The Internet as an Antidote to Walmart
Walmart has a profound effect on America: It helps to keep prices low, it provides an outlet for foreign goods, it employs people, and it bankrupts small retailers in the communities it enters. Understandably Walmart has been getting a bad wrap from some corners. I disagree with much of what is said about Walmart, although I am not one of its fans. My problem with the criticism is that I think it’s off the mark, directed not at Walmart’s practices, but at its incredible success. I am more concerned about Walmart’s effects on our diversity, and I see these effects as inevitable. Were Walmart to disappear, some other conglomerate would have just as devastating an effect on diversity. But there is a way out: The Internet. I believe the Internet will fill the role that was once played by the neighborhood retailer. In fact, I believe the Internet will save the neighborhood retailer, by making the neighborhood bigger.
A recent documentary, Walmart: The High Cost of Low Price, lays out the case against Walmart:
- Walmart exploits its workers, paying them low wages, and giving them poor benefits
- Walmart intimidates its employees, pressuring them not to criticize the company and its practices
- Walmart actively fights unionization of its workers
- Walmart destroys communities by displacing existing retailers, decimating Main Streets across America
- Walmart holds communities hostage, often bargaining tax breaks and other special deals from local politicians
These are serious accusations, but I think many of them are unfair. Yes, it’s true that Walmart is a low-price leader, and that does imply that it puts downward price pressure on its employees and suppliers. Of course Walmart fights any actions that may make it raise prices. Faulting Walmart for this is a bit like faulting Southwest Airlines — one of the very few profitable airlines — for not offering first-class meals in its flights.
This is not to say that there is nothing wrong with Walmart. Far from it. Walmart has been guilty of pressuring local governments into using their power of eminent domain to acquire tracts of land at low cost and give them to Walmart. Local governments defend this by pointing out the sales tax revenue that will be generated by the new Walmart store. But any right-thinking person recognizes this for what it is: theft. The theft may be sanctioned by the government — astoundingly, even the supreme court agrees the government has the right to do this — but it is nevertheless a violation of basic property rights. Put simply, Walmart has no more right to my house than I do, even if the sales tax they can generate if they bulldoze my house and put a store in its place dwarfs what my city can reasonably charge me in property taxes. Of course, the real issue here is not with Walmart, but with corrupt local governments that like to abuse their power for our own good.
A lot of this criticism misses a real point. To understand the damage that Walmart (and other large retailers) can have on a community, it is important to consider why Walmart is successful in the first place. I claim it succeeds because it delivers something that a lot of people value. To some the value lies in low prices. Take me, for example. I don’t mind paying more for some products, because I want to get high quality in return. My stereo system is expensive, so is my television. I could have bought cheaper equipment, but I chose not to. On the other hand, I do not care do pay extra for a box of cereal, so I’m happy to buy it from Walmart if it’s a $1.00 cheaper.
Another Walmart value is product selection, in breadth if not depth. When I moved to Wyoming, I instantly joined the market for snow shovels. Having never bought one, I had no idea where to go to find such a thing (now I know several places that sell them). So I did the obvious thing: I went to Walmart. Sure enough, Walmart had a nice display of snow shovels, and I was done shopping.
The flip side, of course, is that Walmart puts pressure on the local retailers. It will be hard, for example, for a store to sell cereal at a much higher price than Walmart’s. Who wants to pay more for the same cereal? This is bad, of course, but it’s bad only to the individual businesses, which were inefficient in the first place. Surely any moral harm to them is more than offset by the benefit provided to the consumers in the community. And if that’s the case, what’s the problem?
The real problem — to consumers and the community as a whole, not to some individual retail owner — is Walmart’s effect on specialty stores. Consider a local electronics store that sells stereo equipment to the community. The store may stock expensive equipment that only a handful of people (like myself) care about. Since only a few people care about this high-end equipment, the store also stocks several more popular systems, e.g., entry-level DVD players, and it is these popular items that keep the store in business. When Walmart starts selling cheap DVD players, many buyers may decide to buy these items from Walmart instead of the local retailer. This is as it should be. But the effect is devastating. The local retailer goes out of business, so nobody sells high-end electronics equipment anymore! That is the tragedy. When Walmart comes to town, everybody benefits by being able to purchase cheap DVD players, but some people lose by not being able to buy higher-quality players.
