The End of Everyday: Isolationism’s Potential Impact on Walmart’s “Everyday Low Prices”
As Trump raises skepticism on China's trade practices and promotes isolationist investment, Walmart should rethink its strategy away from reliance on low labor and manufacturing costs found in China, potentially to invest in its loyal customer base – the everyday American family.
To feed their families, to build their homes, to live lives they can afford, millions of Americans go to Walmart for “everyday low prices.” The world’s largest retailer has built its reputation, loyal customer base and $482 billion in revenue [1] by selling clothing, groceries, footwear, appliances, furniture and more, at consistently low prices year after year. Enabled by a highly globalized supply chain, Walmart has tied itself to the low-income American family yet employs workers and imports goods from other countries to keep its own costs low. As the political landscape has shifted and will continue to shift under President Trump, Walmart must pay keen attention to the trends and attitudes around isolationism and international trade because of its dependence on consistent low costs and on the low- and middle-income Americans who need those low price options to survive. The behemoth Walmart must focus on global trade trends in this new political era not only to maintain its own “everyday low” costs but to stay true to its promise of the “everyday low prices” that sustain low-income American lives.
A core element of Walmart’s strategy, the leveraging of low international manufacturing and labor costs is currently under scrutiny by Trump’s administration. In a study released December 2015, the Economic Policy Institute posited Walmart imports from China displaced 400,000 American jobs, which comprises about 13% of the 3.2 million jobs displaced to China from 2001 to 2013. The retailer also had $49 billion in imports from China in 2013 [2]. One can conclude that the lower prices from outsourcing, combined with economies of scale, allow Walmart to charge low prices for its goods [3]. But ask Trump begins to issue isolationist policies, Walmart will need to rethink this strategy.
Recently Trump has called the trade relationship with China into question, hinting to a future restriction or impeding of trade between the nations. Though agreement news has flurried recently, the past few months have shown Trump’s skepticism around China’s trade practices:
“We must immediately address the unfair trade practices that drive this deficit, along with barriers to market success,” Trump said. “We really have to look at access, forced technology transfer, and the theft of intellectual property…” [4]
As the US political system calls out isolationist ideals, more Americans hark on the outsourcing of American jobs to developing countries. Currently, one of six men without a college degree is unemployed [5], creating an environment where Americans are looking to country leadership, particularly the President, for employment opportunities. As Trump pushes protectionism to help with jobs, he simultaneously casts a shadow on some of the largest companies in the world, like Walmart. Walmart though will need to be particularly careful due to the large overlap of their core customers with Trump’s most avid listeners. The situation highlights the tension between the middle America and educated elite thoughts on global trade, and opportunities in the US. The outsourcing costs lower income workers their jobs but benefits Walmart in their millions of dollars of savings, a portion of which one may assume ends up in the pockets of the C-suite executives.
Walmart claims to be addressing these issues by increasing its American-made products, creating $10 billion of worth in jobs from 2013 to 2020 but most analysts believe this to be a reactionary announcement to the report, as opposed to a prioritized goal [2]. Walmart also should focus on American labor, bringing manufacturing into the United States and employing the people who buy their products – the everyday American customers, the people who technically are paying regularly so that the Walmart execs exist at all. Walmart should also give its resources to localized training and educational programs in the low-income communities where it operates, taking a play from General Electrics playbook in China. GE, a company that also relies on low labor and manufacturing costs in China to buoy its business, has learned over the years that countries like China and India, now developing to be economic powers, are demanding – and in my opinion deserve – to gain on a long-term level from working with behemoths like Walmart. Access to education and technological training seem like a small price to pay, for the industry-leading gross profit margins that Walmart experiences.
As Walmart considers its options, one can wonder what impact US labor and manufacturing costs would have on the retailer’s everyday low prices and dedicated consumer base. But even if the prices are raised due to the increased costs of labor in the US, the everyday American family will benefit from the job creation. Export-led growth in places like China and India has lifted people out of poverty [6] and the people who have fed Walmart its success also deserve a chance to profit from the company’s power.
