Customer Reviews

The Wal-Mart Effect: How the World's Most Powerful Company Really Works--And How It's Transforming the American Economy

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Wal-Mart, one of the world's largest economies (it accounts for an astounding 2% of the U.S. gross domestic product, and in any given week, 100 million people--half the adult population in the U.S.--shop at Wal-Mart!), has taken it on the chin in recent years. John Dicker's _United States of Wal-Mart_, Bill Quinn's _How Wal-Mart Is Destroying America and the World_, and the recent film "Wal-Mart: The High Cost of Low Price," are all examples of this trend. Each of them documents Wal-Mart's low wages and benefits, its take-no-prisoners competitiveness that slashes-and-burns local business and guts local main streets, and its willingess to buy sweat-shop goods.

In his _Wal-Mart Effect_, Fishman doesn't deny the pernicious practices of Wal-Mart. But the more interesting feature of his book is his analysis of the culture that Wal-Mart has created in the United States. In a word, Wal-Mart has trained the American consumer to expect and to demand low prices, and to immediately suspect that any commodity that has a higher price tag than its Wal-Mart equivalent must be a rip-off. The Wal-Mart ethos, in other words, has replaced traditional consumer concern for high quality with low cost as the primary criterion.

This replacement of quality with cheapness is troubling enough (think of the environmental effect of buying cheap crap that quickly winds up in a landfill). But Fishman goes on to show that the new culture of low costs means that Wal-Mart must relentlessly scurry to satisfy the customer demands that its practices have created. So Wal-Mart increasingly buys off-shore sweat shop products to keep down prices, and in the process is forcing more and more American wholesellers, already struggling to survive, to shut down their U.S. operations and move overseas where labor and production costs are lower.

Fishman is careful to point out that Wal-Mart really does offer commodities--especially groceries, which Wal-Mart offers about 15% cheaper than its competitors--at lower prices, and this is no small benefit for folks who live on the economic margins (a steadily growing demographic group). But the hidden cost of the low prices is a disturbing cultural and economic transformation: a disregard for quality and the outsourcing of America.

Highly recommended.

After seeing a rather frightening documentary about the worst of Walmart's business practices, I decided to have a look at his book. I'm glad I did because I learned quite a few things that weren't exactly public information...in fact, they might actually be company secrets.

Mostly, though, I got a glimpse into the ways Wal-Mart affects our economy, for good and ill, with their relentless search for low prices (which consumers seem to love, not realizing how this could weaken our economy), to the bully tactics used to force suppliers to offer the "lowest price", even in the wake of higher costs for raw materials and other factors that make price cuts near impossible, below a certain level.

The result? Wal-mart often buys from manufacturers who produce products overseas (they can often produce products for prices cheaper than American companies), lessening the benefit to the American companies and actually forcing many longtime name brands out of business. Gone are many of the familiar names we used to see on store shelves and others are hard-pressed to stay in business (Rubbermaid learned a hard lesson when it tried to buck the Walmart dictates and Walmart retaliated) or are forced to lessen the quality of what they offer.

Anyone who lives near Walmart (and who doesn't?) should read this book to get a real idea of how the company influences nearly every product you buy.

Why? Because the Walmart "formula" is one more and more companes are being forced to imitate. Yes, this may result in lower prices for many products but is the overall longterm effect good for us- and our economy? That is a major issue addressed in the book.

By the way, an excerpt from this book appeared in a national magazine and led to what that magazine called the most powerful response from its readers IN THE HISTORY OF THE MAGAZINE. So be prepared for the author to keep you glued to the pages.

I came to this book in search of solid reporting from within the company - afterall, the cover boasts that the author "penetrated Wal-Mart's wall of secrecy." Well, I am sorry to report that the author has done no such thing. Instead, what the reader gets is a rehash of some of what has already been written (if by him in many instances), with extended (and repetitive) stories on outside critics as well as some partners (suppliers) of the company in stories that are so long as to feel like filler. But he does not find any honest visionaries or even concerned doubters within the company to offer perspective, which I was hoping to find. Moreover (and far worse), there are huge gaps that the author entirely misses or indeed may have preferred to ignore.