Before you think that this only affects a small minority of people, consider this. We are all in a minority. Maybe you do not care about high-quality stereo equipment. Instead you may care about high-quality clothing. Or high-quality books. Or high-quality music. Or high-quality furniture. Or high-quality clothes. Maybe it’s not even quality you care about, maybe it’s just something out of the mainstream. Perhaps you like a rare fruit, like guayabas. Walmart doesn’t stock them because not enough people like them, but the old grocery store did, the same grocery store that went out of business when Walmart started selling cheap boxes of cereal.
The real threat that Walmart poses is that it robs us, the consumers, of choice. Nobody cares that some items are marginalized in this way. I mean, do you really care what brand of toothpaste you use? But everybody cares about something, maybe books, or CDs, or maybe something else entirely.
This problem is not limited to Walmart. Any large corporation has the same effect. Top 40 music is the most popular music in the world, otherwise it wouldn’t be in the Top 40. But Top 40 music is bland; other music is better. Popular writers are, of course, popular. But book lovers cherish other writers, not as well known. And there’s no agreement on what these “others” are. For me, it’s Daikaiju’s music (at least this week) and Connie Willis’ books. For you it may be something else. But we both lose when the little stores, which may offer a wide range of music or books, are gone because they can’t compete with the Walmarts. And the little stores will go away. No store can stay in business by selling just Daikaiju’s music or Connie Willis’ books. They have to sell Madonna and Danielle Steel to survive. But whereas a little store, run by a music or book lover, may stock Daikaiju and Willis alongside Madonna and Steel, the bigger chains will not.
And that is, quite simply, inevitable. The truth is that those little stores we cherish, the quaint science-fiction store or the special music store, subsidize the rare items by selling lots of the popular items. In other words, the popular items are necessarily more expensive in these stores, which is why Walmart (or Barnes and Noble, or Music Warehouse, or any large retailer) can sell them for less.
The only way out is to have a store so large that it can stock all the specialty items that one of us may want. To stay in business, this store needs a large number of customers. After all, if I want to open a store that sells specialty books, I need to open it somewhere where there are a lot of readers, and the kind of readers that appreciate specialty books. I have a better chance of finding these readers in New York or L.A. than in Laramie, Wyoming. That’s simple economics, and that’s why shopping is better in the bigger cities.
But the Internet changes these economic assumptions. I can open a specialty bookstore in Laramie, Wyoming, as long as people from all over the country can shop there. And that’s what the Internet lets me do. If Walmart comes to town and starts selling books, that’s OK. I’m not out of business, because I sell a far wider variety than Walmart will offer. Yeah, sure, people will buy Danielle Steel’s latest book from Walmart, as opposed to from me. But they will come to me for their other needs. There aren’t enough residents in Laramie to keep me in business, but my Internet customers will.
And the same happens to me as a consumer. If I want the latest book on Java Server Faces, I won’t be able to find it at Walmart. I won’t even be able to find it at the main bookstore in town — believe it or not, a Hastings. And I definitely won’t find it in the University bookstore. With all the T-shirts, hats, and other Wyoming Cowboys souvenirs, they just don’t have room to sell books there. But I can order it on the Internet and have it tomorrow.
Walmart robs us of diversity. Retailers who could offer it can’t survive when Walmart moves to their small town, so customers who wish for it soon find themselves deprived. But the Internet gives us new hope. It lets the small retailer survive, and gives us consumers choice.
Don’t believe me? Check out Abebooks, an Internet storefront for small, specialty bookstores spread out across the country. Local bookstores have been under extreme assault from large chains in recent years. The large chains get special price breaks from publishers for the popular items, so they can offer popular books at prices below what a local store could offer. So the local bookstores were dying. But Abebooks is bringing them back! The local bookstores are surviving — the one in Laramie is expanding! — and customers all over the country have choice. Oh, and we can all buy cheap cereal.