Customer Reviews

The Retail Revolution: How Wal-Mart Created a Brave New World of Business

5 star:		(4)
4 star:		(3)
3 star:		(1)
2 star:		(0)
1 star:		(2)

 

 

Bentonville and Rogers, Arkansas are home to 750+ branch offices of Wal-Mart's largest vendors; P&G alone has a staff of more than 250 there. Another nerve center of its global supply network is Guangdong Province on the southern coast of China. There you'll find more than 15 million migrant workers and tens of thousands of export-oriented factories. GDP in the region leaped from $8 billion in 1980 to $351 billion in 2006, while the population jumped 20X. Ten percent of its output goes to Wal-Mart. Besides low costs, China's attractiveness includes a stable currency, fast customs-clearance and loading (half the time as L.A.), and supportive government.

Lichtenstein begins with Walton's early retailing experiences, including the frustrations at higher-ups that would not support his push for self-service and discount retailing. Confident in his thinking, and after observing early moves in that direction (eg. E.J. Korvette, etc.) Walton struck out on his own and opened his first store in 1962 using money from his wife's parents.

Other early innovations included phasing out jobbers, mandating use of bar-codes (faster checkouts, easier inventory tracking), satellite communications (faster communications with Bentonville, faster credit-card approvals), strict prohibitions against accepting gifts from vendors, going to electronic ordering.

Walton liked to recruit managers internally (76%), from the military, churches, college graduates who were members of "Free Enterprise" groups on campus. Demands were harsh - constant improvement, and even in the booming 1980s, 10-155 of all managers were demoted each year. (The goal was to increase staff by less than the increase in sales - not as hard as it might seem, given inflation.) Assistant managers earned about $40,000, worked 48-80 hours/week (highest during Xmas season). Few layers meant few opportunities for meaningful promotion.

Overtime was banned, and dodged via numerous corporate shells that fell under sales-limit exemptions. Turnover in 1999 reached 70% in urban areas. Unionization efforts were met with a flood of Wal-Mart specialists, grievance corrections, management re-education or firings, false propaganda, and threats. Wal-Mart has also refused to buy unionized locations when making acquisitions, and once quickly closed a freshly unionized store in Canada.

The average large corporation gives away over twice that of Wal-Mart, based on earnings. On the other hand, it provided excellent community support after Katrina.

Berkeley researchers found Wal-Mart wages about 31% less than the average for large retail establishments, resulting in Wal-Mart employees drawing considerable aid from public safety nets. Other firms have emulated Wal-Mart's tactics (eg. Target), and others have stiffened resistance against their unions as a result (eg. Southern California grocers) - thus, there is a significant "Wal-Mart effect."

Wal-Mart claims its profits/associate were $6,400 in 2007 - hence, raising pay $2/hour would eliminate two-thirds of that amount.

The author sees[...] as a company that pays and treats its employees much better, and as an example to be emulated. On the other hand, he also points out that the average [...] customer has a family income in the $100,000+ range - considerably higher than Wal-Mart, and presumably less focused on getting the absolutely lowest price.

My one quarrel with the author is that he believes the world would be better if Wal-Mart paid its employees better, and offered better health coverage - forgetting that this would take away billions in earnings from its shoppers. Further, it doesn't address the root cause of employees being willing to accept Wal-Mart positions - massive job losses due to outsourcing and illegal aliens.

Lichtenstein's book is both a compendium of Wal-Mart's various sins on our work force, tax system, and local economies, as well as a polemic. People who have followed Wal-Mart's genius in logistics and their squeezing of employees and suppliers will find little that is new, but will appreciate how Lichtenstein has pulled together a useful history of the company, which highlights some of its lesser known successes, like reducing inefficiencies and costs in the supply chain. As a polemic, the book runs out of gas at the end and he could have done a better job of discussing Wal-Mart's possible futures and what may happen to retail labor. The main subtext here is that Wal-Mart has always done its best to undermine labor rights and to avoid compliance with labor law. They occasionally have improved the wages of some of their hourly employees, such as truckers, but generally they have led the race to the bottom, in terms of retail wages. An important point in the book that deserved more space than it was given involved the paltry amount of profit margin that it would take to raise Wal-Mart wages and benefits to those of more generous competitors. Similarly, it's evident that the public subsidizes Wal-Mart's prices through social welfare benefits to underpaid employees and tax breaks for the construction of new stores. Also is evident is Wal-Mart's willingness to lose enormous amounts of money in unsuccessful foreign ventures and to spend money on public relations ventures such as recent efforts to "go green". The chain seems willing to do anything to appear progressive except recognize unions or, until recently, make any meaningful strides in the areas of wages or benefits. Lichtenstein notes that the deflation of wages by Wal-Mart has finally reached the point where it has become a threat to the chain's long-term volume and profit growth.

