On Tue, 28 Jun 2011 02:47:38 -0700, "William Sommerwerck"
wrote:
Wal*mart also (supposedly) insists that suppliers reduce their prices every
year.
Walmart offers the suppliers increased sales volume in trade for a
decreased profit margin. That will work only if the supplier has an
efficiency improvement program in place. It will also only work with
suppliers that are large enough to have sufficient credit available to
fund such programs. That eliminates all but the largest suppliers.
The dilemma for Walmart is that there are really only a few vendors
qualified to sell to Walmart under such a program. There's also
little to stop them from illegally organizing and fixing prices. When
this happens, Walmart finds a medium size supplier, and offers to back
their growth into a large supplier, in trade for profit margin
concessions. How it works in Mexico:
http://econ.la.psu.edu/~jtybout/SDS%20and%20NAFTA_NBER.pdf
The US gets cheap Mexican products, while Mexico gets Walmart.
I know of no other "big box" store that does these things.
My father sold lingerie to Sears during the 1960's thru mid 1980's.
Sears wasn't as obnoxious and as demanding as Walmart, but such
pricing policies (and others) were well established. However, Sears
had a different goal. They were not after the best price. They were
into growth. What they did was build up the business of their
suppliers, knowing that the supplier would need to obtain expensive
financing, and then abruptly cut off all orders. They could then buy
what was left of their supplier for peanuts.
In the case of Wal*mart, the story goes that companies are sometimes forced
to send production overseas.
Most domestic companies would prefer to use domestic production
facilities. It can be done, but not at the price points set by
Walmart. Similarly, if the competition wants to sell anywhere near
the same price point, they too have to go offshore, even if they don't
sell to Walmart.
Cheap merchandise -- of whatever quality -- is part of the "vicious circle"
of rapid technological change and obsolesence.
Good, fast, cheap.... pick two. The buying public has chosen fast and
cheap, so the quality will suffer. Where problems start is when
quality is unobtainable at any price. That's where I think we're
going.
--
Jeff Liebermann
150 Felker St #D http://www.LearnByDestroying.com
Santa Cruz CA 95060
http://802.11junk.com
Skype: JeffLiebermann AE6KS 831-336-2558