CHRISTIAN KING S.

ILARDE

Case 7: Retailing and Wholesaling

Large discount stores and superstores can wield enormous power and impact on a local community.
When a megaretailer like Wal-Mart enters a town, especially a smaller one, it often drives nearby small
retailers out of business and sends downtown business districts into a nosedive. Wal-Mart has been the
target of much criticism for this. When Wal-Mart founder Sam Walton was alive, he responded as
follows: “Quite a few smaller stores have gone out of business during the time of Wal-Mart’s growth.
Some people have tried to turn it into this big controversy, sort of a “Save the Small Town Merchants”
deal, like they were whales or whooping cranes or something that has the right to be protected. Of all
the notions I’ve heard about Wal-Mart, none has ever baffled me more than this idea that we are
somehow the enemy of small-town America. Nothing could be further from the truth. Wal-Mart has
actually kept quite a number of small towns becoming extinct by saving literally billions of dollars for the
people who live in them, as well as by creating hundreds of thousands of jobs in our stores. I believe
millions of people are better off today than they would have been if Wal-Mart had never existed. I don’t
want to be too critical of small-town merchants, but the truth is that a lot of these folks just weren’t
doing a very good job of taking care of their customers. Whenever we put a Wal-Mart store into a town,
customers would just flock to us from the variety stores. With our low prices, we ended an era of 45
percent mark ups and limited selection. We shut the door on variety-store thinking.”

a. What is your assessment of Sam Walton’s remarks?

In terms of consumer benefits, Sam Walton is correct. Let's put ourselves in Sam's shoes. You're
from a small town. There are 20,000 people living here. One grocery store, one hardware store,
and one pharmacy are available. Because each of these stores has a monopoly (they are the
only ones selling their product), they can set their own prices. According to the quote, some
people were estimating their customers and making up to 45% profit. This policy is beneficial to
the business. Remember that the purpose of businesses is to make money. Then there's Wal-
Mart. Every day, Wal-Mart generates billions of dollars in revenue. They bargain with suppliers
to get the best possible price on all goods. Because merchandise moves so quickly, Wal-Mart
does not need to set up 45% markups.

Although we cannot criticize Sam Walton's remarks from a business standpoint because he is
correct in saying that Walmart has provided employment to thousands of workers in small
towns, his remarks about small town retailers not doing a good job of serving their customers
are false and extremely wrong from an ethical standpoint. Sam Walton cannot defend his
position against the criticism by making disparaging remarks about small-time retailers. Sam
Walton's actions do not appear to be ethical in my opinion.

b. Does Wal-Mart have a responsibility to the small retailers it outs out of business? Why?

My college professor taught us a term about Walmart's business practices and strategy. As I
recall, he mentioned "Predatory Monopoly." Entrepreneurs must evolve with the times and the
economy in which they operate. Every company began as a "small business" and grew from
there. Sam Walton set higher goals, took different actions, and achieved different results than
the majority of people.
 Wal Mart certainly devoured a slew of small businesses, but so did Home Depot, Best Buy,
Barnes & Noble, and a slew of other brick and mortar retailers. It destroyed businesses that did
not have a clear business plan, did not focus on their merchandise and customer service, and did
not have a clear vision of what and to whom they wanted to sell. As a result, Wal Mart and other
retail behemoths bear no responsibility for the closure of small businesses.

Many of the businesses that failed as a result of Walmart's entry were trying to sell everything,
sort of like a general store, but they couldn't match Walmart's pricing because they lacked
buying power, which was exacerbated by the fact that they were ordering many different
categories of merchandise from a large group of suppliers. I believe there were also businesses
that were simply not in the right geographical locations and thus lost customers as a result.

c. What does the future look like for small retailers in America? How can they compete with
retailing giants like Wal-Mart?

Dealing with the emerging issues in this generation is difficult enough for retailers. The retail industry is
changing like never before. Digital shoppers who have grown up interacting with touchscreen phones
make up the new generation. Grocery shopping at the supermarket has become a special occasion, as
weekly grocery orders are delivered to the door. Technology's pervasiveness will continue to grow and
shape how consumers define shopping.

Despite the rise of online retail, the physical store will continue to play an important role. Many
customers will continue to visit physical stores for advice, socialization, and product testing. In the new
world, both traditional and online retailers face challenges. Incumbents struggle to implement digital
innovation at a sufficient rate, while online retailers lack store management expertise. While some
companies will continue to build their own solutions, acquisitions and partnerships will become a more
common way to quickly acquire new skills, capabilities, and assets.

Competing with large retailers can be intimidating, especially if you're new to the business. Your
competitors already have a loyal customer base, effective marketing campaigns, convenient store
locations, and well-trained employees. When it comes to competing with larger corporations, you have
two choices: try to imitate what they do or do things differently. Accepting a variety of payment
methods will help your company appear more substantial. Invest in a good POS system, preferably one
that integrates with your accounting software. These don't have to be expensive and will give your
company a professional appearance.

When market conditions change, smaller retailers, like a speedboat versus an oil tanker, can move
faster. Maintain a close eye on your customers' interests and preferences, and you'll be able to
anticipate their needs. Price competition with the big players is usually a bad idea. You may not be able
to significantly reduce their prices, but you may be able to negotiate other deals. For example, you
might be able to get a variety of products in your shop before Wal Mart. You could also have some
product lines made specifically for you.