Lichtenstein's main interest is labor, but he fails to tie together the challenges facing Wal-Mart, beyond some bland consideration of how the chain's business model has hit a wall and that upward mobility for managers was slowing. He is probably correct that the chain risks the fate of Sears, which has limped along for years, but doesn't go much further than this. Unlike Sears, Wal-Mart has managed to create enemies among main street merchants, organized labor, citizen's groups, politicians, and many potential suppliers. It's a business that talks loyalty but tramples the loyalty of workers and suppliers and probably has alienated potential employees in places where it is a dominant part of the local economy. The remaining markets without Wal-Marts are more expensive places in which to operate and to enter. The need of Sam Walton's heirs and Wall Street to increase yields over time is likely to undermine some of the current model and perhaps lead tinkering with its success. Already, Wall Street has prodded the chain to builder smaller stores. It seems likely that unsuccessful ventures like Sam's Club or the stores in Japan may be sold at some point. The chain also may need to grant more autonomy to store managers and show more flexibility in supplying stores. The chain also may need to rethink its low margin, non-growth areas that have been used to drive store traffic: CDs/DVDs, books, toys, and food. besides being low profit sources of revenue, they also represent the only areas where Wal-Mart still changes less than competitors on a wide range of items. Over time, the chain has focused on volume building items to underprice the competition, while many general merchandise lines cost the same as at other chains. Wal-Mart is reaching a point where ambitious early management employees who reaped the greatest benefit from bonus plans are ready to retire. It's clear from Lichtenstein's book that innovation has come from outside the company and the loss of ambitious early risk takers may weaken management further. Moreover, managers represent perhaps the one workforce where Wal-Mart could cut costs in the future, such as through reductions in bonuses and other compensation. Wal-Mart will be around for a long time, but it may be in a more or less debilitated state, with more or less influence on labor practices and store-supplier relationships. The current recession has proven to be a boon to Wal-Mart, but it's unclear how long that will last. As for labor, it's unclear whether it will ever be successful in organizing Wal-Mart or forcing long-term changes in the way that it's employees are treated and compensated. The neo-feudal Southern cultural roots of the chain (well documented in this book) may be too difficult to change beyond some token non-opposition to minimum wage laws.

Lichtenstein's history of retailing has a number of misconceptions. There had been efforts at mixing food and general merchandise going back to the 1950s and involving chains as diverse as DC's Giant, Grand Union, Meijer, and even laggard National Tea. In addition, supermarkets had grown continuously from the 1950s to the 1970s, when even less aggressive chains typically built new stores in excess of 20,000 square feet, and often had stores of over 30,000 square feet. Finally, SS Kresge had been particularly aggressive in entering post-WWII suburban shopping centers, although these stores were the first to go when that chain began its waves of store closures in the 1960s. Kresge had favorable long-term leases on its urban and small town downtown stores and these locations were unlikely to face direct competition from K-Marts. The weak history of retail and the lackluster analysis at the end knocked off a star, but I think this is still worthwhile reading even for people already familiar with Wal-Mart's effect on retailing and beyond.

Unlike most books of this genre, the chapters actually add to the understanding as opposed to just repeat the same argument over and over again. Lichtenstein shows how Walmart developed and then preceded to shape the market for retail and grocery shopping, and by extension, to the distribution and manufacture of goods. Most of the impact has been negative, if you are not a free market capitalist, that is.

