontier" (35). We as Americans have given into consumerism and forgotten the value of small businesses, paying for quality, and a sense of culture. Although the costs of goods themselves are cheaper than we could have ever previously imagined, it also comes at a high cost to communities.
Source:
Smith, Hedrick. "Frontline: Is Wal-Mart Good for America?" Frontline. PBS. Boston, MA, 16 Nov. 2004. Television.
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