Sunday, 18 August 2013

The genius and the curse of Walmart winningly captured in The Walmart Effect

From The Week of August 12th, 2013

Of all the traits humans share with their fellow organisms, a desire for a efficiency must be considered the most pervasive and consequential. For though it does not rise to the surface of our everyday thoughts, in governing everything from the way we walk to the manner in which we approach daily tasks, it shapes our every action. This is not altruism, nor is it a conscious effort to leave as little a footprint in our wake as possible. It is an outgrowth of the harsh discipline evolution has stamped upon our genes. For when energy is scarce, as it has been for most of our genetic history, what little is available must be preserved at all costs in order to improve the odds of survival. Unlike every other creature on Earth, however, humans have freed themselves of the chains of that limited energy environment and exploded into a world where the desire for efficiency can have a global impact. And it is difficult to imagine their being any organization to better represent both the glories and the tragedies of this truth than Walmart. Charles Fishman explains.

Launched with humility and little fanfare in 1962, Walmart has become, in the decades since, a retail phenomenon that has swept the globe. Sporting a workforce of 1.6 million associates, enough to populate a small country, and amassing sales that make it larger than much of its competition combined, it has deployed the singular vision of its founder to create a retail empire unrivaled in human history. Eschewing flashy sales and headline-grabbing headquarters that so often tempt its competitors into profligacy, its philosophy is shockingly simple; sell for the lowest price possible. Then, next year, find a way to sell for even less. And continue until every possible inefficiency has been wrung out of the retail system. This not only fosters trust in customers who don't have to worry about waiting for half-off sales to purchase their goods, it drives their suppliers to streamline their practices until every non-essential element has been eliminated from their business.

This thirst for the lowest price has had a transformative impact upon the retail chain, allowing customers to purchase goods at prices that, adjusted for inflation, are a fraction of what they once were. However, it has also placed many of Walmart's suppliers in an impossible position. For there are only so many inefficiencies to eliminate. Once they are gone, Walmart's relentless drive presents them with one of two unpleasant options: lower the quality of their goods in order to save money, or lowering their prices and eliminating their profit margins which exposes them to the risk of being hurled into bankruptcy at the next bump in the economic road. Their only other choice is to remove their goods from Walmart's stores which, given Walmart's reach, would be tantamount to business suicide. This is the new reality and one entirely created by a company that did not exist fifty years ago.

The Walmart Effect is a revelatory examination of a remarkable company. Mr. Fishman, adopting a frank and conversational tone, walks the reader through not only Walmart's history, but the philosophy that has made it one of the first organizations to master the commercial opportunities of the global economy. From the humble wisdom of its founder to the everyday realities of its suppliers, the author discusses in glowing terms the delightful ways in which Walmart's single-minded devotion to the lowest price has improved the practices of countless companies, passing these savings onto the customer. We're invited to revel in the simple brilliance of a company that understands the basic human desire to get the best deal and not to be made to feel the fool, desires that Walmart has woven into the very fabric of their business.

However complimentary, The Walmart Effect in no way shrinks away from the company's dark side. Walmart's zealous pursuit of the lowest price has not only driven many of its suppliers out of business, it has forced many others to eliminate their unaffordable American workers and export their manufacturing needs to Asia where a toxic mixture of poverty and unenforced labor laws have created a fouls stew in which millions of desperate people are forced to toil for pennies. Walmart, like many other American retailers, makes all the appropriate noises about ensuring that it sources goods only from reputable suppliers, but these lame assurances ring utterly hollow, especially when one considers that Walmart would have to violate the core tenet of its belief system to avoid using virtually indentured workers. It would have to raise prices.

For all its virtues, The Walmart Effect, feels terribly dated. The degree to which it exposes Walmart's unforgivable insensitivity to the plight of those affected by its drive for efficiency is still relevant, but Mr. Fishman published his work in late 2005, before the rise of which, though still not as massive as Walmart, threatens the Arkansas giant's entire business model by offering the customer an opportunity to get the lowest price without even leaving his couch. Walmart's inability to combat with a comparable online presence suggests that amazon will eventually consume Walmart once it can guarantee same-day delivery of its innumerable products. This is a consequential chapter of this story that Mr. Fishman did not foresee in 2005.

Nonetheless, this is a fascinating read. Walmart has undoubtedly done the customer a great service in making all manner of products more affordable, but in doing so it has helped to create a monstrous system of exploitation that cannot be ignored. Engaging work... (3/5 Stars)

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