But this is not a crucifixion of the retailer. It shows how Walmart resisted unions in the US (but not so effectively in other countries), how it has resisted decent health care and wage increases (however, that's shifting as its growth decreases and it realizes that its own employees can't afford to shop at their stores). Walmart has an incredible amount of power in the retail market and has wielded to its employees detriment.

However, like the book Cheap, Lichtenstein emphasizes that customers want the low prices and employees like the apparent "family atmosphere" evoked in Walmart stores (at least initially, until they realize they'll never get a salary or full time job there). Unless people are willing to pay more (and thus have less), Walmart will reign supreme

This book, more than any other,has helped me to understand the retail industry. The book tells the story of retailing, with a focus on Wal-Mart. I enjoy this book so much that I've actually put aside mysteries to read this instead.The Retail Revolution: How Wal-Mart Created a Brave New World of Business

This is a most amazing history and insightful study of this retail giant. But the author goes beyond the focus on Wal-Mart in his analysis of the past, present, and obvious future of economic developments in the U.S. and throughout the world. Very enlightening, and also most frightening. Very highly recommended!!!!

The Retail Revolution: How Wal Mart Created a Brave New World of Business tells the history of how Wal Mart changed the way business was done. Other books survey the company's structure and evolution but this guide from historian Nelson Lichtenstein links Wal-Mart's rise to the cultural and religious values of Bible Belt America and political influences, considering his the company success has changed American politics itself. An outstanding guide, this covers more social angles than most and any business or social sciences library will welcome it.

One of the oft forgotten realities of 20th century economics was how Keynesianism was created to answer the problem of chronic unemployment, regular recessions and potential deflation in market economies. Keynes argued, correctly, that in times of economic downturn, the government could, by deficit spending and cutting taxes, add consumer stimulus to the economy, thereby mollifying or eliminating a downturn with its accompanying rising unemployment and deflation. Instead, the economy could continue to grow through Keynesian policies.

With that bit of historical perspective, we can see how Nelson Lichtenstein sheds light the effect that WalMart has had on wages, prices, the income of its suppliers and the overall US economy. WalMart has had a deflationary effect, through its outsourcing of jobs to China, its anti-wage and anti-union policies, and its poor benefit packages it pays its associates.

WalMart may grow and profit, but its effect on the overall economy has been deflationary, placing its suppliers and associates in the economically untenable position, respectively, of dealing with lower prices and lower wages

I am not a Wal-Mart employee nor do I even shop there but I think I will start today.

Given the title, I thought this book would elucidate on fundamental changes in the retail industry with case studies from various well-known retailers. Instead, it focuses on Wal-Mart with laser precision and proceeds to bash it at every turn without cause all the while freely admitting that most methods implemented were borrowed from others which begs the questions, "Did Wal-Mart ever invent anything new? What were other famous retailers doing at this time?" Rather than research historic data and report on trends, the author chooses to randomly and I do mean randomly point out perceived flaws in Wal-Mart. On rare occasions, we are given actual references to articles that back up some of his assertions but more often than not, we are stuck with his rants and no facts. Further, his explanation of retail history is extremely misleading as he leaves out critical issues.

Apparently, the author has never actually visited a small town nor queried the local population as to where they do their shopping and what are the available choices for purchasing goods or seeking employment before and after the arrival of a Wal-Mart. Since when have small businesses hired only full-time employees or offered health insurance and pension plans? They don't even have such things for themselves let alone the non-family staff. More importantly, America consists of a collection of social classes with a range of disposable income. Some like expensive items, some don't. Wal-Mart fills a niche yet rarely a word on how it stacks up against it's competitors nor what retailers that address high income niches are doing. The author prefers to rant that Wal-Mart doesn't behave like General Motors in the 60s and somehow that is just wrong. The author clearly doesn't understand supply and demand economics or basic business practices. If Wal-Mart expands because competitors floundered or just plain screwed up and have to close stores, then Wal-Mart is behaving in a predatory manner. If Wal-Mart implements new tech in a savvy way that gives them an edge over competitors, then Wal-Mart is sinister and anti-employee. And it is extremely odd that anything cited about Wal-Mart is cited from a public source meaning competitors have ample opportunity to adopt the same business tactics yet we aren't treated to any knowledge of what they are doing. Again, why the title if you don't want to talk about retail?

