Sunday, June 21, 2009

Companies Tony Loves: Walmart

This week's installment of the Companies Tony Loves Series is on Walmart. "Companies Tony Loves" posts describe why innovative companies and business practices make us all better off, and therefore why they deserve our love. "Companies Tony Loves" is featured every Sunday on this blog.

Last week, I lauded the role of successful small businesses for improving our lives. Using the example of local coffee shops in Bozeman, MT, I argued that small businesses can make any community better off, especially in a market as competitive as Bozeman's coffee shop market. Small businesses -- at least the ones that are still around -- compete by providing better value. This fact makes me love them.

Given my love for small businesses, my admiration for Walmart might surprise you. To many people, Walmart epitomizes everything that is bad for small business. Here's a story you may have heard: Walmart enters a town and drives many of the established local businesses out. Then, Walmart exploits the community. That's the perception anyway.

But, that's not how I see it. Walmart does not force consumers to buy their products. Walmart induces them into the store by offering low prices on everything. That's not bad for consumers; it is great for consumers, even in the long run. My experience with Walmart is that they enter a community with low prices and keep those prices low.

For example, consider the Walmart location in Butte, MT. Here is an opinion article from the store manager in Butte, discussing why Walmart is good for the community -- after 15 years of serving the Butte market. He makes some very good points: Walmart offers low prices, decent service and competitive wages. Scoff all you will at the wages Walmart offers, but before you do, ask yourself what someone doing the same work at a local store would make. I doubt it would be much higher.

There is a strong contingent of Butte locals who have never embraced Walmart, saying that "Walmart only offers low prices until they drive out the competition." After 15 years, the prices are still low at the Butte Walmart. I wonder when the competition will move out of town so Walmart can start raising prices...

After 15 years, there are fewer high-price businesses in Butte, but isn't the Walmart option a much better one? The consumers who switched stores must have thought so. And, those consumers are better off. As last week's EconTalk podcast suggests, the employees are possibly better off as well. And, that's coming from a man, Charles Platt, who took a job at Walmart to write about his experience.

If there really is something irreplacable about the local businesses, they can use that quality to attract customers. That's what distinguishes local businesses I love from the ones I can do without. The coffee shops in Bozeman are so efficient and innovative that they keep the big stores out, whereas Butte's ailing small businesses cannot compete with Walmart except through picket lines and complaining to the local media.

Efficiency and value are deserving of admiration -- entitlement is not. On this measure, the local businesses that cannot withstand Walmart's competition do not stack up. Walmart -- just like the local coffee shops of Bozeman -- provides a great service to its community. Put down your placard. Grab a shopping cart. I assure you that you will find good value inside.

If you have ideas for Companies Tony Loves, please let me know. It could never hurt to have more suggestions!

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