Thursday, August 03, 2006

Book Review: The Wal-Mart Effect

The Wal-Mart Effect: How the World’s Most Powerful Company Really Works – And How it is transforming the American Economy, by Charles Fishman

Wal-Mart has become so large and so powerful that author Charles Fishman regards it as a force without precedent. His book makes a sobering case. It is an institution that provokes simply by being what it is. Its competitive ruthlessness and market predominance make it so unavoidable that even a passing reference in conversation can provoke a strong reaction. Some people love Wal-Mart, others make it part of their personal identity to distance themselves from it. Yet there are enough of the former to keep their stores crowded, here in Canada as is the case in the U.S.

Fishman says Wal-Mart is arguably the most important privately controlled economic institution in North America. With some 1.6 million employees in 2004, and some $10.3-billion USD in profits, Wal-Mart dwarfs all competing retail companies, and in the U.S. is larger than Sears, J.C. Penney, K-Mart and Target combined.

Certainly there have been other great dominant and powerful corporations, such as the early Standard Oil or the Ford Motor Company of the 1920s, or even today’s Microsoft. Yet as Fishman details, what sets Wal-Mart apart is that it never lets up on its competitors. Even after it has eliminated local retail competition it continues to maintain the “always low prices” policy that is its war cry. In fact, this book is full of instances where Wal-Mart continues to cut costs year after year and it even digs into the business practices of its suppliers so that they can work together to cut costs. With the average Wal-Mart purchase at just $3, its success is based on millions of very small transactions at very low margins.

By “The Wal-Mart Effect,” the author means the multitude of ways in which this marketing giant impacts society across the economic spectrum. His book deals in part with our conflicted feelings toward Wal-Mart, and the nagging worry implicit in the phrase, “The Wal-Mart Economy,” which underscores the fear that there might be a social cost to be paid for those “always low prices.”

Fishman himself is conflicted about Wal-Mart. It is clear he deeply admires and is astonished by this retailing behemoth. He shops there. At the same time, he feels Wal-Mart has become so powerful and so exceptional that it requires a new sort of regulatory and legislative oversight. He forcefully argues that a new paradigm is necessary to deal fairly with the power and reach it has acquired. He says a $100-billion corporation should be held to a different standard of obligation to society than a $10-million corporation or even at $100-million enterprise.

For its part, Wal-Mart does not talk about Wal-Mart. It is company policy to decline comment to reporters and, more significantly, insist that suppliers also refrain from discussing their relationship with Wal-Mart. That is how such a large and influential institution manages to cut such low profile in the press. In short, Wal-Mart has been hiding in plain sight, which is why this well argued and researched book is so important.

Fishman’s book balances legitimate concerns at the overwhelming power of this retail colossus with respect for its millions of customers and a clear acknowledgement of the economic benefit they gain from shopping there. Better still, it’s a quick and easy read, offering a rare look at this giant of modern retailing.

Strongly recommended.

Before I go... Just for the sake of comparison, here is another new Wal-Mart book: No one makes you shop at Wal-Mart: The surprising deceptions of individual choice, by Tom Slee. It takes a consistently critical view. Whether it amounts to an anti-corporate diatribe or is patronizing to the millions that shop there, is up to the reader. I prefer Fishman’s substantive and balanced work, but if you don’t like Wal-Mart and want to enjoy cleverly written antipathy toward it, this other book may well be for you.