Home Class Politics Isn't This Capitalist, Free Market, Death Of Retail Just Wondrous?

Isn’t This Capitalist, Free Market, Death Of Retail Just Wondrous?



Not if you’re at American Prospect it’s not, no. Apparently the economy should be set in stone so that consumers don’t benefit:

The failure of antitrust enforcement to create a fair, competitive environment for department stores facing anti-competitive pressures from discounters bears a striking similarity to the present moment, with Amazon playing the role that Walmart and other discounters played in the past.

Well, OK, what was the effect of that role Walmart played?

Productivity is the principal driver of economic progress. It is the only force that can
make everyone better off: workers, consumers, and owners of capital. Wal-Mart has
indisputably made a tremendous contribution to productivity. From its sophisticated inventory
systems to its pricing innovations, Wal-Mart has blazed a path that numerous other retailers are
now following, many of them vigorously competing with Wal-Mart. Today, Wal-Mart is the
largest private employer in the country, the largest grocery store in the country, and the third
largest pharmacy. Eight in ten Americans shop at Wal-Mart.

There is little dispute that Wal-Mart’s price reductions have benefited the 120 million
American workers employed outside of the retail sector. Plausible estimates of the magnitude of
the savings from Wal-Mart are enormous – a total of $263 billion in 2004, or $2,329 per

Even if you grant that Wal-Mart hurts workers in the retail sector – and the evidence
for this is far from clear – the magnitude of any potential harm is small in comparison. One
study, for example, found that the “Wal-Mart effect” lowered retail wages by $4.7 billion in

Seems pretty good. But we must stop Amazon doing the same because reasons.

The unthinking left in all its glory.



  1. On this one I don’t disagree but actually its the big boys who are ensuring that they enforce fair traded items. Look at Amazon and Walmart’s retail 10-K’s and 10-Q’s and you’ll see very quickly that they have absolutely ridiculous low margins.

    In comparison, I have no operating expenses, basically, at all. Yes, Walmart and Big Box retailers can undercut ‘Main Street’ retailers, but they have no chance at competing with discounting warehouse etailers.

    Walmart operates large stores stocked with inventory that costs alot of money to do. Amazon, the etailer moved to quick delivery to differentiate its offerings. So let’s say that you want a widget that costs $100 and wholesale is $50. That’s a keystone markup.

    Walmart and Amazon aren’t just selling you a widget though, they are selling you a widget that in Walmart’s case can be picked up today. In Amazon’s case they are selling a widget that can be delivered tomorrow and they are going for same day delivery as well. And that is EXPENSIVE. So expensive that the margin on the sales is 5% or less.

    But I have an offer I would love to make for you for that widget. I can get you that widget for $70 in SEVEN days.

    Hmmmmm……want it today? Want it tomorrow? Or do you want it in seven days?

    Your choice, right? Wrong. Because Amazon and Walmart send out little bots onto the internet that pick up pricing information.

    And if you undercut them you will get an email: “Please remove all of our items from your website until you can bring them up to compliance. You have incorrect pricing” — Incorrect pricing? Meaning LOWER than Amazon.

    And the last thing retailers spending money on a boatload of inventory a mile from your house and spending billions on trucks and warehouses to get you an item tomorrow is to actually compete, you know, ON PRICE.

    So yes, if you are looking for that widget, that $100 widget from Walmart or Amazon looks good because you can get it ‘now’ — but what you’re missing is a deal that you’re NEVER offered, the widget, heavily discounted, delivered from the ‘slow boat from China’

    Because of Walmart and Amazon, prices are LOWER and HIGHER.

  2. Presumably, Amazon are only in a position to request you remove items that undercut their pricing if you’re a business that uses Amazon to sell your products. So someone on (say) eBay can offer you the $70 widget, and there’s nothing Amazon would or could do about it.

    • Amazon doesn’t talk to you of course. The entire thing is that the larger players account for such a large percentage of a suppliers’ business that Amazon and Walmart, et al. can simply tell the suppliers, first of course they will get an MFN clause and then they will tell the supplier that they must ensure that no other customer will be allowed to sell lower. Now, this doesn’t mean that things are never sold at a lower price, sure, there are closeouts, etc. Whether you think this is legitimate, and in the US this is perfectly lawful to enforce a MAP policy pursuant to what are called a manufacturer’s Colgate rights., fact of the matter remains that Amazon and Walmart, as RETAILERS, are actually massive, inefficient monstrosities that actually CANNOT compete on price. Here I’m just highlighting that misconception that somehow they’re so cheap. They’re not, they just have enough market power to ensure that the suppliers have to play ball TODAY.

