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Wal-Mart Wage Hike Debacle Continues As Suppliers Forced To Layoff Employees Amid New Fees
Earlier this year, in “What Happens After A Mega Corporation Raises Its Workers' Wages,” we detailed the plight of Wal-Mart’s supply chain in the wake of the retailer’s decision to raise the pay floor for its lowest-paid employees. Here’s a recap:
When mega-corporations such as WalMart and McDonalds, whose specialties are commoditized products and services and who have razor thin margins, yet which try to give an appearance of doing the right thing, by raising minimum wages, they start flexing their muscles, and in the process trample all over the companies that comprise their own cost overhead: their suppliers and vendors. Take the case of WalMart: the world's biggest retailer "is increasing the pressure on suppliers to cut the cost of their products, in an effort to regain the mantle of low-price leader and turn around its sluggish U.S. sales."
What WalMart is doing is borderline illegal: it is explicitly telling its vendors "this is what you will do with your excess cash." Of course, we say borderline because WMT's action is perfectly legal in the confines of the pure law. However, in the context of an economy that is sputtering, WMT's vendors have no choice but to comply or risk losing what is certainly their largest revenue stream and risk bankruptcy.
The irony is that while WMT (or MCD or GAP or Target) boosts the living standards of its employees by the smallest of fractions, it cripples the cost and wage structure of the entire ecosystem of vendors that feed into it, and what takes place is a veritable avalanche effect where a few cent increase for the lowest paid megacorp employees results in a tidal wave of layoffs for said megacorp's vendors.
As those who frequent these pages are no doubt aware, quite a bit has happened in Wal-Mart world since we penned those words. First there were “plumbing” problems which, for at least five locations, were so intractable as to necessitate store closures. Then came the mid-level management rumblings as the rest of Wal-Mart’s employees suddenly realized that an across-the-board wage hike for the lowest-paid workers meant the wage hierarchy was suddenly and irreversibly distorted. Shortly thereafter, a memo circulated at an Arkansas recruiting firm indicated a raft of layoffs could be in store for the Bentonville home office. Finally, unable to make up the $1 billion cost of the wage hikes and unable to pass that cost on to customers without surrendering the “low price leader” crown, Wal-Mart began cutting hours.
Now, we get still more evidence that the world’s largest physical retailer is attempting to make up for the cost of hiking wages by pressuring its suppliers only this time, the supply chain is pushing back. Here’s Bloomberg with more:
After years of meeting demands for ever cheaper prices, many Wal-Mart Stores Inc. suppliers are saying no to new margin-squeezing storage fees and a payment schedule that could delay for months how quickly some are paid.
The world’s largest retailer says the changes, laid out for vendors starting in June, reflect a push to simplify its relationships with suppliers, put them all on the same footing and reduce costs so it can offer customers the lowest prices. But some vendors see the new policy as an attempt by Wal-Mart to fatten its margins and offset wage hikes for store workers earlier this year.
And whereas before, Wal-Mart was “merely” asking suppliers to do everything possible to lower prices (i.e. dictating how vendors will use FCF), this time, Wal-Mart is actually adding new fees:
Vendors were already feeling added pressure from Wal-Mart to cut costs after the retailer told them earlier this year to dial back on marketing and promotions and use the savings to lower their prices, he said.
Traditionally Wal-Mart has largely avoided the extra fees some other retailers charge, so the policy change was a surprise, said Leon Nicholas, a senior vice president at Kantar Retail, which advises dozens of Wal-Mart suppliers.
“What is so shocking this round is that they are being aggressive not in asking suppliers to take costs out of the system so the supplier can lower prices, but instead adding cost into the system,” Nicholas said. “It looks as though they are trying to have it both ways and trying to pad their own margins where they are facing cost pressure.”
As for suppliers who don’t comply, well, they’ll be “punished”:
Wal-Mart could punish suppliers that don’t agree to all or some of the new terms by cutting back shelf space for a product, giving it less favorable placement in the store or dropping a supplier all together.
Just as we predicted back in April, the end result of Wal-Mart’s push to score public opinion points by making the meager wages of its lowest paid workers look a little less meager will be the elimination of jobs along the supply chain:
A smaller supplier, notified of the fees late last month and given two weeks to accept, said it won’t be able to make a profit on its Wal-Mart business under those terms unless it fires workers or cuts wages and benefits.
So there, once again, is economics 101 at work and as we noted late last month, it should have been abundantly clear from the start that if ever there were an employer that could ill-afford a $1 billion across-the-board pay raise without immediately making up the difference by either firing some employees, cutting hours, or squeezing the supply chain it’s Wal-Mart, because after all, they’re the “low price leader”, and you don’t hold on to that title by passing labor costs on to customers.
In the end, suppliers may be trying to push back, but they're unlikely to cut their noses of to spite their faces by creating a contentious relationship with the company that's responsible for their largest revenue stream which is why ultimately, it's vendors' employees who will suffer so that Wal-Mart's cashiers can make $9/hour instead of $8. We'll close with the following lament from Leon Nicholas (quoted above):
"You can push and push, but at the end of the day you know where the power lies."
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So, Walmart screws its suppliers by adding fees... And Walmart wins how? Circular firing squad defined.
BAD economic numbers are BULLISH for stocks!
Its the "worker" who always pays for theses decisions.
Layoff List: http://www.dailyjobcuts.com
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Tyler, the Left hates Economics 101. Thus, they completely ignore it, and substitute their own reality.
"what? no wage growth? well, then, we'll mandate it. problem solved!!"
This will eventually trickle down to the end user, which will have a poorer shopping experience, and will decide to pay a dime more for the trinket at a different store, which probably pays its employees more (e.g. Target).
