Wal-Mart undercutting practises

[donnay]

First of all, Walmart does not have a HUGE net profit. They profit 3.6% of sales. Small percentage compared to most companies. Most companies have "loss leaders", which are items they will sell at cost, or occasionally a little under cost to attract business in the hopes the customer will buy other products. A good example of this is milk.

From Wiki:

For the fiscal year ending January 31, 2011, Wal-Mart reported a net income of $15.4 billion on $422 billion of revenue with a 24.7% gross profit margin). The corporation's international operations accounted for $109.2 billion, or 26.1%, of total sales.[1] It is the world's 18th largest public corporation, according to the Forbes Global 2000 list, and the largest public corporation when ranked by revenue.

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From Wiki:

Wal-Mart Stores, Inc. (NYSE: WMT) is the world's largest retailer and grocery chain by sales. Wal-Mart is so large that its are almost 50% more than its 5 closest competitors combined, including Target (TGT) and Sears Holdings (SHLD). Because of its mammoth size and buying power, Wal-Mart can buy its products at rock-bottom prices, exchanging high purchase volumes for low cost while passing the savings onto its customers. Many suppliers give in to Wal-Mart's pressure because they depend on the discount retailer for a majority of their sales.

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Fortune 500: Walmart Keeps Top Spot, But Exxon Is Profit King
http://www.huffingtonpost.com/2011/05/05/fortune-500-list-walmart-exxon-profitable_n_857991.html

The going might be tough for America's citizens, but more and more evidence, most recently the newest Fortune 500 rankings, suggests the corporations are doing just fine.

On Thursday, Fortune released their list of the 500 U.S. companies with the highest gross revenue in 2010. According to the results, the top revenue-earning U.S. companies recorded the third-highest increase in combined profits since the list's invention. Big companies, many of which profited from a belt tightening in the form of job cuts and productivity increases, the AP notes, also continued to leave the U.S. behind, expanding more overseas than at home.

Walmart, despite declining sales, remains atop the Fortune 500 list, followed by three oil companies: Exxon Mobil, Chevron and ConocoPhillips, in that order. Also in the top 10 are two financial giants (Fannie Mae and Bank of America), two Detroit stalwart's (General Motors and Ford Motor), Warren Buffett's Berkshire Hathaway and energy company General Electric.

But while Walmart remains the highest revenue earner, it was far from the most profitable Fortune 500 company last year. On the strength of rising oil prices, Exxon Mobil, second to Walmart in total revenue, nonetheless recorded a net profit nearly double that of Walmart's, $30.5 billion to $16.4 billion, Fortune notes. Chevron, AT&T and JPMorgan Chase also had higher net profits than Walmart.

Within the top 10 revenue-earning U.S. companies, only Fannie Mae and Bank of America recorded a net loss last year. Fannie Mae, AP notes, jumped to 5th place from 81st in a single year.

Check out the full list here. http://money.cnn.com/magazines/fortune/fortune500/2011/
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Another forum member posted this in another thread, I think it is worthy to post it here:

Chart of who "owns" the Federal Reserve
http://www.save-a-patriot.org/files/view/whofed.html

Corporate tyranny...is not conducive to a Free Market.

 

[Eryxis]

What are you trying to say Donnay? It looks like you're confusing net profit with gross profit.

 

[donnay]

What are you trying to say Donnay? It looks like you're confusing net profit with gross profit.

I am saying that their net profit is more than Txrose4ever implied. That net profit is more when you factor in the international operations too. This is a Corporation who receives subsidies which, to my way of thinking, Wal-Marx doesn't appear to need any handouts.

 

[erowe1]

I am saying that their net profit is more than Txrose4ever implied.

Using the numbers you just posted, their net profit is exactly what Txrose4ever said, accurate to the tenth of the percent.

 

[Rothbardian Girl]

Walmart Love?

Without having read all of the posts in this topic (I got to about the fifth page before I got bored of reading the same arguments over and over again), I'll just throw my two cents in now, I guess:

Some of you have argued that Walmart doesn't receive that much assistance from the government to continue its policies. I would disagree with that. Walmart enjoys an incredible amount of protection from the government in various ways. I'll just list them here to make the post easier to read:

1. Subsidies
Some of you may think I'm beating a dead horse here, since a few people brought up the issue of subsidies in earlier posts, but it is worth noting that Walmart received at least $1B dollars in subsidies from the records that could be found (about 160 incidents). The real figure could be much higher, because people within the company have stated that Walmart tries to get subsidies in at least one-third of its stores (that comes out to about 1,000 stores in total).

