The Wal-Mart Effect: How the World's Most Powerful Company Really Works - and How It's Transforming the American Economy

“It is easy to get caught up in the fresh energy of Wal-Mart’s new environmentalism and its new openness. You can lose track of the fact that while Wal-Mart is changing in ways that are dramatic and important, the new Wal-Mart is in most ways the same as the old Wal-Mart.”

Fishman uses his own findings in order to craft a complex account of Wal-Mart’s true character and practices. Fishman doesn’t accept Wal-Mart’s new sustainability efforts as ready evidence that the corporation has changed. Fishman therefore maintains a critical stance and continues to hold Wal-Mart accountable.

“That very attitude is why the book that follows remains so important. Back in the 1970s and 1980s, who would have thought that Wal-Mart’s obsessive effort to keep prices low would have had unpleasant consequences? Who could argue against low prices? That most of Wal-Mart’s potential environmental impact comes not from changing its own operations, but from once again reaching back into its supply chain, into the operations of the companies whose product it sells, means that Wal-Mart’s influence in the United States and around the world is likely to increase, not stagnate or fade.”

In his Introduction to the 2011 edition of the text, Fishma argues that his original 2006 publication remains relevant to national and global understandings of the economy and the global supply change. The Introduction discusses the ways that Wal-Mart has amended its policies, but also considers the superficiality of these policies and thus Wal-Mart’s continued need to change.

“Wal-Mart has even changed the way we think about ourselves—as shoppers, as consumers. Wal-Mart has changed our sense of quality, it has changed our sense of what a good deal is. Wal-Mart’s low prices routinely reset our expectations about what all kinds of things should cost—from clothing to furniture to fresh fish. Wal-Mart has changed the lens through which we see the world.”

Fishman defines the Wal-Mart effect as the ways in which a corporation like Wal-Mart has the power to impact even the emotional, psychological, and philosophical experiences of its consumers. Fishman uses first-person plural pronouns in this passage in order to align himself with his reader and to suggest that he and his reader are part of the collective whose experience Wal-Mart dictates.

“I don’t actually shop at Wal-Mart, I go to buy things. I know what I need as I walk in the door, and I always work the same path through a particular kind of store—there are only a few different store layouts. My goal every time is to get through the place and emerge with the basic necessities we need without surrendering too much money, or too much time. […] In most Wal-Marts, getting from one end of the place to the other (baby products and health and beauty products for example, are often in opposite corners of the stores) requires determination, energy, a refusal to be discouraged, a certain wiliness, and a big-box sense of humor.”

Fishman incorporates his first-person experiences as a Wal-Mart shopper into his reporting in order to humanize himself and earn his reader’s trust. He employs a narrative and conversational tone that places him on par with his reader and reveals his intimacy not only with the Wal-Mart store but with family life and modern American retail culture.

“The wave of accusations and revelations about Wal-Mart’s workplace practices seemed to catch the public, and ostensibly the company, by surprise. What Wal-Mart’s senior management seems not to fully appreciate is that, in fact, those practices spring from the same source as Wal-Mart’s cost advantage over Target: an unrelenting focus not on profits but on controlling costs. Financial discipline, cost control, had become for some an excuse for exploitation and mistreatment. The virtue had morphed.”

Fishman adopts a more direct, assertive tone when describing the trade-offs of Wal-Mart’s dedication to offering low-cost products. Fishman doesn’t defend or sympathize with Wal-Mart when critics interrogate their corporation, because Fishman wants Wal-Mart to hold themselves responsible.

“‘No more children. I thought, What if I had two kids down here at the store in the stroller, and they went down the stairs?’ Windy wasn’t seriously injured, but Larry English stuck to the decision he made on the way to the hospital that Sunday. ‘She’s the only child I have, and that’s part of the reason. Did Wal-Mart run my family? Not really, but yes. You ate, breathed, and lived Wal-Mart. Out of a desire to be the best. It is a sacrifice.”

Fishman incorporates former Wal-Mart employee and manager Larry English’s account into his reporting in order to convey the sacrifices that Wal-Mart requires from its workers. English didn’t demand fewer hours or free childcare from Wal-Mart when his child was injured at work. Instead, English decided not to grow his family in order to devote himself more thoroughly to his job. His story is just one example that Fishman uses to underscore Wal-Mart’s hold over its people.

