Black Friday at Walmart - Part 1

Walmart is a classic case of the chicken or egg question - its interpretative ambiguity a wonderful topic for economic discussions which will never know resolution, but interesting to discuss, nevertheless. And it appears to be a recurring topic, especially around Thanksgiving.

This year the headlines were about the Black Friday brawls at Walmart over towels that sold for less than a dollar ( and of course along with the news about the protests by Walmart Union workers, which we will talk about in Part 2) which led me to write this post. 

With over 10 million transactions on Black Friday alone, customers swept up over 2 million television sets, 1.4 million tablets, about 2 million dolls and over 2.8 million towels. Should we be thankful for Walmart and for its super sized discounts in a still (sigh)  faltering economy?

When we talk about wages and other cost saving techniques employed by Walmart as compared to its so called competitors Costco and Target, what we sometimes miss is the target segment that Walmart is catering to. Walmart primarily targets families with incomes less than $60,000 per year. For this customer segment 'customer care' or the 'shopping experience' is not all that important. Low prices- Always. Period. Why would you need highly motivated, smiley faced, customer friendly employees to run this operation? Costco does not have a layaway section, Walmart is planning to expand it's lay-away. Target does price match for select retail periods but is also looking for opportunities to move away from being a low end retailer - remember the Neimen Marcus line and the Missoni collection? 

I  think Walmart has a very unique and rather successful business model, which works especially well in economic downturns and no amount of union protests will cause them to change their strategy, because they still receive over 30 applications for each open job at Walmart and numbers don't lie, but then....

When I was little I used to say that I will never become a doctor, because a doctor can be rich only when everyone else was sick. It did not sound very right. Similarly Walmart makes profits when the economy is down, when people fight over towels that cost less than a dollar and when its employees are underpaid - in spite of the successful business model - something does not seem right here.  Does it?

But then again, what if no one wanted to be a doctor for the same reasons and there were no incentives for doctors to become the best at what they are doing, what if a cure for cancer will never be discovered, what if there were no vaccinations and flu shots, what if there was no research and no development in medicine, What if...?

I will leave you at that for this week, we will pick up with Part 2 next week. Hope you had a great Thanksgiving!