  3. Many, many, years ago I had a summer job in the packing department of a factory. It was a bizarre experience, because the place contained some rabid Lefties, including a guy who once expounded long and noisily (like a long drawn out fart) that all stately homes should be demolished and the bricks reused to build council houses. It took up the whole of one tea break. Afterwards, the trade union rep motioned for me to stay behind for a chat. He could perhaps see that I had a different view of life!

    He explained that the firm gave him what I would now call ‘facility time’ – a day every week – to go round the factory and collect Union subs. He wasn’t, to be frank, doing it for the Union. Instead, he said that it gave him the opportunity to see every worker in the factory, most of whom were ‘thick’ so that he could sell them all manner of junk that he carried round in a satchel. (As an aside, he sold me a pair of ‘indestructable’ socks that I still have, 52 years later. Yes, they are truly indestructible!)

    The Union was, he said, little more than an insurance policy against the worst that some jumped-up tosser promoted to foreman might do just out of spite – in comparison, Management were benign and tolerant!

    But, and this is the whole point of my exposition, he said that it was not good business to have less than 100% markup, and that was even taking account the fact that he was already being paid for his time! It was, and I forget the details now, something to do with maintaining stock, some of which was ultimately unsellable.

    Anyway, the point was, he said, that the Gobshite was full of shite, and did a lot of damage to his cause, because he was widely despised. Almost certainly Gobshite would have disapproved of the Shop Steward’s ‘free enterprise’, but being a Shop Steward made him unassailable. A sort of 60s Union equivalent to the pussy pass. The point I took from it is that an appropriate markup is part of business, and that some forms of business need 100%. Perhaps some organisations can work on 5%, and that can only be possible with the economies of volume. Somehow, I doubt it.

    • Seeing on a quick google that Walmart’s gross margin is 24.7% — that is a little bit under a 25% markup on COGS. And yes, that IS low, but still I have, in comparison, next to 0 OPEX, so I can destroy even that. There’s NO PRICE I can’t beat them on, if allowed.

    • A lot of European nations have this no shoes in the house rule so they wear these heavy duty socks that won’t wear out after the third time they’re worn. By the end of the day those socks do get a little ripe.

  4. The interesting thing is that 20 years ago, they’d have been complaining about chains pushing out independents, now it’s about Amazon pushing out chains. Perhaps what’s really going on is that thing of the left being really conservative. That they just don’t like change, in whatever form.

    I also think “the death of retail” overhypes it and ignores what’s happening at the other end, that there’s quite a lot of specialist retail now. Take wine: Tesco might have destroyed the likes of Victoria Wine and Thresher’s, but there’s quite a lot of wine shops filling the niches that Tesco don’t serve.

  5. WalMart was successful by undercutting other retailers on price and they were relentless in finding ways to drive costs and prices lower. If you want to pick it up today, they are still by far the most efficient option for thousands of items.

    I’m not sure about the WalMart & Amazon price conspiracy bit above, but Adam Smith did note that whenever merchants got together they’d be talking about price fixing PDQ.

    I have noticed an interesting bit about prices online – often websites won’t show you the price until you put it in your cart. Finally got an explanation – occasionally you see something marketed as “the lowest price, guaranteed”. In reality it’s the lowest price that can be advertised, per the small print. So, another retailer can sell it for less, but they have to hide the price until you’ve put it in your cart. So, that is a bit of anti-competitive funny business.

  6. “inventory that costs alot of money to do.”

    Yeah, inventory very expensive at negative interest rates.

    “As an aside, he sold me a pair of ‘indestructable’ socks that I still have, 52 years later. Yes, they are truly indestructible!”

    They used to make clothes out of asbestos? Is there anything it isn’t in?

  7. “inventory that costs alot of money to do.”
    Not if you’re Walmart. They buy on 120-day terms and turn it round in a week or two. Capital requirements on stock are actually negative. Yes, there are buildings to maintain and staff to pay, but holding the stock is not a cost. What’s hurting them is that this free capital used to be worth something — at 5% interest rates it’s to the order of 1.5% — which makes a significant contribution to the costs of those staff and buildings. When the value of capital is near zero, this money has to be found elsewhere.

    “So let’s say that you want a widget that costs $100 and wholesale is $50.”
    Amazon and Walmart don’t buy wholesale, they buy direct from the factory for $40 and send their own trucks to pick up the goods. The wholesalers selling at $50 are probably the ones screwing everything up because they can only supply at that price when there’s a cancelled order that the factory wants out of its hair, hence availability is patchy.


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expunct (ɪkˈspʌŋkt)
VERB (transitive)
1. to delete or erase; blot out; obliterate
2. to wipe out or destroy

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