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SOURCES
[1]Walmart Corporation, “Walmart Annual Report 2016,”
https://s2.q4cdn.com/056532643/files/doc_financials/2016/annual/2016-Annual-Report-PDF.pdf
[2] The New York Times, “Walmart’s Imports From China Displaced 400,000 Jobs, a Study Says,” (Dec. 9, 2015) https://www.nytimes.com/2015/12/09/business/economy/walmart-china-imports-job-losses.html
[3] Center for Economic Policy and Research, “Wal‐Mart: Always Low Prices Means Always Low Wages,”
http://cepr.net/publications/briefings/testimony/walmart-low-wages
[4] Politico, “Trump’s trade boasts in Asia mask looming China problem,” https://www.politico.com/story/2017/11/14/trump-china-trade-deal-244896
[5] The Economist, “An open and shut case,” (Oct. 1, 2016)
[6] Wall Street Journal, “Globalization in retreat | GE, the ultimate global player, is turning local,” (June 29, 2017)
I disagree with the premise that Walmart has a responsibility to American consumers. The very notion does not exist in a capitalist market – rational consumers will go where the prices are lowest for the given quality they seek, and they will have no loyalty to the organization selling to them.
Were Walmart to source its products in the US, its price competitiveness is likely to decline due to higher labor rates. Competitors, especially those small enough to operate outside the radar of the current administration, will manufacture abroad, sell similar products for less, and gain market share as a consequence.
Unless the average consumer is fundamentally irrational (I would argue they tend to be more rational than not, though unfortunately this is not a given), the plausible outcome shifting manufacturing back to the US is a) more jobs for Americans (which arguably is unnecessary, given already low rates of c. 4.4% adult unemployment), b) declining Walmart market share and c) declining Walmart profitability. Walmart, in all likelihood, will lose.
Consequently, the Walmart execs ought not be asked to shoot themselves in the foot because someone thinks that a job in place X is for some reason more valuable than a job in place Y. I, for one, argue that an employed family is an employed family, wherever they might reside.
This is an interesting read and I think that Walmart’s buying power and sheer scale leave it uniquely positioned to help lead a manufacturing renaissance in the U.S. While I agree that Walmart should play a more active role in workforce training and education, I think assistance from federal, state, and municipal governments is necessary. The public sector not only has the power to allocate funding for education and training programs, it also plays a communication role in helping to match the demands of private enterprise with the education available (especially at state-sponsored schools). If manufacturers and retailers like Walmart were able to more clearly articulate skills gaps to both academic institutions and the public sector, more could be done to develop tailored training that will meet the long-term needs of American industry. Governments may also use tax incentives to encourage companies like Walmart to expand training and apprenticeship programs.
Walmart must stay true to its promise of “Everyday Low Prices”, which is the reason why millions of Americans buy at Walmart every week. Any supply chain change that increases Walmart’s prices might have a very negative impact on the company.
That being said, Walmart must be aware of 1) Customer trends asking for more local products. The company can introduce new local product lines at a different price point than its globally sourced products and 2) Government and media pressure to source local. The company should be cautious to navigate this subject without promising actions that will negatively impact its current price point, and at the same time avoid creating public animosity against the company.
In addition to that, Walmart should not lose its focus to prepare itself for the expected “retail war” against Amazon that is going to take place in the very short term. Failing to provide “Everyday Low Prices” to customers would be a way to lose the war before it starts.
I agree with the commentary that, for Walmart, price trumps all (no pun intended). I’m confident that the majority of Walmart’s products – especially electronics, toys and clothing – will never be able to be manufactured in the US at the same price. On the other hand, I’m less confident about the extent to which Walmart’s core customers will pay more for products made in America. Therefore, any increase to COGS would have to hit Walmart’s margins, as opposed to causing price hikes — a choice I’d be shocked to see.