Wal-Mart's business practices are well known: promising "everyday low prices" and convenience as its competitive advantages as a general merchandiser, the company relentlessly searches for cost-efficiencies in the form of squeezing suppliers, offering relatively low wages and little health care, and developing an unprecedented logistics operation that literally spans the globe with sweatshops in China, etc. That is about it and it explains the company's phenomenal expansion and the growth of its power.

Of course, the case of the critics is becoming equally well known: 1) workers need a "living wage" and better health coverage options; 2) suppliers need better treatment so that they do not ruin their brand when selling to WM; 3) local governments should not face so much pressure to grant tax breaks and other concessions to WM; 4) local businesses need some protection and nurturance to stay in business when WM comes to the community; 5) WM needs to learn to listen to the concerns of critics and act on them better.

Fishman covers these areas competently, if by reiterating stories that anyone who follows the issues should know, such as the way that Vlasic pickles was bankrupted by being forced to sell at a price too low to sustain itself. (This important example, which he broke in his original article for Fast Company is now repeated in just about every critical source I have read on the company.) As such, the substance of the book is really not much beyond what should appear in a long article, meaning that there really is no much new in this book - it is just a compilation of what we know, well written perhaps, but surprisingly thin.

I did get some detail on issues such as the environmental impact of WM's demand for Salmon on Chile or what economists are researching on the company. In addition, there is very useful original reporting on WM's foreign-factory inspection programs, which Fishman portrays as PR window-dressing and which I will use in my currect project. Nonetheless, I was often disappointed at the thinness of the reporting and the sparseness of ideas in the text.

However, what Fishman fails to cover - and which is already becoming well known - diminishes the value of the book. At the moment, Wal-Mart is facing a series of crises. Not only has it saturated the rural areas of its origins, but customers are beginning to tire of the low quality and shabby, pedestrain styles it offers. This is directly reflected in its declining stock price and profit margins. Finally, consumers are beginning to learn and disapprove the company's practices.

The remedies to this crisis are far from certain. First, WM must go into new georaphical areas, that is, into more urban environments. Unfortunately, it has proven rather inept at doing so because unions and political activism are strong in these areas, which translate into passionate resistence to the company in the form of economic empowerment, community control, decent treament of workers, etc. (I have witnessed this first hand as a reporter in the community of Inglewood, near LA, which mobilised a diverse coalition and beat the snot out of the company.) Second, the company hopes to appeal to higher-class consumers, who disdain its style while shopping there for low-margin generating necessities. These are precisely the well-educated consumers who oppose the company for all the reasons that critics are advancing: environmental impacts (traffic and pollution), the assault on traditional downtown areas, etc. Getting them onboard, let alone in, may not be possible.

Thus, to placate these critics, WM would have to do the unthinkable: pay more, invest more in the community, and refrain from certain forms of competitition. Alas, this would erode its competitive advantage, forcing the company to raise prices and hence undermine its core business model. Amazingly, Fishman barely acknowledges this dilemma and offers no comprehensive analysis on it. This is not great reporting if you ask me.

So I would only tepidly recommend this book. If the reader wants a general introduction, this is a decent place to start, if incomplete. But if the reader knows the issue and argument, don't bother with this book if you are looking for new detail or comprehensive coverage. A far far better book is Nelson Lichtenstien's Wal-Mart: The Face of 21-Century Capitalism.

Charles Fishman is a lot like Thomas Friedman, only on a limited travel budget. Both authors look at the world, collect data, talk to a lot of people and pundits, write best-selling books and take on an air of expertise. What they both really have is this "Gee whiz, can you imagine that?" view of the world. Much of their writing offers little real insight or recommendations and sometimes only very little food for thought. They sell a lot of books and this apparently causes their audience to confuse writing for thinking, speaking for knowing, and words for wisdom.

Wal-mart is huge - duh! Fishman would probably liken them to the Death Star in "Star wars," while a Wal-Mart executive likens the firm to Baby Huey - young, huge, immature, and prone to making large but largely innocent errors. Neither simile works. All the apocalyptic hyperbole about Wal-mart taking over the world economy or outsourcing all of America should be taken for just that, hyperbole. Fishman laments (p. 241) that the twenty largest firms today account for twenty percent of the nation's economy, while twenty years ago it took thirty firms to capture twenty percent of the market. What he fails to discuss is who used to be among the top thirty firms back then and where they are today. And he ignores the fact that the American economy has grown so much that the dollar value of the economy outside the control of the top twenty firms is growing even faster. And he completely ignores the world economy, growing faster still. And, like Friedman, he ignores the lessons of history. Twenty years ago, IBM and Japan would have been the villains in this book, not Wal-mart and China. Forty years ago it would have been General Motors and the Soviet Union. Fifty years ago, Bethlehem Steel and... well, no foreign country, as the world economy was in pretty bad shape after World War II. It probably would have been the UAW.

