Simultaneity

Before I go further, I'm not trying to paint Wal-Mart, nor Scott as evil overloards. Wal-Mart has a fundamental integrity in its dealings that's unusual in the world or retail (or in the world for that matter). Wal-Mart does not cheat suppliers, it keeps its word, it pays its bills briskly; and it expects the same in return.

The big deal is can be summed up in the big jar of pickles. Simply put, Wal-Mart has a clear mandate for its suppliers: "On basic products that don't change, the price Wal-Mart will pay, and will charge shoppers, must drop year after year." That's hard on most companies since their biggest cost, employees, tends to rise each year. As a solution, many companies move off-shore. From 1998-2003, Wal-Mart doubled its imports from China to close to $12 billion - about 10% of all Chinese exports to the United States. Yes, companies began moving off-shore before Wal-Mart hit the big time, but they have accelerated that pace and are giving non-U.S. companies a huge pipeline to the American market.

In addition to the price drops - delievery is expected to be right and to be on-time. Wal-Mart does such a large volume that a window is scheduled and if you miss your window, your goods are just not put into the warehouse. And that means they don't get to the stores.

Year after year you must find a way to cut costs or you find yourself out in the cold. For many companies, this means slicing to the bone - and sometimes means fatal cuts. Why not just give up selling to Wal-Mart rather than killing the company? The answer comes from Gib Carey, a partner at Bain & Co., who is leading a yearlong study of how to do business with Wal-Mart. "Wal-Mart is the essential retailer, in a way no other retailer is," says Carey, "Our clients cannot grow without finding a way to be successful with Wal-Mart." Dial Corp., for example, does 28% of its business with Wal-Mart. If Dial lost that one account, it would have to double its sales to its next nine customers just to stay even.

So, is it bad that Wal-Mart makes these demands? Shouldn't companies find ways to reduce costs and increase production? Of course, but companies that streamline too quickly are prone to failure - and for those that lose their jobs becuase of price reductions, well, you can't buy anything if you are not employed.

However, I suppose that as jobs are cut to make way for cheaper products from overseas, the unemployed can go work for Wal-Mart. It's an incorrect assumption that Wal-Mart is mostly part time employees; they are almost 80% full time jobs and spent $2bn in health benefits last year.

In summary, Wal-Mart is huge and can make or break any US company that becomes involved with it. They're a huge importer and can set up lines of import with more ease than other companies - so they can make or break any non-US company that becomes involved with them. They also have one of the largest work forces in the US. And, they're one of the most honest companies you could do business with. That makes them a powerhouse - and makes Scott more powerful when it comes to turning the tide. Is that bad? I don't know, go read about the pickles and decide for yourself.