Finally, as a global organization, Walmart will need to think critically about how it defines “local,” especially if it is going to use this tagline as a marketing tool. I would bet that, as an organization, it will reap more benefits from isolationists from creating more jobs at the storefront level for Americans versus sourcing American made products.
Great article and interesting arguments. I am highly skeptical that Walmart will feasibly be able to switch broadly to US manufacturing for the majority of their products for a couple of reasons:
1. Price. Unless Walmart changes strategy away from EDLP, consumers will continue to expect the lowest prices. That is currently the core of their value proposition.
2. Well established supply chain infrastructure in China for their wide array of products (switching costs would be huge and have to be done very gradually to move to more US manufacturing).
As a promotional tool however, featuring certain “Made in America” products could be a PR win if executed well. Walmart has a “Made in America” program, but faced backlash in 2015 when certain products in the program were actually found to be made overseas.
I do agree that Walmart could better serve the American consumer by paying their workers higher wages. As Walmart loses market share to Amazon, they need to double down on the key differentiators. One major differentiator and potential advantage is the opportunity to provide quality face to face customer service. Currently, Walmart is lagging behind some other brick and mortar retailers with in store customer experience, but with a well executed overhaul, they could drive real change.
I absolutely agree Walmart needs to continue not only to pay attention to isolationist trade policies, but to lobby against them. Earlier this year, they joined forces with Target and 100+ other major US retailers in the Americans for Affordable Products Group, backed by the National Retail Federation which lobbies hard against protectionist tax and trade policies that could impose a 20% penalty on many of Walmart’s imports [1]. This makes a ton of sense, given their high import exposure and commitment to low prices, as you mentioned.
But until there’s additional clarity around whether these policies are enacted, Walmart should avoid increasing it’s import exposure where it can profitably do so. I was surprised to learn that despite this political pressure (and Trump’s and Walmart’s emphasis on creating American jobs), Walmart is actually moving away from the “Made in America” merchandise, at least in part, by inviting international sellers to list merchandise on its website [2]. Unless the financial benefits are significant, I’d discourage them from attracting additional negative political attention until there’s more clarity that they’re safe from import penalties.
Sources
[1]: http://fortune.com/2017/02/01/walmart-target-border-tax-trump/
[2]: https://www.reuters.com/article/us-walmart-vendors-exclusive/exclusive-not-made-in-america-wal-mart-looks-overseas-for-online-vendors-idUSKBN1AC1VJ
I absolutely agree Walmart needs to continue not only to pay attention to isolationist trade policies, but to lobby against them. Earlier this year, they joined forces with Target and 100+ other major US retailers in the Americans for Affordable Products Group, backed by the National Retail Federation which lobbies hard against protectionist tax and trade policies that could impose a 20% penalty on many of Walmart’s imports [1]. This makes a ton of sense, given their high import exposure and commitment to low prices, as you mentioned.
But until there’s additional clarity around whether these policies will be enacted, Walmart should avoid increasing its import exposure where it can profitably do so. I was surprised to learn that despite this political pressure (and Trump’s and Walmart’s emphasis on creating American jobs), Walmart is actually moving away from the “Made-in-America” merchandise, at least in part, by inviting international sellers to list merchandise on its website [2]. Unless the financial benefits are significant, I’d discourage them from attracting additional negative political attention until there’s more clarity that they’re safe from import penalties.
Sources
[1]: http://fortune.com/2017/02/01/walmart-target-border-tax-trump/
[2]: https://www.reuters.com/article/us-walmart-vendors-exclusive/exclusive-not-made-in-america-wal-mart-looks-overseas-for-online-vendors-idUSKBN1AC1VJ
This is a thought-provoking piece on the conflicts facing Walmart as it is faced with isolationist demands. On the one hand, their customer base demands low prices, but it is also this same (or very similar) customer base that is in support of President Trump demanding manufacturing jobs in China, which keep prices low, to be moved to America.