Eventually the executives will figure out that they are losing market share and the only way to improve the customer experience is to pay themselves less and their cogs more. They will realize that $1,000,0000,0000,000,0,000,00,0,00,0,0 is actually not much different than a mere $1,00,000,00,0,000, but $12/hr is a shit ton better than $8.
Worked as a Prime contractor for years, then got told there is a new nationwide contact being developed. Background - had no change in the old contract for years, and had no raise in rates for over six years. Was at a point where I needed a significant raise to cover all the increases in operating costs over the past few years.
Worked without a contract for over a year while waiting for this 'new contract'. Told my construction division that the new contract had better have at least a 10% bump in some of the main billable items - nothing personal - it is just basic retard math - more forced overhead imposed on my operation = I need more money. The new contract arrived via FEDEX. It was about 50 pages long full of legal bullshit and a bunch of new added requirements for me to deal with ie. more money out of my pocket. The old contract was only five pages. Finally found the new rates , and laughed my ass off. The morons had the balls to cut some of my prices. Called up my division management and told them that I just threw the new contract in the garbage.
I heard that they have not been doing to well getting anything done ever since.
Maverick
Re: Walmart
I remember when Weyco put in their VMI (Vendor managed inventory) program; you shipped to a Weyco distribution centre and they paid you for whatever amount of your stock was sold, at the end of each month. Reverse vendor financing.
I told them if I needed to finance a company the size of Weyerhaueser then their credit was too shakey for me.
Eventually Weyerhaueser took a $5 billion plus write-down from Rogel overpaying for Willamette.
Somebody has to do the work for those who like to churn and skim. My system is simple: Pay me or fuck you.
Wal Mart continues to loose foot traffic, foot traffic from people with more disposable income, and market share to just about everyone else. Dollar stores are slicing them to ribbons. Wal Mart continues to lose money on their grocery side of the business for over 7 years; Target has an even worse record and may abbandon the food model all together as it is a loss leader.
Even with WMT losing money on groceries it's still not #1 on my grocery shopping destination list... ALDI kills them...
I make it a point not to ever go into a Wal-Mart again. Last time I was there I got "asked" to see the receipt of the few items I bought by the nice wal mart girl at the exit. Yea right, I forgot they're dealing with the not-so-cream on the top.
Sounds like you already have figured out one of the Pope's talking points when he visits the US. He may command the UN and Con-gress to give everyone a living wage, working or not. If the fed can't get inflation started the Pope will try.
These catholic shit must outlawed. Lenin was correct: Religion is a opium for working people.
If that's what the pope wants, the Catholic Church can pay for it. They are a wealthy church with a lot assets. They are also one of the largest land holders in Europe and the United States, so they can sell some real estate to help finance his proposal as well.
The book "God's Bankers" estimates the Vatican wealth at about $35 trillion; three times the wealth of the Queen of England's holdings when property is included.
Just the "left"?
Still don't get it, I guess.
There are no workers in a centrally planned financialized economy, just millions of slaves to the benefactors of inflation.
Walmart was and is a predatory corporation. Look at what happened to the store greeters they used to have. Just like that, gone. 25 years ago, Walmart ads boasted of how its merchandise was "Made in the U.S.A." With the massive overseas outsourcing Walmart has done, aided by the corrupt "free trade" policies of the Clinton, Bush and Obama administrations, it is no surprise that factories across America shut down. You can't compete with overseas suppliers who pay their workers 50 cents an hour or less and don't have to follow any pollution regulations.
junction
Amazing- Sam's 4 spoiled brats down-arrowed you !
K
Im Free Trade supporter and think the idea of a global marketplace is something humanity should aspire to but what America did in the last 40 years is appalling. Its not "free trade" to ship all the decent wage paying factories from the rust belt to China because they can do it for less by ignoring EPA, OSHA and just lock people into dormitories to pump out product for import - thats called colonialism. In fact its something much more sinister than that since the ones being colonized are communists who welcome it openly, which would then make us fascists. In the end the Americans swallowed the bait and bought into the lie back in the 1980s when they were being told just wait until you retire a millionaire, now its too late without massive upheaval to the whole system.
I am not a free trade supporter. The original federal gov of this country was supported by tariffs. Now look at it.
If you wish to have access to US markets, then you got to pay. Dumping product under cost isn't fair.
Walmart is one of the major taxpayers parasites living of the public welfare-system.
We need a man like Trump!
I once worked for a company that sold lots of big chains including Walmart, Kmart, Home Depot, Lowes, Menards, etc. I was involved at lots of sales and management meetings including traveling to Walmart in Bentonville, Arkansas (little hick town in the middle of nowhere). When you first go to meet a buyer, you have stars in your eyes about landing a huge account so you tend to be aggressive on pricing. Say you start with a 20% margin built-in and they start buying from you. Then they start hitting you with new store discounts (maybe 40%), Electronic Data Interchange (EDI) fees, % of sales fee for returns, advertising fees, special advertising fees, shiipment error fines, discounts if certain sales levels are met and it keeps gonig on. if you aren't careful, all those fees can reduce your profits to 0%.
Then what happens one day if, you are selling Home Depot, and they are $35M volume of your $50M business - they threaten to drop you unless you sell your business to them. Your business often can't survice that kind of volume drop so if they make a good enough offer, you sell. There are many brands at Lowes and Home Depot that I have seen this happen to. You may think Rigid Tools is not the same as Home Depot, but you would be wrong.
Another story. I was once at a buyer's meeting at Walmart, and we had a new woman buyer (we were selling USA made hardware tools). She wanted a lower price, and we were talking about our USA quality, etc. She said she didn't care. She came from women's clothing and said if she could buy a pair of panties for $0.05 she would take it. She said she didn't care if they only lasted a week. True story.
