The Power Of The Consumer

Wal-Mart is a company that many love and many hate. Some describe it as the classic example of how Capitalism can work, while others feel that it is an example of the problems with Capitalism. It seems that how we feel about Wal-Mart is based on our frame of reference. The fact is we the consumer have created Wal-Mart and if we want Wal-Mart to change we the consumer will need to push them to change.

I have taught a course on Business Ethics for several years now, and Wal-Mart is one of the companies that we will usually discuss. The topics will range from the large company driving small mom and pop stores out of business to the exploitation of its associates. Many people don’t realize the amount of money that Wal-Mart gives back to the community, and its heavy involvement in Students In Free Enterprise (SIFE).

The fact is, we have made Wal-Mart what it is today, and if we want it to change we need to vote with the power of the dollar. This is what economics is all about. This appears to be happening as “Local Grows On Wal-Mart.”
Probably the most efficient activity that Wal-Mart does is manage its supply chain. In order to provide low cost product to the consumer Wal-Mart will drive cost out of the supply chain. This puts an incredible amount of pressure on suppliers to provide their goods to Wal-Mart at the lowest price possible. Now Wal-Mart has been pushed to see the value of local suppliers of fresh food. The debate is around whether Wal-Mart just sees another way of making a buck, or are they responding to the demands of the consumer for community involvement and responsibility?

Wal-Mart is the largest grocer in the United States. They sell about $120 Billion dollars in food annually. Managers of stores are encouraged to purchase produce grown within 450 miles of local distribution centers, even if local produce is more expensive. The question is why are they doing this?

I think it is good management from both the cost and social responsibility  perspectives. I also think that Wal-Mart is choosing to do this because it is the right thing to do both economically, socially, and environmentally. By choosing to limit “food miles,” Wal-Mart is limiting pollution, while reducing diesel costs. By buying locally Wal-Mart is reducing spoilage which is more efficient.

Last year Wal-Mart made a promise to double its purchases of locally grown produce. Wal-Mart has also decided to remodel all of its stores to be sustainable. The question is why? I think all they are doing is responding to what the consumer wants, which means our system works. The invisible hand that Smith talks about in The Wealth of the Nations is consumer self-interest. If our collective self-interest is to purchase items with a moral minimum of social responsibility, then corporations will change to be in line with consumer demands. Sometimes we think we don’t have any power, but we do. Management will respond to the aggregate demand of “us.”

And that is my thought for the day!

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One thought on “The Power Of The Consumer

  1. I stopped shopping there years ago, and hope not to be forced (by a cruddy economy) to HAVE to go back. While I value the fact that Wal-Mart is making some changes, partly in response to pressures from groups like “Wake Up, Walmart”, my worldview has become highly critical of super conglomerates and monopolies of any kind. I firmly believe that the US is weaker after deregulation and anti-trust laws not being enforced, or even eliminated. Capitalism works best, IMHO, when there’s a somewhat level playing field and lots of competition, a scenario that is rapidly disappearing, except, perhaps with sports? The NCAA limits the number of scholarships a school can dispense, and even most pro teams have some sort ot salary cap to encourage some parity. My sense of social justice has a clause that suggests, “The wealthiest shouldn’t always WIN”
    PS I’d LOVE to visit Ireland someday, maybe even on my sailboat, “Shamrock”!

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