I believe ultimately many jobs will remain in China because of the deep economic benefits, as much as our current leadership demands otherwise, but Walmart will need to find ways to increase the perception that they are creating jobs and driving economic value in the US. Hopefully they will find a way to provide better pay to their lowest-paid employees so that at least they are benefiting from the increased profits from Walmart’s business in China.
Even though we can argue whether companies such as Walmart have the corporate responsibility to bring manufacturing jobs back to America, it does make sense to attribute the company’s resources in developing some contingency plans in the event that aggressive isolationist policies do come to fruition.
Even though the majority of people cite low labor costs as the predominate factor of outsourcing, it is important to note that, given the current landscape, America simply does not have the same amount manufacturing expertise compared to countries such as China. I agree with you that Walmart should try to remediate the loss of skill by addressing the large manufacturing gaps in the education pipeline.
This is an interesting view on the tension of isolationist policies aiming to protect american businesses (such as Walmart) simultaneously damaging their competitive advantage. I question whether bringing manufacturing jobs to the US would be of much benefit even to the communities for two reasons: 1) As you pointed out, product prices are more than likely to rise and potentially become out of reach, and 2) given Walmart’s widely reported history of underpaying its employees and improperly training them (https://www.theatlantic.com/business/archive/2016/01/walmart-raise-2016/425058/), the quality of the jobs potentially available may not even be desirable for the vast majority of Americans.
Keeping labor costs low has clearly been a competitive advantage for Walmart (some might say unethically so). However, isolationist policies wouldn’t only affect Walmart; they would also affect competitors such as Target and other discount super retailers. Given that Walmart would remain the largest, and given that they have engineered ways to keep labor costs low even in the US, I think they stand to remain the incumbent leader in delivering “everyday low prices” even if at the expense of poor labor relations and low customer satisfaction (http://time.com/3715877/walmart-satisfaction-index/).
Very thought provoking essay on the tensions that many actors in our society face when these isolationist ideas come around. In this particular case, I agree with your point that the overlap between the incumbent President’s supporter base and Walmart’s core customer base puts the company at particular odds in this subject of American manufacturing jobs; however if we look at the highly publicized subject of bringing iPhone manufacturing to the U.S., by some accounts (http://www.businessinsider.com/how-much-products-would-cost-if-made-in-us-2016-11) the retail price could more than double, while job creation would not reach significant numbers (https://www.technologyreview.com/s/601491/the-all-american-iphone/). If we extrapolate those considerations to the overall question of Walmart’s role in supporting U.S. manufacturing jobs, I believe the company is better off fending back the isolationist cries than trying to compete with higher priced goods made in the U.S., even though the two actually impact the same group of people.
This is a really interesting piece that highlights the massive dilemma that Walmart is facing due to the very real threat of isolationism posed by this president. Walmart must find a way to address two competing goals that are supported largely by the same group of customers. A large part of the president’s base are in Walmart’s target market and would be incensed if prices increased, however they are the loudest supporters for policies that would limit globalization and the lower prices it contributes to.
It is also unclear, if these policies would in fact have a net positive impact on the American worker. There is a very real possibility that the cost of living increase would outpace the added income caused by jobs being moved back to the United States. This is because it wouldn’t only be the prices of Walmart increasing, but those of all companies with a manufacturing arm that have outsourced jobs. Additionally, it will make American companies less competitive on the global scale which will lower profits and potentially lead to lay offs.
As a result it is imperative that Walmart and companies like it, vigorously fight against these isolationist moves. They should do this both through lobbying and through educating the public on the benefits of globalization.
Jordan, thanks for the post. I’m a fan of Walmart (personally) and a fan of their ELP strategy (as a student of business). Walmart was one of the first to figure out that “low prices” was not synonymous with “cheap.”
If we think of Walmart’s cost structure as a fixed pie, since I doubt they give away profits, they will be forced to compensate for increased costs elsewhere. While I’d expect to see some price pressure, I think Walmart’s first move will be to squeeze its suppliers. Similar to Amazon, Walmart is often referred to as “retail crack.” Suppliers are hooked on Walmart and their livelihood depends on it. As such, Walmart can pin suppliers and manufacturers against one another to drive down costs. This is an easier move than asking its beloved customers for more of their hard earned dollars.