What happens is that the suppliers are under huge pressure to reduce costs so naturally, they move operations to China, make cheaper products, cut corners, etc. If you want to buy a quality tool grade steel screwdriver at Home Depot, you can't . All you can buy is cheap Chinese crap because the buyers are so focused on price.
I will gladly pay multiples for a quality product that lasts than cheap crap that lasts for one job,
Too many eggs in one basket. The basket drops, most of your eggs break and you are screwed.
I will buy a few food items at wallyworld, but not much else. Like you said, low quality is their style.
I only have been in WallyWorld 5 times in 3 years. I hate that place. Thier all dirty and messy. Target is cleaner, but the same Chinese shit, for more money. Fuck Walmart.
I wont even shop at Homo anymore unless absolutely nessessary. Whatever shithole they buy their steel fasteners from, like screws, bolts, etc. the mild steel is so soft 50% of the attmepts to drive the fastener results in shearing the heads off and having to spend 10 min drilling out the fastenr, that is if your Homo bought bit can drill it without going dull. Homo has lowered the bar to complete crap for most products and put all my local lumber and hardware stores out of business by catering to the dumb fuck hous fraus and dickless weekend warrior husbands for volume, FUCK THEM.
Not many factories know how to make quality steel (there are many different types with very specific properties), know about some of the important, but subtle stamping techniques, heat treating, plating,,, For example, when you heat treat steel to make it stronger, the type of steel, how the items are racked before going into the furnace, the furnace temperature, the furnace atmosphere, the length of the treatment, the quenching oil and post heat treating tempering - all of these things play a huge role between a part with different qualities. The consumer who just sees the finished product has no way of immediately knowing the actual quality. One part could last a lifetime and the other 10 minutes.
The Chinese factories don't have the knowledge, and they don't have the quality control from batch to batch. Even in the USA, it is a bit of a black-art where the trade is passed down from one generation to the next. When I was working at the American factory, we would benchmark our tools firing into a steel plate to last 100K shots - more than the average customer would use in a lifetime. The Chinese stuff lasted about 1,000 shots.
MaxMax
Time to outsource the Walmart purchasing department; maybe the whole company. There should be tariffs at the border for the privilege of access to the U.S. market. Period.
True story. Home Depot plays the sqeeze the supplier game on everything. So last year the 2 largest cedar picket producers merge and tell Home Depot what the price is.
I get a call about how Home Depot would love to buy from me again. I told them the most money I ever made off that line was shutting it down. Don't know what they eventually did but I simply don't care.
K
ALL of my tools came from estate sales, including nails, screws, etc.
Benn doing this myself actualy. If I randomly see an old pipe wrench or socket set, whatever really at a garage sale or resale shop, I just buy it.
Just ask bankrupt Vlassic Pickle.
And just about eveything inhouse at Home Depot is made by the same folks that make Harbor Freight. Only the color plastic is different.
Tarriffs....Tarriffs....Tarriffs.
All good and strong nations protect their business and economic health with tarriffs. No one can compete with slave labor. The argument has always been that other nations with "free trade" will just go with slave wage arbitrage and thus "grow" their economy by providing their people with cheap pieces of iShit and those that have tarriffs will stagnate and decline. Perhaps....but give those other nations enough time and they will hollow themselves out and decline anyway. And the ones who protected their domestic economy and industries will actually end up better than the rest in the long haul.
But NOOOOOooooo......the N.W.O. folks couldn't have that. You know...because national sovereignty is so unfashionable. And so UN-feudallistic.
They need folks working three jobs so they have little energy to resist or be informed. Don;t want those pesky folks like in the 1940's and 50's with critical thinking skills.
My only advice to the death trap: learn some new skills and stop gluing to the TV.
Why not play it safe and study my butt off to become a STEM graduate, a petroleum engineer, right?
Oil-Related Energy Layoffs Exceed 130,000 by Mid-yearhttp://www.desertsun.com/story/morrisbeschlosseconomics/2015/06/23/morri...
The middle Class destruction is epic. It's no surprise consumers are broke.
Yep, and if it hasn't hit you yet, just wait.
You just missed the cycle. It will be back and and you will find a job....plus go ChE/PE...when one is up, the other is down.
Good Luck!
Oh, and tariffs are not the answer. Free trade works if .gov is not invoved (taxes and regulationsthat stifle new innovation). Both of these are forms of control and limit competition...aka alternatives to wal-mart, home depot, etc. But you guys keep living in your fantasy world if you think .gov will ever help you in ANY way.
Kahn Academy. Look it up.
Let me tell you about STEM. I know 5 barely employed 40 something PHD scientists and engineers. Some worked for big pharma and made shit until they got laid off. One chemist I know now makes cheese in their garage because thats more money. One basically makes a tradesman's salary but 2x the hours in mechanical engineering - no overtime when your a "profesional". Computer scientists are constantly replaced with fresher meat willing to work cheaper. STEM is is just 21st century cogs.
/s
Yes, but we have Obamacare now which is keeping us healthy, and our fighting men and expensive weapons have been deployed to every corner of the earth and that is keeping us safe!
Our Dear Leader and those congress people in Washington are really making things better day by day. Besides, those scientists and engineers have EBT cards to fall back on! USA! USA!
s/
what a sad, sad comedy act this country has become.
because the suppliers can't cut dividends, executive pay, or stock buybacks, that would be bad.
Would you rather sell a billion widgets and lose a penny each? Or sell a million widgets and make a dime each? Top line revenue is meaningless if you are losing money on the bottom line.
Would you rather sell a billion widgets and lose a penny each?
Dude, you haven't paid attention at all. See, what you do is you make up for it on VOLUME !! Works for the gov't, right?
All volume means is you have to work even harder to lose money even FASTER!! Thats how stoopid some of these corporate people are. Lets use loss leaders and discount the shit out of everything........and LOSE MONEY!!! But look----our stores are full of people!!