The subsidies also do not only go to the stores themselves, but also to the distribution centers that Walmart employs. The actual process of granting subsidies is very shady and usually figures can only be verified if they are picked up by local media. (We all know how great of a job the media does in reporting every single fact. )

Of course, subsidies take the forms of property tax breaks, free land grants, making the land usable for the store, income tax credits, etc. Some of you have argued that tax credits are actually good, but I personally only see them as good when they are available to all possible parties; otherwise, it creates an unfair advantage IMO. There are TONS of examples of other subsidies that most people don't even consider. All these things add up.

2. Walmart as a "Big-Box Retailer"
Unfortunately, I think many of us can make eloquent arguments for why the typical economic program nowadays fails, because usually it is designed to make the public sector bigger and pass accountability onto the taxpayer, but some of us here don't see the connections with that and operations like Walmart. Retail stores actually do very little to create jobs, because all they do is take resources away from small businesses (those "mom-and-pop operations" that I think donnay mentioned before). Sometimes Walmart actually drives a lot more business away than it creates.

Another factor to consider is environmental and really societal impact; these retailers often encourage people to travel large distances away to get to them, which leads to all sorts of pollution and sprawling problems. Again, it's another factor that may or not convince some of you. I know a lot of us don't think environment is the most important thing to consider in the context of businesses succeeding, but I think the development of sort of a one-size-fits-all suburb in nearly every place in America has really hurt us.

In other words, Walmart tends to squeeze the taxpayers for its own benefit. It seeks public assistance to enhance its bottom line. The fact that Walmart itself is a very controversial company doesn't mean that all the controversy comes from "protectionists" or "unionists". And lastly, Walmart may end up destroying more jobs because of its need to reach into nearly every function that smaller businesses could handle. Hell, I've even seen a Walmart bank when I've been to the one in Auburn.

I encourage you guys to read this link: http://www.goodjobsfirst.org/sites/default/files/docs/pdf/wmtstudy.pdf It's extremely long, but it does an incredible job at documenting the extent to which Walmart has benefited from its often-shady practices. There is a whole wealth of information out there about how bad big-box stores like Walmart actually are for society as a whole.

 

[Zippyjuan]

First of all, Walmart does not have a HUGE net profit. They profit 3.6% of sales. Small percentage compared to most companies. Most companies have "loss leaders", which are items they will sell at cost, or occasionally a little under cost to attract business in the hopes the customer will buy other products. A good example of this is milk.

The low margin is important. WalMart makes money on small margins by moving a ton of products. This is also why small benifits such as tax breaks can be very significant. If you are making three percent on each good and you get a two percent break while your competion doesn't, that makes it easier for you to undercut their prices. On such small margins, they cannot afford to make the same reductions you can. That gives you a significant advantage. You have five percent to work with while they only have three percent. You can actually sell at below their cost and still be profitable.

 

[Eryxis]

The low margin is important. WalMart makes money on small margins by moving a ton of products. This is also why small benifits such as tax breaks can be very significant. If you are making three percent on each good and you get a two percent break while your competion doesn't, that makes it easier for you to undercut their prices. On such small margins, they cannot afford to make the same reductions you can. That gives you a significant advantage. You have five percent to work with while they only have three percent. You can actually sell at below their cost and still be profitable.

This is the entire thread summed up very concisely. I can't really believe that people defend the subsidies as "not that big". Nobody wants protectionism, but if the alternative is to compete against a politically connected juggernaut, then I'll take my chances with protectionism. I think we all want a level playing field for all businesses no matter the size.

 

[Becker]

This is the entire thread summed up very concisely. I can't really believe that people defend the subsidies as "not that big". Nobody wants protectionism, but if the alternative is to compete against a politically connected juggernaut, then I'll take my chances with protectionism. I think we all want a level playing field for all businesses no matter the size.

exactly, people want protectionism when it benefits them, and they want outsourcing, joblessness, and immigrants when it benefits them. They otherwise hate all of them.