Further, as more production gets shifted to the United States, it will be our American producers / manufacturers that subsidize Walmart’s higher cost profile.
All told, this “in-sourcing” rhetoric should be vetted by economists and scholars before becoming part of the political vernacular.
Jordan – very interesting article. I think you’ve highlighted an interesting tension between the benefits and costs of in-sourcing. I have a few issues with the notion that you raised in your last paragraph that sourcing domestically will be a net positive to US workers as they will benefit from job creation at the expense of higher prices.
First of all, I think that countries with a cost advantage in production should continue producing. The US would be better off having its workers be temporarily unemployed/displaced but trained and redeployed to more productive areas of the economy, which would increase their incomes without an increase in the cost of goods at places like Wal Mart. We see unemployment rates at ~4% right now (i.e. very close to full employment), so I’m not sure how big of an impact bringing jobs back to the US via domestic sourcing would have.
Additionally, not all Wal Mart shoppers are low income. I think that changing the supply chain in a way that increases prices would drive many shoppers to places like Target, where they can also get a better shopping experience for a slightly higher price.
Wal Mart’s reason for existence is its low prices, and any intentional change to its prices would be unwise in my opinion.
Lot’s of interesting points raised above. It seems like the bulk of the disagreement comes down to differing views on what responsibility companies have to better society versus to make money for shareholders. My thought on the subject is that, while it would be great if we could expect companies to care about their communities, broadly, it’s a much safer bet to expect them to try to create value for shareholders (while staying true to the legal bounds they operate within). Realistically, for better or (more likely) worse, it’s what they were created to do, and how they’re structured in the current system.
With that said, I don’t think that means we need to just throw up our hands and assume that we can’t influence companies to do things that benefit society. I’d argue that, if customer attitudes were changing – e.g. to the point that Walmart’s customers were willing to pay more for goods that they knew were manufactured under fair conditions or within the U.S. by U.S. workers (a future that’s not impossible, but which seems very far from the current world) – it’s conceivable that companies could be motivated to “do the right thing” not only for the warm and fuzzy feeling they’d get for doing so, but also for financial reasons that they could show to their shareholders. But in the meantime, I think it’s a stretch to try to convince management teams to make uncompetitive choices, or their shareholders to accept lower returns – at least until we get to a point where markets (or governments!!) reward firms for doing good.
While Wal-Mart may benefit from cheap overseas labor, I do not agree that relocating those factories and jobs to the United States is the most effective choice here. Foreign countries have a relative cost advantage over the United States when it comes to labor expenses and we can’t fault companies for taking advantage of those economic realities. Instead, Wal-Mart provides an enormous value to the United States consumer by providing desirable products at prices that consumers are willing to pay – their role in the economy is not to provide manufacturing jobs. Instead, the United States should leverage its other competitive advantages and push workers into those career fields.
It’s ironic how the people supposedly most helped by isolationism – the working class put out of their jobs by cheaper overseas competition – are also the ones who would suffer most from the increased prices they would have to pay as a result of fewer cheap imports. I like how you highlight this dichotomy in your essay. I wonder how digitization and automation factor into this equation though – if Walmart’s suppliers could replace much of its labor with automation, would the price benefit come back to developed countries?
Interesting analysis but I think the Trump administration trade-related threats are just that – hawkish signals to his voter base but (hopefully) unlikely to be put in practice due to the massive economic implications for our country and the global economy. While Walmart must pay close attention to these developments and continue its lobbying efforts, I’m not sure the situation calls for them to steer away from a labor cost advantage in China
A great write-up showing the tensions Walmart faces in balancing its customer promise and changing context. My view on this is that if a protectionist agenda is in fact pursued in a real way from Washington, all American retailers will suffer tremendously. Walmart is not the only company that benefits from cost arbitrage in Asia. In fact, many of the smaller retailers in America will find it nearly impossible to survive if they needed to source product from America. If anything, Walmart is in a good position to deal with these changes given its sophistication and talented procurement team.