Again, you must not know the formula.
1) Lose $1 per transaction
2) Increase transactions 1,000,000 fold
3) ??
4) PROFIT !!!!!!!!!
I'll get Matt Stone and Trey Parker on the line to expalin it to you.
It works for fracking. Oh, wait...
"Would you rather sell a billion widgets and lose a penny each?"
Exactly! As a former Wally vendor, I finally had to drop them as a customer. Between the Just-In-Time demands that leave one holding all the inventory, 90 to 120 day payment terms, and all the other beauracratic hassles it's just not worth the effort.
"Top line revenue is meaningless if you are losing money on the bottom line"... Agreed
You just have to have product to justify your loans for your stock buybacks. Revenue is irrelevant.
/S
Sell at any cost. Even below cost! We will make it up in the volume.
/S
Walmart is good but they are amateurs at fuck the supplier compared to GE.
true that, remember Nardelli left GE and went to HD,
changed local sourcing to regional to global, FTW.
Wal*Mart is turning in to the Dollar Store. The brand-name stuff they sell is always in weird packaging with less product than the 'normal' packages you can get everywhere else. It was OK when you could by normal stuff cheaper, but now you have to decide whether the odd Walmartized brand-name products are even that much of a bargain.
You were never buying normal stuff at Wal-Mart. It was always the portion of the production run that failed quality control of other retailers. Wal-Mart was just defrauding America by implying it was the same thing.
America's race to the bottom, brought to you by that economic terrorist Sam Walton.
Yeah, Walmart is going down a road similar to the one taken by Woolworth and K-Mart... one of these days, you'll walk into SuperCenter and see a "blue light special" floor cart. They have developed many creative methods of ripping people off.
Some of their schemes are a sort of "stupid tax": individual items priced at $1.00 while a shrink wrapped package of 4 identical items will sell for $4.99 ...and most not so arithmetically obvious, but the same practice is seen thoughout their stores.
They've begun selling items that are probably foreign to most shoppers like electrical fixtures, parts and assemblies that cost them less than 10 cents for, say, $1.79 just because they can get away with it.
Another twist I've seen recently is to repackage a consumable to make you use more: rolls of paper towels that used to be just fine with sheet size about 11"x 8" have gone to 11"x 11". Why? To make make you use more and buy more by increasing the minimum sheet size.
Quality has taken a back seat to margins everywhere possible...especially with their house brand "Great Value" (HA!). Their plastic cups have become so thin and have such small re-inforcing ribs that you can barely hold them filled with liquid for fear you'll squash the cup! The idea seems to be that you can pack more in a smaller space by making them telescope more tightly.
They've also found (apparently) that they can get away with charging significantly more than some items local competitors for many items simply because of the time and cost differential to go somewhere else for a significantly better price on a few items.
And don't me started on their stupid scheming rat-bastard buyers!
I could go on and on. But more often than not now, I go to other stores for acceptable quality and better prices.
Razor thin margins? I THINK NOT!
Sam Walton's concept of decent quality at a fair price seems to have died when he died and his heirs took over with "guidance" Wall Street, I'm sure.
Maybe his poor little kids just feel they need a few more billion to keep up with those Koch kids! Ugh! ...makes ma eyes water a little.
Or, maybe it's all Wall Street.
One thing is certain: the Walmart you see now is not the one Sam built!
It is simple. They transitioned from an entrepreneural business model to "professional management". This has become the scourtge of virtually every major retail chain today as they have evolved into public corporations.
Marketplace at work. Move on.
Srsly...
Except Id like to add that the problem really is Walmart is trying to make up the cost of raising wages AND not cut down on a bloated management that makes wayyyyy too much for what they do. Which is again, nothing of value.
So in essence, they are more trying to keep their high level employee bonuses growing amidst a recession. Honestly, this is probably a larger factor in the reason to go HAM on their suppliers.
Walmart is fucking themselves. If I was a vendor, I would set up an Amazon store and then brag about quiting the Walmart disaster. The one thing Walmart DOES NOT want is more bad PR.......
You missed the point;
Walmart is the last of the big brick-and-mortar discount crap stores.
People (and I use the term 'people' loosely) shop there because they can get cheap plastic Chinese crap inexpensively and conveniently.
Most of these 'people' won't go to the trouble of going online, ordering a product and then having to wait for it to be delivered.
Heck, most of these 'people' probably don't have credit cards or even bank accounts so they can order anything online.
The suppliers you're talking about are already dealing with the razor-thin margins of Amazon.
The reality is, suppliers of cheap chinese crap have very little pricing power in a global economy that's slowing down...
I go there to watch the Escalades park in the extra-wide handicap parking lots and then the drivers roll out into a double-wide scooter. They scoot inside and load up their carts with racks of ribs, pork chops, Doritos, gallon buckets of ice cream, and so on.
And most of all, checking out has never been easier with your EBT!
Exactly,
Last I checked, Amazon doesn't take EBT...
Just wait.
@loki...you managed to describe EVERYTHING that is wrong with our "society".
He forgot the sweet tea.
On the bright side, the Great Pacific Garbage Patch might stop growing in size if Wal-Mart goes out of business.
This is why Dollar General is kicking Wally's butt here in rural SC.... I can get the same stuff right down the street at the DG.
PR is the entire point of this exercise. The plight of low skilled walmart retail employees is put in front of the public frequently while nobody cares about the higher skilled people who make the stuff walmart sells. The media is not going to pay attention to those people losing their jobs only the hourly rate walmart is paying its least experienced and least skilled employees.
They are not paying the electrician , hvac , plumbing etc guys on time either
That's not Wal*Mart's fault.
FEMA ordered them to build the killing floors and blood chutes, and now FEMA can't pay 'cause the U.S. hit the spending limit again. The coffin liner guys are having the same problem. Goddam deadbeat feds!
