Wal-Mart — The good, the bad, and the ugly

Wal-Mart is using its martket clout to keep food prices low. This article mentions three methods. I like this one:

Shrink the goods. Ever wonder why that cereal box is only two-thirds full? Foodmakers love big boxes because they serve as billboards on store shelves. Wal-Mart has been working to change that by promising suppliers that their shelf space won’t shrink even if their boxes do. As a result, some of its vendors have reengineered their packaging. General Mills’ (GIS, Fortune 500) Hamburger Helper is now made with denser pasta shapes, allowing the same amount of food to fit into a 20% smaller box at the same price. The change has saved 890,000 pounds of paper fiber and eliminated 500 trucks from the road, giving General Mills a cushion to absorb some of the rising costs.

This makes eminent sense. Why drive trucks that are only partially full? Denser packaging saves money and hurts no one. It’s a win-win situation.

The second method, cutting out the middleman, is a common business tactic. Instead of buying its brand-name coffee “from a supplier, which buys from a cooperative of growers, which works with a roaster”, they go directly to the cooperative. So, if costs go up their “efficiencies” allow them to keep the retail price lower.

Is this a good thing? I have blogged about my growing support for buying locally-grown food. I have also voiced my complaints about the high prices at some of the farmers’ markets here in Phoenix. I want to go a little further by pointing out that low-price is not my ultimate measure of whether to purchase a product.

Wal-Mart does have low prices. But, I am one of those shoppers who recognizes the social costs imposed by big-box stores. I willingly pay a higher price to support local businesses. Besides, I can’t stand being in a Wal-Mart, or most other corporate retailers. There is something deeply depressing about Wal-Mart. Its not just the blue branding. It’s written on the faces of the employees and shoppers.

So, if Wal-Mart cuts out the middleman in order to keep costs lower, it may mean you pay slightly less for your coffee. But, you will pay in other ways. They force out local businesses. They pay low wages. And they are just plain ugly.

The third method employed by Wal-Mart to keep prices low is to buy locally. “By sourcing more produce locally – it now sells Wisconsin-grown yellow corn in 56 stores in or near Wisconsin – it is able to cut shipping costs.” This turns out to be a bad thing, though. The article goes on to describe how Wal-Mart is forcing these local suppliers to eat the higher costs of production. In other words, the local growers are not able to pass their costs on to the consumer.

So, although Wal-Mart is buying some of its food locally, they may be doing local producers no real favors.