I never really could decide if the author was subsidized to write this book by an R.J. Reynolds type manufacturer or the AFL-CIO as he feels so strongly about these issues.
1) Manufacturers should decide exactly how many widgets they intend to make and retailers should beg to be allowed to sell them up to and including offering bribes. We used to call that communism. How's it working? How dare Wal-Mart provide feedback such as near exact tallies of what they currently have in stock when negotiating to purchase more. More importantly, Proctor and Gamble freely admitted that this business model worked until the markets were saturated so they were looking for a different approach. Yet no word on that or any other manufacturer in a similar situation.
2) All American businesses are better run by unions especially unions that assume employees lack basic education like international studies or economics so they can get all worked up about the imagined excesses of 1-2 corporate executives rather than realities like deflation or international competition whenever the union attempts to renegotiate a contract. How about explaining some of the atrocities that unions have done to themselves such as stifle creation of new jobs based on new products or services forcing companies out of business or jobs overseas? How about demanding wages and benefits higher than their efforts add to the bottom line? And why the assumption that Americans love unions? They have been fading for decades in all industries. Is that Wal-Mart's fault too?
3) Consumers love high prices particularly in order to subsidize union workers because saving money and spending it elsewhere isn't in their best interests. No doubt this explains the growth of Costco, Wal-Mart and Amazon.com. And secondary markets like Game Stop, E-Bay or [...]. Instead he actually drags you back to the 1930s (but Wal-Mart started in 1962) to rant about past union struggles and recite historic labor laws as if they matter. Seriously.
4) Retailers don't give a hoot about reducing inventory or turning over stock by tracking it. Yes, he admits that Wal-Mart uses barcode tech but doesn't say how or whether they were the first or whether other retailers do it too or even what they actually do with the data. Considering the title, an entire chapter should have been written about this issue. And no mention that manufacturers too decided that just in time manufacturing is a great way to reduce costs when copying Japanese business methods in the 80s. More importantly, none of this works in a vacuum. It requires business relationships with vendors; a two way street which begs the question, "How is this Wal-Mart's fault?"
4) Manufacturers really don't want to know if retailers buy less of their products because it is too easy to shoplift or the packaging doesn't communicate product information well. Wal-Mart is bullying manufacturer's rights to make products as they please. I'm sure investors in blue chip corporations would agree.
5) Any employee no matter how incompetent should be allowed to work at Wal-Mart until retirement. Since when has any job at the bottom been used for anything other than basic training and a reference to work somewhere else? The author never explains why grumbling employees complaining that they earn less than union workers down the street don't switch jobs. Nor does he value the fact that Wal-Mart often opens stores in areas where previously there were no jobs thus creating jobs. Nor does he consider that many workers actually prefer part-time work because it matches their schedules.
5) Methods for distributing goods have changed. We have standard shipping containers for boats, planes, trains and trucks. We have wide multi-lane freeways. We have reliable communication methods and GPS tracking. UPS and Fedex have built businesses around this technology. Surely, Wal-Mart uses it somehow yet all we hear is the plight of the Trucker's union then a fast forward to Wal-Mart providing the best maintained trucks, highest paid truckers with low turnover, low accident rate and 99.8% on time delivery. Did you get all that?

Aside from these silly ideas and others that he vents about, the author treats you to random facts about Sam Walton such as he hunts or boats around for relaxation. Relevance? What a stupid book!

Its a very nice book !!!

Can touch you about the global retail !!!

This book presents a shallow and unfocused review of Wal Mart and what Wal Mart does. Don't buy the book, instead go to a Wal Mart and you will learn more than you will from this book.
I bought this book to learn about Wal Mart and I get stories about a 1911 fire at a sweatshop in New York. The author's focus is Wal Mart should raise workers pay around the world and provide more benefits. The author doesn't like Wal Mart or Republicans. I paid $9.99 to read that. A waste of money.