As Jordan points out, customers are the real loser here. They will pay higher prices, eroding their standard of income. In terms of helping displaced workers, this is the most critical question our society faces in my opinion, and there is no easy answer. Ideally, training and education will help displaced workers enter new industries, but that is often a fantasy vs reality. One comment pointed to the low US unemployment rate, but we are also at record low workforce participation rates (https://data.bls.gov/timeseries/LNS11300000) as many displaced workers have given up looking for work. It is a real problem that must be addressed.
Interesting and very relevant article that discusses one of the most debated issues in politics today. Walmart was a great company to choose to focus on for this dialogue. In my view, Walmart would be one of the companies hurt most by isolationist policies given that price is their biggest differentiator. COGs is such an important input for the operations of their business, and anything that affects that has a potential to affect Walmart’s bottom line considerably.
I agree with Alex that Walmart needs to have a contingency plan in place if this does happen, to be sure they understand every possible scenario outcome. I’m sure this is something they are already doing, and would be curious what their mitigation plan would be!
I certainly agree with you that those who work hard (in many cases extremely hard) to make low-cost goods should benefit from the value they are creating. This is currently not the case in the US or abroad. You state “Walmart also should focus on American labor, bringing manufacturing into the United States and employing the people who buy their products – the everyday American customers, the people who technically are paying regularly so that the Walmart execs exist at all. ” I want to challenge that because I think that trying to create jobs is not necessarily the right answer. The right answer may actually be to automate all of retail with no-cashier stores (such as those that Amazon is piloting) and e-commerce. Warehouses too could be automated in many ways. That will be tremendously value-accretive financially and destructive in terms of jobs. One possible solution to the human emotional and financial cost is to provide a basic income. Experiments are underway in Finland as to the results of basic income. I think the real question will become to what extent do we want to use robots/technology to improve the quality of human life and how are we as a society going to distribute that value?
I agree with analysts that American job creation is low on Walmart’s list of goals. The reality of the job market in the US is that, even paying everyday low prices, the average American worker has a higher standard of living and therefore higher minimum wage than the regions where Walmart has outsourced its manufacturing. The US simply can’t compete on manufacturing costs while also creating manufacturing jobs here in the US. I worry that in trying to supply jobs in the US, Walmart will be forced to raise prices on the very people they are employing, making the newly employed not much better off.
I think your suggestion to provide education and technological training makes the most sense. I believe a more highly skilled workforce is the path toward economic strength, especially as automation threatens jobs in manufacturing. While Trump may be focused on job creation, I agree that Walmart would make the most impact educating (and continuing to employ) its workforce.
In general, I would agree that Walmart’s supply chain is at high risk if isolationist policy trends continue, given that a large portion of the company’s competitive advantage stems from globalized procurement and production. However, I actually think there could be a number of silver linings to the company if isolationism takes hold. First, isolationist forces could disproportionately affect low-end “internet only” global vendors that are competing with Walmart on price. Some of these vendors don’t even have physical store locations, just warehouses in cheap locations, so they are able to operate at cost levels comparable to those of Walmart. Since the majority of such players are based in non-U.S. economies, they would be weeded out via isolationism which could reduce the competitive intensity for Walmart. Second, Walmart could use the changes prompted by isolationism to rebrand itself as an American company, bringing jobs back here, which could help boost demand among U.S. shoppers. One key challenge as others have alluded to is that they need to think about the quality of the jobs that would be created if they moved more of their supply chain back to the U.S. since many run the risk of being low-wage, poor working condition roles. Therefore, while likely a net negative for Walmart long-term, isolationism may have some hidden benefits that are being overlooked.
Jordan raises important questions in her assessment of isolationist policies’ potential impact on Walmart, which relies heavily on foreign labor and goods to operate its business successfully.
