Walmart: The High Cost of Low Price

I recently watched a documentary on the business practices of Walmart titled, "Walmart:The High Cost of Low Price." After watching this, I most likely will not shop there again. I recommend this documentary to anyone who enjoys, well, documentaries and hates the economy right now.

The documentary starts off talking about what happens when a Walmart enters a community. What occurs is the same thing that happens anywhere when a new chain store or restaurant comes into a city or town. People flock to that one area and they do great business while the other businesses revenue drops. Most of the time, however, people get tired of the new chain and business goes back to normal at these smaller places. That is not the case with Walmart. Walmart continues to do business. Walmart comes into a community with promises of new jobs and bringing in more money to the town. For the first month, maybe a year, this is true. That is until the other smaller businesses finally lose all hope and shut down. Family businesses that have been around nearly forever are forced to close because of Walmart. Since I am taking a finance course in my Masters Program, I know that this is just business. The better business comes out on top. The problem here is that there are two losers, the owner/ workers of that small business and us, the consumer. When these small businesses go out of business, we are losing something valuable. Walmart employees are not trained on the items that they are selling. If you ask anyone a question at Walmart, they read the same tag that you just read or go in the back and look up the item online. If you go to a garage and ask a question about a part or product, they will give you an real answer because they have actually used the item. You lose the knowledge of the product when you switch to Walmart. You also lose the quality. Walmart is known for how cheap they can buy items for so they can keep their prices low. It does not matter if the product works or not because they get get thousands of the same item and do not care if a few work or not. Small businesses cannot afford to sell bad products. When you buy from a small business, you are buying quality because the small business cannot afford to sell bad products (there are exceptions to this but those companies do not last long). Walmart's, and other chains, have a Customer Service area for customers to return items. This should be the first red flag. If there is an entire area devoted to returning items, that means that the company knows they are giving you crap. They are prepared for the customer to return items, they expect it. They know that their employees either sold you a defective item or an item that you really did not need. They do not care because they make it easy for you to return the item to ensure that you keep coming back. By shopping at Walmart you lose quality products and service. You cannot blame the hourly employees for their lack of knowledge though. Most of these employees have very little training. Former employees stated that they watch training videos discussing customer service and how the store operates. The guy who helps you in the electronics area was probably working in the household items area the day before. He has no idea what he is talking about. If you ask him for a recommendation, he will most likely tell you that Apple products are better and that Sony has the best televisions. This will be based on the fact that everyone likes the IPad or IPhone and the Sony television looks the brightest to him.

The documentary continues with the employees. Walmart Hourly employees make a grand total of about $13,000 a year. That is below the poverty line. This works to Walmart's advantage. Not only do they pay these employees little to nothing, but most of these employees spend their money at Walmart. These employees cannot afford to shop anywhere else. Walmart Hourly employees also work about 60 hours a week. This is because all hourly workers work overtime. They do not get paid overtime though. Most of the managers tell the hourly employees that there is no overtime money so they cannot pay them overtime but need people to work late because of the amount of work left to do that day. This is illegal. you need to get paid for every hour you work. So how come nobody says anything about this? The employees are scared. Since most of these employees are below the poverty line, they need this job. Walmart managers are constantly hiring to scare the employees into thinking that they will get fired if they do not work unpaid overtime hours. At $13,000 a year, these employees are living paycheck to paycheck. They cannot afford to be fired. Nor can they afford an attorney if they decide to sue Walmart for firing them. They lose either way. 

The other issue with Walmart and its employees is the benefits. Walmart has a great insurance plan for its employees. Everyone gets the same benefits at the same cost. That is great except the hourly employees cannot afford it. One hourly employee stated that she was getting $75 taken out of every paycheck for health insurance for her children. That leaves her with less than $10,000 for the year. This employee stated that employees have to decide if they want healthcare or food. Another former employee said, "There’s no where around that there’s a company that makes this much money and still turns around and makes their associates go to the state for aid.” The documentary then goes on to show how much money employees get from state aid. One example is that in Massachusetts 4,172 Walmart workers and dependents are on state healthcare.

Walmart also costs the state money in other ways. Walmart is given subsidies to build their stores in certain areas. Walmart has been given over $1 Billion to build their stores. They create bidding wars between towns so they can get more money to build these stores. Towns are paying a billion dollar corporation to build stores in the towns. Meanwhile, these small businesses are given no money to keep their store running and are forced to sell their business. The problem does not stop there for the store owner. The price of all businesses drops significantly once a Walmart comes into town. Not only does the company lose value, but so do the buildings. These store owners are left with nothing. Most times there is not sale of a business or the store itself. The business shuts down and the building is left vacant. You would think that Walmart could not get any worse. It does. Since Walmart creates these bidding wars between towns, sometimes they get a better offer late in the game. There have been times where a Walmart has been completely built, and then another town offers more money. Walmart then says here is your money back, we are moving. These Walmarts stay in the area though. They will move a couple of miles down the road. An example is Cathedral City Missouri that gave Walmart $1.8 Million to build a store in their town. Walmart then backed out last minute and moved their store 2.2 miles to the city line into a town that offered them more money. Now this town is left with a huge, empty store that cannot be used for anything else. Now the town has to decide if they want to have a vacant, half finished Walmart standing there or use the money that it paid Walmart to build, to now knock it down. According to "Walmart: The High Cost of Low Prices", there are 26,699,678 square feet of vacant Walmart stores (2004). 

There is an entire section that talks about overseas business and how Walmart treats their factory workers. I will not get into this topic because we all know how these workers are treated. I will provide a little insight as to how these workers are treated. Walmart factory workers are given an option on where to live. They can live in the factory dorms or live off site. All workers pay a "dorm fee" but if you live off site you do not have to pay for utilities. If you live in the dorms you have to pay for every item you use and how much you use. Everything has a meter. Most workers work a 12 hour shift but get paid for 8. This would be at minimum wage but since most Asian countries do not have minimum wage, Walmart pays them as little as they can, and Walmart can go pretty low. Workers are then threatened into lying to health inspectors. 

Walmart is also known for how secure their store is. In each store there is about 200 cameras and four security personnel. Their parking lots are not safe at all. 80% of all crimes at Walmart occur in the parking lot. That means that you are more likely to be robbed than Walmart. As soon as you purchase an item at Walmart, Walmart has no care for you. Walmart parking lots have been the place of murder, child and adult abduction, rape, assault, molestation, mugging, and theft. Walmart was brought to trial and it was discovered that Walmart had done a study as to how much crime would drop if they had security patrol the parking lots. I was discovered that at that particular Walmart, the crime rate would drop to 0. Walmart tried to hide this information so they would not need to pay for extra security.
Walmart has also, in the past, talked about how caring their employees are by advertising their work with charities. The Walton family, Sam Walton is the founder of Walmart and Sam's club, has donated less than 1% of their billion dollar fortune. Sam Walton's wife and 3 children each have an estimated $18 Billion. Walmart has a fund for Walmart employees who need assistance. Employees are able to donate directly out of their paycheck. These employees raised over $5 Million for this fund. The Walton family, as a whole, donated $6,000. To put that into perspective, if the Walton family donated 1% of their fortune to this fund, it would cost them $180 Million. 1/10th of a percent would be $18 Million. 1/100th of a percent would be $1.8 Million. Bill Gates has donated over 58% of his fortune to charities. 

So, I will not longer be shopping at Walmart. The way that they treat their employees and the communities that they are in is enough for me to spend the extra money to shop elsewhere. I encourage you to watch this documentary and make your own opinion on the topic.