Fishman attacks Wal-mart for making use of government health care for their employees at a time when many large American firms are clamoring for even more of that. He ignores the failed effort to force Wal-mart to spend more on employee health care, known to be bad business practice by the states and, for that matter, ruled illegal by the courts. He reports stories of American employees making quality products being displaced by cheap foreign labor making shoddy, low-quality goods. These displaced employees then shop at Wal-mart knowing better than anyone that they are buying cheap, shoddy, low-quality goods. Fishman and these displaced employees, along with millions of other Wal-mart shoppers, confuse price with value. Fishman is dismissive of the growth of stores like Target and Kohl's, stores that ignore the "low prices always" motto and replace it with a better shopping experience. He can't really grasp why Wal-mart same store growth is waning. He shows little interest in or appreciation for Wal-mart's efforts to go green, to save energy, to share ideas. Maybe they are responses to criticism; and just maybe, these acts are too little, too late to stave off the decline of Baby Huey.

Wal-mart has mastered logistics and supply-chain management to a level that wins universal admiration. They flattened the world well before Friedman noticed. When Hurricane Katrina hit, Wal-mart, not government regulators or regulations worked best to solve problems. But being good at what you do and very big makes people envious, curious and suspicious. What Fishman seems to really despise is Wal-mart's ability to keep secrets. He seems intent on opening up Wal-mart's books, to force them to tell the world and their competitors their market volume and share. He thinks the government should force Wal-mart to be more open, just as the government "forced" auto firms to achieve higher fleet gas mileage. When Wal-mart says they hope to double the mileage of their trucking fleet, Fishman seems to prefer another useless, inefficient, ill-advised government program.

The unwritten lesson is that if you want enduring, sustainable value in your purchases, your life, and your economy, you'd think twice before shopping at Wal-mart, and maybe you wouldn't shop there at all. And you certainly would not purchase any state lottery tickets. Or smoke cigarettes. But that doesn't make Wal-mart evil.

Critically examining factors in American capitalism which Wal-Mart mastered to grow into the corporate powerhouse it is today, Charles Fishman's book won't be stocked in the book section of those mega stores. However, then conceding their ongoing popularity with the American public, it also won't be on the most read lists of those believing the discount retailer is Satan.

Unlike the struggling K-mart, Wal-Mart had understood the importance of customer satisfaction and continues to maintain it with a cut-throat diligence. Stores are clean, bright, stocked with ample quantities of name brand products at cheap prices, and helpful employees. Furthermore, the Wal-Mart store mascot itself is a smiley face, designed to raise customer comfort and trust levels. Traditionally associated with the free-spirit 60's, the icon now represents anti-union- free-market-southern-capitalism at the most direct: `Always low prices'.

It does not necessarily translate into a `smiley face' environment for employees of the stores however. Fishman notes that only former Wal-Mart employees were able to be interviewed for his book. Corporate policy officially prohibits current employees (including management) from taking with anybody who would write anything that could possibly be construed as critical. Furthermore, he questions the costs behind the `low prices' even if the products themselves are being purchased by individuals with little money.

Like myself (who practically lived through Wal-Mart as a financially-struggling college student) and many others, Fishman honestly wrestles with his complex feelings about Wal-Mart specifically and American retailing in general. People uneasy about Wal-Mart labor practices and community-environmental impacts still shop there because of our own economic situation and/or time considerations. The company's bottom line might be making profits for itself, but its products ultimately do enable us to succeed with our own tasks and get on with our own lives.

The genius of this book is that it poses the thesis and supporting questions without consequently degenerating into either a doctrinaire defense or attack of this retailer.

Fishman points out that Wal-Mart's economic doctrine has the retailer consistently shopping for whatever manufacturer can meet the company supply specs and today's supplier may very well be discarded tomorrow in this very atmosphere. Depending on perspective, it is either heartless exploitation or simply the game of capitalism being played by somebody really knowing game rules. This translates into consumers expecting that other stores will offer their products at simmilar prices, and abandonding them when this does not occur for whatever reason (higher manufacturer and/or supplier wages). Fishman wants us to make up our own perspective on the company and how it came to be.

