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Surviving Wal-Mart's effect on the world

By Ester Venouziou, Times Staff Writer
In print: Monday, October 13, 2008

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First, let's get the misconception out of the way: The Wal-Mart Effect, by Charles Fishman, is not a book bashing the world's largest retailer. Instead, Fishman, editor-at-large of Fast Company magazine, says it's about how Wal-Mart's low prices have an impact on society and on the economy. And along the way we find out how the company went from being a role model for capitalist society and the American dream to perhaps one of the nation's most hated corporations. Fishman will be speaking at Eckerd College in St. Petersburg Tuesday. His book isn't preachy. He doesn't tell you not to shop at Wal-Mart. "Half the adults in America go into Wal-Mart every week," he says. Fishman buys stuff there, too. But he wants shoppers to know low prices come, well, with a price. Yes, that sweater for $12.97 might be a great deal. But down the street there is the little boutique owner, trying to explain to customers why sweaters at his store are double that price. Somewhere out there is a supplier who decided to lower quality to meet Wal-Mart's low-price expectations. "We need to look at the consequences," Fishman says.

What are some of the more surprising things you found when researching the book?

The products: "I hadn't thought about the impact on quality of products. You can't reduce prices without reducing quality."

The stores: "I visited 150 Wal-Marts in 26 or 27 states. … They're all different; they all have slightly different character."

The insiders: "The world is very different from inside Wal-Mart," Fishman says. In the past few years, executives have "tried to open up, to understand the criticism. … They don't have horns and fangs, they're not plotting ways to destroy the world. … They think of themselves as really providing a service and don't understand why they inspired so much anger."

What can small businesses do to survive when a Wal-Mart moves into their neighborhood?

"The most important thing is, don't panic," Fishman says. "And don't try to sell as cheaply as Wal-Mart. If you try to compete by matching prices, you'll get crushed."

Wal-Mart's profit margin is extremely low. For every $10 of merchandise it sells, it keeps only 30 cents, Fishman says. For a private retailer whose daily sales volume might be just a couple of hundred dollars a day, that's an unrealistic profit margin.

"There are plenty of arenas in which Wal-Mart is not going to be able to win. But head to head on price is not a way for a local business to win. And businesses shouldn't imagine that price is all that matters. If it were, Starbucks wouldn't exist."