When they started this quantative easing shit so many years ago everyone was afraid it would cause inflation... even hyperinflation.
Well, that didn't happen because WHY?
Simple.
The 'money' from QE never reached Mainstreet; it stopped at Wallstreet and allowed banksters and brokers to bid up financial assets and real estate.
Mainstreet consumers only 'benefitted' to the extent that low interest rates allowed them to obtain credit and spend 'money' they really didn't have.
The US economy is 70% consumer spending.
QE and low interest rates caused consumers to go heavily into debt to buy crap they couldn't really afford. This forced asset prices higher as consumers felt 'richer' as they tapped the 'equity' in their homes.
He have now reached (or will shortly reach) peak consumer debt.
Spending must slow (see ZH article today on next week's Retail Spending Report), and consumers will cut non-essential spending.
Next up on deck: deflation...
I agree. It's interesting to watch how many credit cards are declined at the checkout counters these days. Even for a mere $18...."declined!"
I'll never forget checking out of the Westin in Key West about 4 years ago with my wife.
The young (mid 20s, early 30s) couple checking out in front of us had to use 4 FOUR! different cards of varying amounts on each.
"Try this one for $200 . . . no? Try it for $100 . . . ok good. Now, try this one for $700 . . . no? Try it for $500 . . . no? Try it for $250 . . . ok good."
It took all my will to not burst out laughing - but really it was sad.
I was once in a Wallyworld store about 8PM on the last day of the month. All three customers in front of me had their credit/EBT cards declined for less than $10 each in purchases. Unbelievable.
Over the last 9 months, Walmart has been on an unprecedented price hiking binge. I can think of a lot of stuff that's up 30% since the beginning of the year. It's gotten so bad that the regional grocery stores and Target are now competitive with Walmart. Also, Walmart has discontinued numerous products I used to buy, and they are frequently out of the stuff I want to buy, like Windex and Dawn dishwashing liquid.
So I've pretty much stopped shopping at Walmart. Fuck 'em!
Wal*Mart is turning into the GUM department stores of the old Soviet Union. Pretty soon, you'll only be able to buy plastic dishes and rubber boots there, and people will line up for them because that's all they can afford.
@VegasBob: same here. Seems like everytime I go in town to get supplies, Wal-M has ratcheted up their prices on the same items another notch...no more watch out for failing prices, it's more like: "Yikes! Be careful you don't get impaled on that huge rising price spike over there!" The "everyday low prices" signs are an insult and a joke.
For example: over a period of about 24 mos, Alaskan Pink Salmon went from $1.49 to $2.89 even as the price of caught salmon was falling! (but recently was lowered to $2.42 ...I guess there's limit to what they think they can get away with).
Prices at Wal-M have gone up much faster than at other retailers. I have been shifting my buying to Target, Safeway, Albertson's and Smith's because Wal-M has been falling well short on price and quality.
Milking the shit out of customers is Wal-M's new purpose in life. I'm starting to hope they go under to make room for a replacement or at least a competitor.
Anyway, the reference to "razor thin margins" in this post is BALONEY!
Who eats pink salmon???????
My sister works part time at Babys R Us and she can't agree more. It is common for folks to buy diapers and have to used three or four cards or have to call the credit card company for approval, and she sees people with a bundle of cards held together by a rubber band, and they go until they find one that will work.
"...and she sees people with a bundle of cards held together by a rubber band, and they go until they find one that will work..."
Never though about it but now that you mention this, I can remember plenty of times someone with the rubber-band credit-card deck was in line ahead of me. Thankfully, they usually scored on the first card or two. The rubber-band thing was what caught my attention. I can't stand having to carry more than a single card.
Good. Tell her to keep voting.....it's obviously working.
Could this be why?
http://i.imgur.com/nLze1P6.png
http://i.imgur.com/uA6KnIp.png
http://i.imgur.com/5ET1bO6.png
http://i.imgur.com/RdnTG1L.png
http://i.imgur.com/7iDD6uO.png
It's illegal to show those charts in the U.S.
Please turn yourself in NOW or we'll roll the MRAPs.
"Next up on deck: deflation..."
No. More QE! If deflation happens, then the US gov't is finished. $19T in debt is death sentence if deflation happens.
The gov't will need more QE to continue its debt expansion. No way will Washington close its doors until the dollar is toast. Perhaps a short deflation blimp, but the long term is high inflation and probably a Venezuela style collapse. Perhaps sooner if Bernie wins in 2016. If some how Hillary wins, I think she will turn the US into a full police state, equiped with forced labor camps to avoid a collapse (aka Stalin 2.0). I don't think the GOP will win in 2016. There are too many FSA members, and the remaining conservative voters are disguised with the GOP. A significant of former GOP voters are likely to vote for independents, which will be enought to give the DNC an advantage.
More QE only if other countries continue to dump USTs. If not, they may call whatever they do QE, but it'll be something different.
Those countries are dumping treasures to save their skins, not because they won't to. Sorry the fed will gladly buy those treasures back for pennies on the dollar.
And mainstream america spent their way into debt serfdom while calling those who didn't kooks and worse. The saver had to be punished at every opertunity while mainstream american cheered the low low rates on money they didn't have to buy new shit they didn't need.
When and if the deflation hits those of us that saved and stayed out of debt will again be labeled enemies of the people.
Inflation did not happen as expected because the money did not go into the hands of the American consumer. It went into FED banks who made ZIRP loans which were traded in Forex or equities mkt. In the meantime , job losses, home losses, reduced hours and wages greatly reduced spending power of 100 million+. And it will get worse.
Now we are looking at deflation.
Thus the money printing must continue. There is little money velocity.
"When they started this quantative easing shit so many years ago everyone was afraid it would cause inflation... even hyperinflation.