While there are certainly risks associated with isolationist policy that may require Walmart to invest more in American employees, it seems unlikely that the company would have an incentive to take aggressive action until it is legally forced to do so. Walmart competes against other big-box retailers on the dimension of pricing, so it is disincentivized to be an early mover in hedging this isolationism risk.
Further, if the company believes Trump’s presidency will only last one term and his policies are not likely to endure, the board could make the case that taking action today would be too short-sighted. It may be wiser to focus on the long-term.
Thanks for your essay, Jordan. Below are some thoughts I’d like to add to this robust discussion:
You cite above that 1 in 6 American men are looking for jobs – do you have any visibility into what types of jobs these men are seeking? I wonder whether this unemployment statistic is reflective of a gap in the demand/supply for skilled labor (e.g., professional services that require some sort of advanced education) or for relatively unskilled labor (e.g., the type of work that Walmart would often be supplying). An important assumption you are making is that this supply/demand gap in jobs that you cite could be meaningfully mitigated by Walmart’s re-shoring of manufacturing capacity (meaningful enough, say, for its customers not to care that Walmart’s “everyday low prices” are no longer that low).
Leaving job creation out of the equation for now, as you pick up on above, the Walmart case is particularly interesting because American people (and many Trump supporters) shop at Walmart and are reliant upon its low prices, yet they also have subscribed to a political belief that re-shoring manufacturing capacity will “make America great again.” I wonder what these customers value most: the loyalty of Walmart to Trump’s calls for re-shoring (e.g., principle), or their pocketbooks (e.g., low everyday prices). I don’t think we know yet, but if Walmart were to re-shore, I suspect that customers would “vote with their dollars” and would be more willing to forgive Walmart for its outsourcing if it meant they would have more money in their pockets at the end of the shopping day.
One solution to this, of course, would be for Walmart to eat these higher labor and manufacturing costs, decreasing their gross margin while keeping costs low for American families. However, I don’t think this is realistic (and I know you don’t, either, based on your essay). There is a fundamental and problematic misalignment here among Walmart shareholders and management and the Americans that they serve. Is the government’s protectionist policy protecting the right stakeholder in this case?
Thanks for the great read Jordan!
The tension between people wanting these jobs and also needing low prices has been ellaborated really well. IF Walmart is forced to move its manufacturing to the US, I think they would need to scrape away at their bottome line in order to maintain EDLP. However, the long term plan would need to be to increase prices. One of the questions that I would struggle with is around the right communication to its consumers and also new employees. Communicating the learning of “You cannot have your cake and eat it too!” is easier said than done!
I also liked your thought around trying to strengthen Walmart’s position in these developing countries by spending time, effort and money on education and technological training. Along with the moral obligation, I almost think it is a competitive necessity with growing globalization.
Great article Jordan!
I think it’s very important for WMT to consider the implications of isolationist policy on their business model. It’s an interesting question regarding how a move away from foreign manufacturing would impact the bottom line. I’d imagine protectionist policy would require companies produce goods within the trade organization that they’re sold. This would take a great number of WMT to Mexico, or result in increased cap-ex as production becomes automated in the US.
The way in which WMT chooses to absorb/pass on these costs will be interesting. The company has acquired JET and Bonobos recently, each of which reduce they firms alignment with the “EDLP” slogan. These outlets maybe a destination for a pass through of the increased costs. If not, what is the consumers alternative? Isolationist policy that impacts WMT will impact every other retailer AMZN included, even if EDLP gets more expensive, it will still be EDLP and thats all the consumer cares about.
Very interesting article. I think it is interesting to push the argument further, though. In particular, I am imagining a scenario where Walmart indeed sources more products from the US, generating more American jobs but having consumers pay higher prices for the products they are buying today – is this a better outcome than what is currently occurring today? It is not clear. Consumers have benefited greatly from gaining access to cheaper products – their lifestyles have improved because of this. Giving this up for slightly higher incomes is a trade that does not seem like a clear choice to me.