Can’t Win a Losing Game: Back to School Edition

“Anybody can cut prices, but it takes brains to produce a better article.”
Ross Perot

Let’s do some math.  If consumers are spending $18.4 Billion, and Wal-Mart can save them some money, how is this a bad thing?  Say Wal-Mart could cut 10% off the cost, that’s a savings of $1.84 Billion dollars going into the pockets of the consumers. 

How is this bad?

Dear Scott:

Because ongoing and neverending consumption of cheap overseas crap continues to ba a bad thing---keeps american wages low, keeps foriegn interests buying cheap american debt, keeps your tax dollars flowing to pay interest to foriegn bodies without putting dent in the principal.  Walmart encourages us to consume without production, to accept low wages or risk losing more jobs to third world countires, to look the other way while it perpetuates slave labor.  Buying walmart crap endorses all this with your feet and your dollars.

Martha,
I’m sorry, but your statement is factually incorrect.  Median real wages have risen almost every year for the past 30 years, minus the years we had recessions and the next two years following those recessions.
We’re also not losing jobs.  Unemployment is almost at it’s lowest point in 100 years. 

Basically, what’s happening is that we are prospering by lifting third world countries like China out of poverty.  Win-win.

Scott,

“Basically, what’s happening is that we are prospering by lifting third world countries like China out of poverty.  Win-win.”

First, you have to understand, that many here have a ‘Welfare Mentality’ and would rather hand out billions in foreign aid, than allow these other countries to take part in the ‘World Economy’!!  Second, is the fear, that if other countries get on track with a better economy, they might pass up the U.S. and take over the #1 spot in the world!!  It’s an EGO thing, with the foam finger, we have to wave it as “We’re #1” and we’re willing to keep others down to do it!!  If there is slave labor and poverty in other countries, it is because the protectionists here, won’t let them get up on their feet!!

Apparently You Don’t Understand the History of the USA, RDS

Where would America be today had it not been for slave labor and poverty?

You say: “...many here have a ‘Welfare Mentality’ and would rather hand out billions in foreign aid...”

Yes!  I agree.  Let other countries take part in the world economy...but on a level playing field. The U.S is not responsible for getting other countries “on track.” You keep saying RDS that if companies can’t compete, they shouldn’t be in business.  Well...to word it another way, if countries can’t compete, they shouldn’t expect to be a part of the “world economy.”

Which country sent money to the U.S. after World War II?  Which country sent money to the U.S. so we could “get on track?”

If you are against the “Welfare Mentality” RDS, then you should be against the “billions in foreign aid” (some people might call them subsidies) that our government is pissing away every day.

Screwedby,

“Where would America be today had it not been for slave labor and poverty?”

America would be exactly where third world countries are now!!  We’ve already “been there, done that”, years ago!!

“Let other countries take part in the world economy...but on a level playing field.”

And, WHO sets the standards for that ‘level playing field’, the U.S.?  Do all other countries have to adopt the U.S. model, paying wages equal to what is paid in the U.S. and use the SAME labor laws as the U.S.?

“You keep saying RDS that if companies can’t compete, they shouldn’t be in business.  Well...to word it another way, if countries can’t compete, they shouldn’t expect to be a part of the “world economy.””

Right, and those countries are trying to compete, but there are people here that want to shut them out and NOT allow them to export to the U.S.!!  And, if U.S. companies can’t compete with wages and prices of other countries, would you still say that “they (the U.S.), shouldn’t expect to be a part of the “world economy”?

...and Wal-Mart can save them some money, how is this a bad thing?

It’s not a bad thing. I’m all for Wal-Mart cutting prices. And they can sell as much as possible. As long as their profit is cut along with the prices, it’s great thing.

Even is they push the cuts back to the suppliers, it’s still a good thing.  Whatever had it’s price cut had to lose quailty. (Anyone used a regular yellow pencil lately? Piece of crap!)

I hope Wal-Mart adds loss leaders to all these reduced items. I hope consumers hold Wal-Mart to ‘comping’ competitors. I hope more customers utilize coupons when they buy from Wal-Mart. I encourage people to only buy the things at Wal-Mart that are the cheapest.

Ken

You claim that cutting costs leads to a decline in quality. Doesn’t that also mean that higher costs lead to higher quality? Ford and GM have hourly labor costs that are more than $30 over Toyota’s hourly labor costs. Do Ford and GM produce vehicles that are far superior in quality?

Hyundai makes cheap cars yet they are tops in quality. Cheap does not necessarily mean lousy quality nor do high costs (Land Rover=crap) equal high quality.

Ken,

Their profit MARGIN is pretty consistant year in and year out.

Screwed,

Slave labor retarded economic growth in the states that relied heavily on it.  Growth occurred much faster in the NE and North part of the country during the slave periods. 
Freedom works better than slavery at creating economic growth.

Their profit MARGIN is pretty consistant year in and year out.

Isn’t that just a nice way of saying that despite huge increases in sales, Wal-Mart’s profit increased less than 1%?

You call it “consistant”, RDS calls it “dynamic”, and I call it stagnant.

Go figure?

Ken V,

If a company with a $11 billion profit has a 1% increase, that means they made $110 million MORE PROFIT than the year before, how many here, think that $110 million isn’t very much money?  Don’t forget, they only have a 2% to 3% profit margin!!