Well, that didn't happen because WHY?"
Also we have had stealth inflation via, same price, lower quantity/quality in packaged goods.
Use the Big Mac Index (same yardstick the Economist mag uses to compare purchasing power of currencies). Change back from a dollar for the "meal" (burger, fries and coke) in 1970, now around $6 to $8 bucks depending on where you are located. This translates into a 6 to 7 fold increase in price for the same crap. Tell me how 2% compounded over 45 years amounts to 600-700%. And no, I am not a Rotten Ronnie fan.
Finally, in the world of stocks and flows (stocks here are not shares), we had fractional reserve banking working in reverse during the great crash. Much of what the Fed did (and other central banks) was related to patching up gaping holes in paper assets from the past, and not related to pushing up prices of new assets.
This sounds like Steve Liesman. It did cause inflation. Have you tried to rent an apartment? Rents are up since 2009, yet income is not. Paper products are more expensive - not only was there a price increase, but the packages are smaller. A two-pack of saline solution has increased over $1 since that time. Tide has reduced the package size from 100 oz to 92 oz on top of a price increase. Many food items now have reduced package sizes. If you shopped and paid attention after 2008, the package size decreases were very noticeable because there were so many.
If you supply Wal-Mart you do not have a real business.
The saying used to be" the only thing worse than doing biz with wm is not doing biz with wm" not now
So what is shanking the $? Thing is going strait down.
Unfortunately, on Wall Street everything is artificial. Nothing is natural or logical; therefore the unexpected always is happening. Every effect is the result of a planned and purposeful cause. Whatever is done usually was intended, procured.
If prices soar to the swallows' nests, they were put up there. If they slump to the coal cellar, they were dumped there.
And only the few big inside operators know which will be done on any particular day. Consequently everybody else in the United States who either speculates or invests in "listed" securities is merely gambling blindly, recklessly, without the slightest knowledge or chance of knowledge.
A mere guess as to whether that day the masters of the machine will decide to lift the lever up or push it down.
And he will not and cannot know, or have the slightest idea or inkling until after, figuratively, he has dropped his money in the slot, made his bet, heard the whirl of the unseen wheel behind the impenetrable curtain, and the attendant, "the broker” opens the little peek-hole and, as usual, calls out : "You (lose/win)! Try your luck again?"
Reality.
Peak Wal-Mart has arrived?
Peak Wal-Mex was 2005 when the older stores had deeper and better quality inventory, the parking lot was jammed, and customers debated whether the outside garden checkout lines, 2, yes sometimes 3 cashiers, would be shorter than inside lines. Then suddenly, the new enlarged WMT's arrived, a failed attempt to impersonate Target, and just in time for the Great Recession and the beginning of the end of the big box business model, starting with CCI folding, then Best Buy shrinking, then ever-sharp WMT closing it's new, massive, 3 year young Sam's Club, now casting a ghostly 138,000 sf shadow over the adjacent never busy WalMart, mostly vacant with only 3-4 cashiers open, and no lines at all except midnight on electronic deposit days.
The new Depression is already here, hiding in plain sight, inside WMT.
http://www.desertsun.com/story/money/2014/08/19/la-quinta-sams-club-site-goes-auction/14310067/
Target is hurting, too. They have layoffs every other month.
You have to ask yourself how bad things are for them when they have to lay off 180 workers IN INDIA!
Zero-0 is the true minimum wage.
When the "Minimum Wage" is increased, some get more, and some get Zero-0.
Remember the true minimum wage is -0-, when some are let go to pay for who remains. The life boat shrinks and some are pushed into the water.
The last time WallyWorld shook down its suppliers about costs, many closed the doors, went bankrupt and/or moved to China.
Walmart raised its wages because they could no longer attract workers as the service industry grew. Then they got hammered by the strong dollar and had to cut costs. Now you guys say look, higher wages bad, bad!
Vlad,
How many payrolls have you ever met? I say BS.
When wages are the result of social / political pressure instead of economic decisions, I say the most vulnerable employees will suffer. There is an adage that says "when the elephants fight, it is the grass that suffers.
Higher wages aren't bad. Regulated and mandated hgher wages are bad. They hurt the very people they purport to help. Just ask the 25-30% (maybe higher) unemployed minority youth. I'm sure many of them would happily work for less than mandated minimum wage.
Looks like basic competitve business to me in 2015. No tillegal at all and after the last ten years, i don't think "business ethics" exists anymore. Maybe it never did for Wall Street but the voracious greed from bankers, DC and Wall Street board rooms has trickled down to every transaction and dealing now.
It's simply 2015 business.
I get the feeling that people who write in ZH have already pre determined that minimum wage is a bad thing, purely on their ideological basis. Hence looking for ways to "prove" how it is not working. Not saying it is or it isn't, but some objectivity could only improve things. Are you SURE there is no upside to wage growth?
Only if it is offset by population degrowth.
If you want to understand how economics works in the real world, ignore everything you read here. Almost everything that ZH esposes here is BULLSHIT: low wages, low taxes, no regulation, supply side economics, etc is plain rubbish.
For economics to work income must be distributed for everyone. There is no such a thing as a productive people, there are only consumers.
NOT THIS: "For economics to work income must be distributed for everyone."
THIS: For economics to work market participants must have equal power.
There is a difference.
"For economics to work income must be distributed for everyone". Based on what? Let me guess: From each according to his abillities, to each according to his needs.
"There is no such a thing as a productive people". Really? Maybe you're not, but I know many productive people, talented people and I'm pretty sure they make much more than min wage.
Stop listening to your professor and get a job or open a business.
thought this was a drug free zone?
What a crock. You cannot consume what is not produced. The problem with socialist type systems is everyone does end up a consumer and there aren't any producers left. The shelves of the stores are empty and people get angry that nobody is willing to work for zero or negative wages to fill them.
