Walmart Cries Foul

Facing increasing competition from Internet retailers, Walmart attempts to portray itself as the underdog unable to compete against the unfair advantage posed by online merchants able to avoid sales tax collections. Meanwhile, aware that shipping costs offset sales taxes, consumers are shifting to online retailers because they get a better shopping experience.

The argument that consumers are flocking to Internet retailers like Amazon to avoid paying sales taxes captures only part of the reason for their success over traditional brick and mortar retailers such as Walmart and Target. Ironically, Main Street mom-and-pop stores have argued that big box retailer Walmart unfairly uses its purchasing power to offer prices they are unable to match. Walmart is still prevented from entering some markets with the argument that their presence destroys Main Street and leaves the urban center a desolate wasteland of empty buildings and shuttered businesses, thus destroying an American way of life. Americans have always sought out a bargain and it’s certainly not an American tradition to pay higher prices than necessary. Walmart’s low prices have done more to alleviate poverty than any government or private philanthropy in history by allowing people to live improved lives with access to consumer staples at lower prices.

However, as conditions have improved for those in lower economic strata, they’ve been able to move to an even better level of retailing that allows them to bypass the inconveniences offered by traditional retailers. Lower prices on life’s necessities allowed for the purchase of computers and access to the Internet with its vast array of shopping choices. Consumers can now conveniently shop for exactly the item they desire, easily compare price and availability among multiple online retailers, and have the items delivered to their door all without the hassle of driving to the store, facing a limited selection, and waiting in line.

Shopping at Walmart often means empty shelves of low-cost store-branded products, disappointing customer service, and long checkout lines with unattended registers. Throw in no sales taxes and online retailers become an even more attractive option. Walmart shoppers have complained for years and been told by store managers that their hands are tied by the folks in Bentonville, referring to Walmart’s corporate headquarters in Bentonville, AR. Competitors such as Target have capitalized on this discontent from Walmart patrons to offer a richer shopping experience with trendier, more upscale merchandise and less of the cattle car experience offered by Walmart. However, even Target can’t compete with the convenience of online shopping.

So Walmart, who has experienced denial of entry to select markets through skillful use of the political process by entrenched local retailing interests using the economies of scale straw man argument, now seeks to hypocritically use the same political process to bash its online competitors into economic oblivion with the sales tax avoidance straw man argument. I suppose this is a much easier task to undertake than the arduous process of designing and implementing a better shopping experience for its customers. They fail to realize that this strategy will only temporarily stave off the inevitable loss of market share as consumers continue to flock to those retailers offering a better shopping experience.

Walmart introduced change to the retail landscape by using economies of scale in purchasing and supply chain management to offer consumers lower prices, and profited from this strategy to become the world’s largest retailer. In this position, they’ve fallen into the classic business trap of becoming lazy and overly cautious; unable to embrace or even see the change occurring around them as they futilely hope for the formula that has brought them so much success in the past to resume its magic. They are clueless as to how they can leverage the famous supply chain management system that proved so effective against traditional retailers to be competitive with their upstart Internet rivals. They grasp at straws to blame their sliding fortunes on unfair competition; failing to remember when they were accused of the very same infraction and how they successfully countered the accusations by delivering on their promises of a better shopping experience through lower prices.

Instead of complaining about unfair competition, perhaps Walmart should rediscover customer service. Time was when Walmart Associates could be found and knew where items were located. Shelves were well stocked, and the few occasions when an item was out of stock could be quickly corrected by alerting an Associate. They have low prices, but often don’t have merchandise to sell. Frustrated shoppers have walked away in disgust as their complaints have fallen on deaf ears.

It makes little economic sense to purchase consumer staples online and this will continue to be the segment in which Walmart thrives as a jazzier choice than Dollar General or Fred’s. They offer name brands in a single stop shopping experience that, despite all of its flaws, continues to offer value to consumers, especially in the midst of an economic recession. Walmart’s unsuccessful forays into upscale shopping move it away from its core competency of low price consumer staples. It enjoyed a period when it was the only game in town after downtown retailers closed up shop, but the Internet has changed the retail game once again. Walmart shouldn’t be surprised that the tables have been turned on it from nimble competitors who learned many of their lessons by studying the world’s largest retailer.

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