...think that $110 million isn’t very much money?

But $846 million is just one week’s sales, remember, RDS?

P.S. They didn’t make “$110 million MORE PROFIT than the year before”. They only increased profits by $50 million.

I know you guys are infatuated with big numbers but they really don’t mean much.  Wal-Mart made 3.21% profit last year. Sales and all those weekly visitors may make you feel better about the direction Wal-Mart is taking, but investors don’t see it that way.

KenV,
“Whatever had it’s price cut had to lose quailty”

That is absolutely, patently untrue, for 2 reasons
1) advancements in production, technology, computing, and efficiency have the effect of LOWERING costs with time. How much did a DVD player cost when they first came out?? - how much do they cost now??

2) Price could be lowered by the company in an effort to sell more of the item - that’s simply an accounting trick, and has no effect on the quality whatsoever.

1) advancements in production, technology, computing, and efficiency have the effect of LOWERING costs with time.

I have no argument with that, ghv, if Wal-Mart knew when to stop. There are only so many inefficiencies that can be squeezed out of any system. After that, quality is the first casualty.

Wal-Mart not only dictates delivery schedules and inventory levels but also heavily influences product specifications. In the end, many suppliers have to choose between designing goods their way or the Wal-Mart way. “Wal-Mart really is about driving the cost of a product down,” says James A. Wier, CEO of Simplicity Manufacturing, a lawn-mower maker that decided to stop selling to Wal-Mart last fall. “When you drive the cost of a product down, you really can’t deliver the high-quality product like we have.”

Business Week

I have no argument with that, ghv, if Wal-Mart knew when to stop. There are only so many inefficiencies that can be squeezed out of any system. After that, quality is the first casualty.

I really hope you don’t work for a company that manufactures or sells anything.

tjc,

“I really hope you don’t work for a company that manufactures or sells anything.”

Just think if these guys were CEO’s, their stragety would be:

1.) Pay workers more and give them better benefits (living wage) - higher cost, but less turnover!!

2.) Buy highest quality materials to create product - quality is more important than price!!

3.) Allow employees to set company policies - after all, they do all the work!!

4.) Make sure you hire lots of employees - helps keep unemployment down and eases workload on employees!!

5.) Buy ALL of your materials from local sources, even if it costs more - helps local economy and stops ‘slave labor’ in other countries!!

6.) Take NO subsidies, tax breaks or ‘loopholes’ - make it easy on taxpayers!!

7.) Keep your salary low - after all, you don’t do nothing for it, as the employees do all the work!!

8.) Make sure you give away most of your salary to charty - it makes you look less greedy!!

9.) Refrain from employing technology that might replace workers - got to keep people working at high paying jobs!!

Sound like a successful business stragety to you?

I really hope you don’t work for a company that manufactures or sells anything.

So you’re one of these people that denies the existence of the Law of Diminishing Returns, huh, tjc?

So you’re one of these people that denies the existence of the Law of Diminishing Returns, huh, tjc?

Not at all.  The caveat of diminishing returns is “one factor of production is increased while the others remain constant.” This is not reality.  I suppose you don’t believe in economies of scale or scope.  Your simple relationship between price and quality is wrong, and I suspect that if you worked in a product design or manufacturing environment, you’d know why.

...economies of scale or scope...

The denial of limits is all part of the devaluation of labor and the role it plays in the creation of wealth. No matter how efficient you get, the intrinsic ‘value’ of anything produced can never reach zero. That’s reality.

When you are externalizing costs to such an extreme (billions) like WalMart does and sucking in huge (billions) subsidies and evading taxes with multiple scams (billions) the concept of retail capitalism becomes a farce for the WalMart business model. The economies of scale and scope here need realistic attention to Chinese trade dynamics and anarcho-capitalism skimming off labor in the Global Labor Arbitrage. China is indeed lifting into a better economic speed and expansion mostly paid for with U.S. jobs and a severe diminished observable quality in products that WalMart peddles. What is not recognized by the economic clowns of the internationalist corporate brigade is that equivalence in the account balance (trade) and monetary policy (dollar devaluation 40% over five years, stop publishing the M3) is not happening. These debts are showing in the social costs here in the U.S. therefore WalMart and BushCo must hire PR firms and lie. We will spend approx. $700 billion and how much blood for ‘claims’ to Iraqi oil in the ground if a so called ‘legitimate’ government there will ever sign oil contracts for Chevron and friends ( Bush won’t leave Iraq until ‘they’ sign the oil contracts). Good luck to enforcement, just like trade policy and downward pressure on American wages and escalating mortgage defaults moving into the middle class.
That has been class warfare brought to you by ‘love of money’ psychopaths passing themselves off as economists. Now they need the Democrats to raise taxes on the rest of America to pay for the lavish bullshit the upper .5% have been pulling across town. You don’t think the wealthy are going pay for this do you?
The VAT, eliminate the estate tax (DEATH TAX!), keep the 15% on capital gains. Propaganda? Wait until you see what WalMart and BushCo as international heroes have for the American worker and taxpayer around the corner besides Mexican truckers to replace and bust the teamsters. Economics broadcasting is salesmanship to bullshit people who don’t know better about all the fraud, stealing, lies and murder out of view by irresponsible incompetent corporate interest. Reaping and sowing is still the law.