I think you're confusing wage growth with nominal wage growth. Minimum wage should be called minimum inflation. If burger flippers make an extra 10%, but burger prices rise 10% then wages have not grown. The minimum wage is 0, because no one is forced to employ. In the US the actual minimum wage is 0 - welfare.
I think only two people should enter into agreements, providers and suppliers. I do not believe in discrimination against low skilled workers.
Wait, are you saying a higher minimum wage is inflationary? Holy crap, someone call Yellen quick, she's printed tens of trillions trying to get 2% inflation, but all this time we could have just raised the minimum wage!
Trucker's wages about to be cut.
costco for staples and home goods online for electonics and gifts etc,, fuck the waltons fuck the waltons.
Walmart is not the lowest cost re-seller and neither is AMAZON, in fact both can be the highest price re-sellers on many items.
I totally agree on Amazon - that outfit went downhill in a hurry. Still some bargains if you're really careful and research a lot, but I get the idea that most of the vendors now are the double-wide trailer drop-shipper gang looking to make their fortune. I guess they migrated over from eBay after they jacked up rates and everyone left.
...but ceo pay and shareholder compensation stay the same or go up. seems reasonable...
Why don't these vendors just borrow the money to pay-off WMT ?
Is this not the way it works now?
"Why don't these vendors just borrow the money to pay-off WMT ?
Is this not the way it works now? "
I got the sarc. But the reality is - if a private business walked into a real bank with the balance sheets of most public companies- you would be kicked out the door before you could open you mouth.
With a properly managed MOE process, the value of an hour of unskilled labor never changes.
Now really, wouldn't a properly managed MOE process guaranteeing zero inflation make more sense than this non-sense our Treasury and Fed are doing ... shooting for 2% inflation and realizing 4%?
Wal-Mart has their own bank, so you just know they have some underhanded way to skim more from their vendors, if the vendor takes the "low cost financing" option.
Look, I'm no fan of Walmart, they've been very disruptive to several business I've been involved with. But, the bottom line of any business is the bottom line. No one goes into business with altruistic motives. They go into business to make money. Period. As such, they will charge as much as they are able for their products or services, and keep costs, including wages, as low as possible. It's not evil, it's just business and how it works.
Prices, including wages, should not be regulated in a free market. Regulations cause price distortions. Wages are paid as a function of the employee's value to the business, and the scarcity of employees available to perform the particular function. The greater the pool of potential employees with a given skill set, the lower the wages. That's why professional basketball players, for instance, get paid so much. Their talents are in high demand, and there are only a few hundred (out of 7 billion), who can do what they can. Is it fair that basketball players get paid millions while the average person struggles to pay his bills? Maybe not. But as long as people are willing to pay big bucks to watch freaks of nature put a ball through a hoop, they're going to get paid the big money. Likewise, if you don't like Walmart's business practices, don't shop there. If enough people did that, then perhaps the mom-n-pop grocery stores, albeit with higher prices, would make a comeback and maybe, just maybe, small business in this country (the true job creators) would make a comeback.
Not holding my breath.
The freaks are groovin' in New York!
No worries , it's all good, only smallish companies will be affected as outlined above:
https://finance.yahoo.com/video/york-hike-minimum-wage-15-171254476.html
"small business in this country (the true job creators) would make a comeback."
Could you share what you're smoking ?
Small business was stabbed in the back by corrupt politicians a long time ago. Products arrive in this country without any standards and any inspections.
If you were to set up a U.S. factory with the same working conditions as China, you would be sent to jail.
"Free" markets were observed by Adam Smith, but cause allergic reactions here. Ask Buffet the last time he bought a business that had many competitors. He uses the same formula as Geneen did and GE. He buys businesses that have no competition but if there must be competition make sure it is only one or two. That way, wink-wink, nod-nod can set prices.
Thank you for clarifying one of my points for me: Small business is dead and it ain't coming back. That's why our economy is dead, and it ain't coming back. That's why the "economic recovery" is smoke and mirrors created by politicians to try to keep the "masses" quiet until their pockets are full.
There are no free markets and there haven't been for a long time.
There are no free markets AND NEVER HAVE BEEN.
Despite Adam Smith's propaganda (which was deliberately written to influence government policy in his own time in favor of his own investments and those of his cronies), markets depend on government of some sort for their very existence. THINK: without a government to enforce contracts, how do buyers and sellers solve the problem of trust, except by being very close friends and family? And when they ARE close friends and family, none of the theoretical economics of price are realized, because most of the transaction depends on intangible and long-term relationship benefits, not the relative value of two commodities/currencies. Governments -- whether as elaborate as our continental empire or as simple as the Fair Rules of a once-yearly medieval fair -- set the terms on which all buying and selling take place; governments create or validate currency, whether fiat or specie; governments guarantee hidden or difficult to discover quality issues in goods and services like the contents of pills, the safety of automobiles, or the competence of engineers. Government enforce weights, measures, and standards; individuals are rarely in a position to do so and where they must, markets are of necessity slower-moving and more expensive as every customer must inspect goods and guard against the risk of fraud.
There are no free markets. There are merely markets where powerful commercial elites are not constrained in ways that they would prefer not to be. In other words, there are markets where governments set the laws to the benefit of the public or a non-commercial elite, and markets where the laws are made under the control of crony capitalists.
The problem is that when you need to use for example myths like auto safety you've undermined your own argument.The automakers for decades improved their products safety wise. At times they tried to sell more than the public wanted and lost money as a result. Then when the government took over the SAE standards and relabeled them progress stalled for awhile before it started again. Yep, that's how government brought us safe cars, they took over the existing private SAE standards and put them in the DOT's name. Now they will forever claim credit of giving us safe cars. Much like in the old days they took credit for favorable crop growing weather.All they do is mandate what has already been created without them and take credit for it.