I have an aversion to most books examining corporations because they lack academic neutrality, but this work is a notable exception. Fishman does not want to blame or celebrate as much as understand how the retailer came to be and is continuing to be so prominent.

The inescapable impact of Wal-Mart on the global economic landscape is certainly worthy of in-depth analysis, and business journalist Charles Fishman, senior editor at Fast Company, does as even-keeled a job as possible when it comes to the retail monolith. What I find particularly intriguing about Fishman's approach is that this is not a Horatio Alger mega-success story but a thoughtful account of how the company's principal imperative - maintaining the lowest prices - has had a hammering domino effect on the rest of the country. So uncompromising in its objective, Wal-Mart continually lowers prices, which means makers and suppliers of the products it sells must also cut costs. This is where the power of size and scale really comes into play, as Wal-Mart relentlessly calls for more volume and more cost cutting. The consequence is an inevitable downgrade in materials and quality, and Fishman shares images of third-world child labor as production is forced to make do with the cheapest labor available. Moreover, it's a zero-sum game. When costs cannot be cut even further, the supplier goes out of business, and Wal-Mart moves on to another.

Fishman's book is filled with examples of Wal-Mart suppliers who could not escape the squeeze. Production lines in the US close as a result and throw loyal employees onto unemployment lines. The author offers a startling milestone achieved in 2003 - there were more Americans selling things in retail than making things in manufacturing for the first time in modern history. This means not only lower-paying jobs for workers but also a national dependence on industrial capacity and skills elsewhere. And in the ultimate irony, lower wages mean that families must depend on the lower prices that they can only get at Wal-Mart. With local businesses being driven out of existence, more people will need to work for Wal-Mart to subsist. The author, however, does not paint a totalitarian economic regime, as he clearly shows that Wal-Mart is not destroying these businesses; rather, the shoppers are the ones who put people out of business. In a classically capitalist society where competition is the only acceptable driver, we vote with our wallets, and we need to take accountability for the fact that we are the ones who choose Wal-Mart over local stores. Wal-Mart, in that sense, is the ultimate model of democracy.

Nonetheless, the reality is more textural than economic theory allows, i.e., Wal-Mart's power and scale actually hurt capitalism by strangling competition and truly running the market. Fishman is best when he humanizes the Wal-Mart effect with his extensive interviews. An intriguing example is Jonathan Fleck, the inventor of the "Makin Bacon" bacon cooker. At first, he handled the direct mail orders himself at home through magazines and a promotional offer on Armour bacon packages. When Wal-Mart agreed to market the gadget in 1995, he could finally keep up with the burgeoning demand. But Wal-Mart, true to their operating principles, ordered 200,000 "Makin Bacon" machines. This forced Fleck to find financing, locate a manufacturing plant, and address increasing price pressure from Wal-Mart to sell each succeeding machine for less. His alternative is to face bankruptcy.

According to Fishman, the success of Wal-Mart's strategy still reveals vulnerabilities. A key gap is that it cannot compete on quality or service. Even among its less profitable competitors including Target, Wal-Mart falls short on presentation and the shopping experience, and Costco is stronger in the areas of employee retention and long-term community relations. Bottom line, when it's not competing on price, it can't compete; and ultimately the downward cycle, which Wal-Mart is instigating purely on price, is making it look to markets overseas. Fishman's clearest assertion is that Wal-Mart's scale has forced a new set of rules on the marketplace. After all, we cannot rely on traditional Keynesian models to cover the fact that Americans spend on average $35 million every hour at Wal-Mart, 24/7 every day of the year. The author accurately feels the transparency that Wal-Mart resists is key not only to preserving the capitalist system we value but also to ensuring fair and humane business practices. There is potential for Wal-Mart to recognize this, as the company has the power and size to change not only the way we buy but the way we think.

Pieced together from a mixture of interviews, anecdotal evidence and academic studies, The Wal-Mart Effect dishes up startling statistics about America's biggest retailer. Some of the numbers in this book will make your jaw drop and have you sprouting random Wal-Mart facts around the watercooler. However, the author didn't dig much beyond the surface, and doesn't present any great revelations about business at Wal-Mart. Instead, he relies on "shock and awe" tactics to hold your interest while de-emphasizing strategies for consumers and corporations to manage in a Wal-Mart World.