 

[Eryxis]

Did you read my sentence even or just see " I'll take my chances with protectionism"? When given two bad choices that affect whether somebody can pay their bills or not, everyone will chose the least bad option. I personally am fighting to give people a third choice of a true free market. I assume you are as well or you wouldn't be here.

 

[Becker]

Did you read my sentence even or just see " I'll take my chances with protectionism"? When given two bad choices that affect whether somebody can pay their bills or not, everyone will chose the least bad option. I personally am fighting to give people a third choice of a true free market. I assume you are as well or you wouldn't be here.

true free market, such as the one we see where? Imaginationland?

 

[vodalian]

true free market, such as the one we see where? Imaginationland?

A non sequitur and argumentum ad populum wrapped up in one short comment... Not bad.

 

[Becker]

A non sequitur and argumentum ad populum wrapped up in one short comment... Not bad.

no. just asking if you can show me one, or only in your imagination. any kid can imagine a better place, but if it doesn't exist, you'll always say "thats not how i wanted it to be" when somebody tries.

 

[heavenlyboy34]

no. just asking if you can show me one, or only in your imagination. any kid can imagine a better place, but if it doesn't exist, you'll always say "thats not how i wanted it to be" when somebody tries.

A free market exists anytime and anyplace two or more people engage in free and voluntary trade. A "free market" is not necessarily a literal place. You can make free market exchanges online. But if you had read anything about free market economics you should know this.

 

[helmuth_hubener]

true free market, such as the one we see where? Imaginationland? just asking if you can show me one, or only in your imagination. any kid can imagine a better place, but if it doesn't exist, you'll always say "thats not how i wanted it to be" when somebody tries.

Whenever a voluntary transaction takes place between two parties with no interlopers, that's a tiny free market. Go to a garage sale. Buy a used car. Then you too can feel the joy of being part of a free market.

 

[Becker]

A free market exists anytime and anyplace two or more people engage in free and voluntary trade. A "free market" is not necessarily a literal place. You can make free market exchanges online. But if you had read anything about free market economics you should know this.

ok. so then, free market refers to transactions, fair enough. do you admit no country as a system or whole has a market where all transactions are free from scrutiny, regulations, insurance, or other interferences? (and is it always a bad thing?)

 

[Becker]

Whenever a voluntary transaction takes place between two parties with no interlopers, that's a tiny free market. Go to a garage sale. Buy a used car. Then you too can feel the joy of being part of a free market.

every con artist knows that.

 

[LibertyIn08]

Selling items below cost is good for consumers.

By the way, your friend should take a look at major retail firms' margins.

 

[helmuth_hubener]

every con artist knows that.

A "con artist" uses fraud in the trasaction, right? That's what makes him a con artist. Fraud is a force-substitute. By using fraud, the con artist is trying to obtain something involuntarily, and rather than being upfront about it and putting a gun to the other party's head, he steals it in a more sneaky way: lying about what he's going to provide in the deal. But his fraud makes the transaction completely involuntary just as surely as the gun to the head would.

It's just the difference between the armed robber and the cat burgler: one puts a gun to your head, one quietly sneaks in the window while you're gone, but both are stealing.

 

[Eryxis]

Selling items below cost is good for consumers.

By the way, your friend should take a look at major retail firms' margins.

Yes, but if the only way a company can do this is via tax payer subsidies the it is BAD for consumers.

 

[Becker]

A "con artist" uses fraud in the trasaction, right?

Dependents on what you mean by fraud. Isn't value subjective?

That's what makes him a con artist. Fraud is a force-substitute.

Why is it force substitute?

By using fraud, the con artist is trying to obtain something involuntarily, and rather than being upfront about it and putting a gun to the other party's head, he steals it in a more sneaky way: lying about what he's going to provide in the deal. But his fraud makes the transaction completely involuntary just as surely as the gun to the head would.

except the transaction was done under no force, where the victim had every right to refuse or be skeptical

It's just the difference between the armed robber and the cat burgler: one puts a gun to your head, one quietly sneaks in the window while you're gone, but both are stealing.

the stealer didn't use force against you