Government is a con job. Government has always protected the cronies from the masses. That's its job. They do not set laws in favor of the public. Whatever example you have there is an underbelly to it where the people got screwed or government took action to screw people less because they were near revolt for being screwed historically.
I have no problem if basketball players make millions.
My problem is with my tax dollars paying for the stadium he plays in...
How about the taxpayers paying for my truck and tools?
Sounds like they need to fire more "management" so the people who stock the shelves and do other actual work can keep their jobs.
First of all, Walmart is only raising the wages of 100,000 workers. But Walmart employs 1.4 million people. So the claim that Walmart needs to squeeze suppliers to make up the cost is laughable. There's something else at work here, and it's probably the greed of the Walton family.
First of all, Walmart is only raising the wages of 100,000 workers. But Walmart employs 1.4 million people. So the claim that Walmart needs to squeeze suppliers to make up the cost is laughable. There's something else at work here, and it's probably the greed of the Walton family.
What with China repegging their currency at a lower peg to the dollar, Walmart should get cheaper Chinese crap.
When WalMart came into our town,of 20,000 people,it shut down every mom and pop clothing store craft store,appliance store,and just about everything else but hardware stores.Then came Home depot.within 2 years,every family owned hardware store,(we had three) closed the doors.These were people I had known for ever.None were rich,but they lived comfortably.Now their employees work for Wally world or Home Depot.That's why I never shop at either,and would relish the day they go out of business.Sure they created jobs.But pay so low that we have to subsidize their worker's life thru welfare. When WW III happens,I hope Russia's ICBM's hit Batesville Arkansas first.
Of course, no one at the top of Walmart would possibly consider taking a pay cut or reducing their overall portfolio in order to balance things out. Heaven's no. Once again the "borrow from the future" tactic is rolled out... doomed to fail as always but those brainiac CEO's grasp for it everytime.
If the employees dislike the wages at Walmart what is stopping them from finding a better job elsewhere? Similar to the McDonald's case, you cannot expect a corporation to pay you $20 an hour to flip a burger. The skill sets of the job do not fit that criteria. These people truly believe they are entitled, yet they could have higher wages simply by learning a trade (1-2 years of schooling max) that would allow them to make more money. But this is where is laziness comes into play. Stop complaining and do something about your situation.
Many suppliers will not do business with Wal Mart. In Texas at HEB Grocery (a regional chain) you have a plethora of choices in all sorts of products from oodles of brands. Cheese? 25 different brands. Go to Krap Mart and you get to chose between the inhouse wal mart brand and Kraft. No selection.
Many vendors just don't want to do business with wal mart. They do not want to invest in the facilities to supply wal mart, only to be squeezed to death. + Wal Mart is higher on most it's food items here. Their business model is kinda breaking down do to the fact that:
* 25% of it's patrons are on gov assistance.
* 1/3 of it's customer base now has no car to get to their store
* They continue to be evicerated by neighborhood and dollar stores that are close by
* Their service sucks (I love it when my check out clerk has gang tatoos on her face)
* They are consistently out of stock on hundreds of common items and it can take months to get them in; business envelopes, plastic totes, office supplies, ect and I speak from personal experince.
In a nutshell, wal mart sucks and is the store of last resort. May they burn in flames.
So what is the solution. Never hiking minimum wage ever ?
A big part of the solution is to stop debasing the currency. Everyday folk need something they can save today that will buy a weeks groceries and do the exact same thing twenty years from now.
No, hiking the minimum wage significantly across the board while enforcing labor laws and antitrust regulations rigorously. One of Wal-Mart's up-and-coming problems is the shift to online commerce, where customers have a wide choice of retailers and goods. As their business model depends on utterly dominating retail sales so that they can dictate prices and conditions to suppliers, having multiple alternative retailers as well as an easy option for direct sales spoils their game.
Wal-Mart is on the way DOOOOWWWWWNNNNNN. I've watched this play out for forty years. Budget retailers boom in their initial expansions by attracting capital, both debt and equity, and cheap capital follows the mania. Once they mature into their niche and can no longer profitably expand, they are stuck in a market with razor-thin margins and minimal operating profits. The fact of declining profits hits the capital markets, and they can no longer borrow on the cheap or make large dividend payments. Then the decline sets in as maintenance and remodelling are put off, personnel are laid off to reduce costs, and finally, the shelves start to look a bit bare as they delay in restocking due to cash flow concerns. Customers depart forthwith in search of newer and trendier pastures. Bankruptcy follows; store emerges supposedly "leaner" and more responsive to the "new" market, with half as many outlets . . . and limps on through however many more bankruptcies it takes, until they haven't enough stores left to even pretend to be viable. Google Woolworth's, Murphy's, Kresge's, Zayre, and of course K-Mart.
We had a Persky's in the small town I grew up in.
I remember T.G.&Y
The wife just found out why her Stop & Shop is wacking so many hours from her entire store. These cheap bastards who's parent company is a cheap fucking Dutch corp needs the cash to buy another grocery chain. Fuck the cheap ass Dutch misers.
Whalemart will get their due when within the next year the new "Treasury Note" is issued by the US government to replace the Federal Reserve Note and it is devalued at 30% initially and at 80% in the end versus the FRNs. The result of that will be all the Chinese crap that Whalemart makes all their money on will suddenly cost 400+% more than it does now. Needless to say those prices will be beyond that of the EBT crowd. There goes the ballgame Whalemart.
If Wal-Mart is the "low price leader," I would much rather shop at any competitor who wants to be the "not quite as low price, but still within the budget leader." I would happily pay a few cents more on each item if it helps to put that piece of shit company out of business. Kroger too.
Just as predicted, the only ones NOT taking a haircut are the Waltons and shareholders.