Charles Fishman lays bare the way in which Wal-Mart affects the economy, environment, labor, and prices in the U.S., and throughout the world. He admits that he is a frequent shopper of Wal-Mart, and does not hold back when positive acclaims are due. He also does not pull any punches when it comes to his descriptions of the destruction Wal-Mart is partially responsible for around the world.

If you have any interest in how the world's largest company works, and how it affects everyone, you can not pass this book up.

Fishman has produced a well researched, objective book on an important phenomenon. Unfortunately, it is also kind of dull, partly because Fishman is too wordy. The book begins very well, and I suspect if Fishman had more ex Wal-Mart executives willing to talk freely, the book would have been more interesting (current Wal-Mart execs won't talk and Fishman has no secret sources).

While I think Fishman takes great pains to be unbiased, I also think he is putting too much of the blame for the movement of jobs overseas on Wal-Mart. After all, Dell is the leading PC maker, does not sell through Wal-Mart, and does not produce its product in the US. Also, sales results in the last year or so show that competitors like Target are now taking market share from Wal-Mart.

One stat that particularly bothered me, was that Gap has about 4.5 times the staff for auditing overseas factories, once you adjust for dollar value of sales (excluding groceries). Another disturbing fact: in Georgia, Wal-mart had one child in the state insurance program for every 4 employees, whereas Publix had one child for every 22 employees. Now, there may be benign explanations for both these stats, and I do wish there was more comparative analyses of Wal-Mart versus, say, Target, but they are disturbing stats.

Interestingly, the day I finished this book there was a story in the Wal-Street Journal about a maker of ergonomic pens that just got a Wal-Mart contract; It reads like one of Fishman's case histories. Part of the pen maker's problem is that they were given so little time from the day their product was accepted till the day they had to begin deliveries - there seems no good reason for this. They plan to produce pens which can sell at higher price points, to placate their current retailers, but all their energies are of necessity focused on Wal-Mart.

This book is worth a read by anyone who really wants to understand the Wal-Mart story. Fishman has done a truly impressive job of starting with a blank slate and an open mind in his analysis of Wal-Mart. He looks at Wal-Mart from the perspective of its shoppers, its new employees versus its original employees, its suppliers, other retailers in towns it enters and towns it doesn't. He looks at Wal-Mart's impact on workers in other countries and the environmental impact on other countries. He even talks about Wal-Mart's impact on the quality of items we buy.

As you can see, Fishman's analysis walks the whole perimeter of Wal-Mart and looks at it from every angle. He pulls no punches when what he sees is negative, but he's never shy about pointing out the positive attributes of Wal-Mart either. He arrives at a terrific insight about Wal-Mart; what started out as its greatest attribute - "Always low prices. Always." - has become the source of its worst attributes as it has grown.

I'm a fairly hard-core free-market guy and Fishman has me convinced through sound analysis that Wal-Mart has grown to a size and power where it actually corrupts the free market, forcing companies to sell at below-market prices. His analysis of the effects of that power is spectacular for its thoroughness and unbiased nature.

I'm obviously blown away by how good Fishman's analysis of Wal-Mart is, which made it so much harder to be blown away by how bad his proposed solution is. Fishman decides that the best thing to do to solve the problems created by Wal-Mart is force them to divulge proprietary information about their company to the government so it can properly regulate and control the company.

WOW! If there's an obvious example of an instition that has grown far larger than Wal-Mart and had an even worse effect, it's the government! That's like calling in the wolves to handle your stray dog problem.

The United States now ranks tenth in the world in how free its economy is. Estonia ranks third! Halliburton just moved its headquarters to Dubai and it will be the first in a string of corporate departures if we don't stop with our knee-jerk regulation. That may sound good to us right now with anger over Enron and Tyco still simmering, but in twenty years when we can't find jobs and hold only a shadow of our former economic standing in the world, we will think differently.

Wal-Mart does create massive problems along with its massive benefits, but government revocation of Wal-Mart's rights to its own assets (in this case information) is a solution that is far more dangerous than the problem.

Great analysis. Scary proposal.