“The surest indicator of Wal-Mart’s failure to evolve is the wave of workplace problems the company is facing, the manner in which it handles them, and the way the problems can be traced back to the virtuous elements of Sam Walton’s original culture. Those values—hard work, cost control, discipline—remain admirable, and they are key to Wal-Mart’s success. We want companies that value hard work and thrift. But their application inside Wal-Mart today often looks much different than it did in 1965, or 1975, or even 1985.”

Fishman argues that Wal-Mart’s founding principles have not aged well over the course of the corporation’s evolution. Fishman doesn’t demonize Sam Walton’s primary philosophies, but he does hold that these philosophies haven’t translated well into the context of the multi-billion dollar company’s current retail status, and in fact have dangerous ethical implications.

“The story of Jonathan Fleck is a fairy tale. It’s an improved version of The Wizard of Oz—about a character, an innocent, who treks to the source of all power, pulls back the curtain, and is welcomed inside.”

Fishman uses the story of Jonathan Fleck and Makin Bacon as an anomalous example of suppliers’ relationships with Wal-Mart. Fleck is Fishman’s only representation of a positive supplier experience. Because he is an outlier in Fishman’s research, Fleck’s story doesn’t disprove Fishman’s surrounding arguments about the negative implications of supplying products to Wal-Mart.

“As the company has gotten bigger, its ability to reach deep inside the day-to-day operations of its suppliers has increased, has in fact become all but irresistible. And that is the most potent, least public, least well-understood power of the Wal-Mart effect: the impact Wal-Mart has in shaping the operations, the choices, the product mix of its suppliers. It is harder to discern, and much harder to get people to talk about, at the giant companies that service Wal-Mart, but it is also richer and more far reaching in those settings than in a tiny operation like Makin Bacon.”

Fishman’s inability to interview Wal-Mart suppliers reveals Wal-Mart’s historical opacity and resistance to exposing the truth of its corporate policies. Fishman therefore holds that Wal-Mart has intentionally disguised its internal operations in order to avoid scrutiny and criticism.

“In all the struggle—the drive for efficiency, growth, and innovation—it is possible to lose track of the ultimate point of the creativity and exertion, whether the product is spaghetti sauce, or white cotton briefs, or orange juice. During the early years of Sara Lee’s Wal-Mart team, when their basic apparel business with Wal-Mart was growing dramatically, what was actually happening in the business? Where were the hundreds of millions of dollars of ‘new’ sales coming from? Was Hanes taking market share in underwear and athletic socks from the competitors? Were people replacing their underwear sooner?”

Fishman argues that Wal-Mart’s precedence on low prices and increased sales leads to waste and carelessness. Wal-Mart’s relationships with suppliers including Ragu and Sara Lee directly correlated to the development of Action Alley, a store throughway that loads aisles with products still on their pallets. According to Fishman, this model dilutes the importance and necessity of the product itself and distorts the consumers’ and suppliers’ understandings of supply and demand.

“That’s the scary part of the Vlasic story: the market didn’t create the $2.97 gallon of pickles, nor did waning consumer demand or a wild abundance of cucumbers. Wal-Mart created the $2.97 gallon jar of pickles. The price—a number that is a critical piece of information to buyers, sellers, and competitors about the state of the pickle market—the price was a lie. It was unrelated to either the supply of cucumbers or the demand for pickles. The price was a fiction imposed on the pickle market in Bentonville.”

Fishman uses Vlasic Pickles’ gallon jar of pickles as an example of the Wal-Mart effect. The prices weren’t demanded by customers and were unrelated to farming production. Fishman thus cites the pickle promotion as evidence of Wal-Mart’s power over its suppliers and competitors.

“Said an executive at Dial: ‘We are one of Wal-Mart’s biggest suppliers, and they are our biggest customer, by far. We have a great relationship. That’s all I can say. Are we done now?’ Goaded a bit, the executive responded with an almost hysterical edge: ‘Are you meshuga? Why in the world would we talk about Wal-Mart? Ask me about anything else, we’ll talk. But not Wal-Mart.’”

Fishman incorporates his reporting obstacles into the text in order to provide evidence of Wal-Mart’s suspicious behaviors and dubious operations. The Dial representative refused to talk to Fishman, because they feared compromising their business relationship with Wal-Mart. This dynamic proves Fishman’s theory that Wal-Mart not only controls its suppliers, but hides the truth of its internal operations.

“The excitement of Wal-Mart and Levi notwithstanding—the new products have sold well, although Levi’s overall business continues to struggle—the whole exercise was disheartening, a confirmation of the discouraging aspects of the Wal-Mart effect, and the creeping irresistibility of the Wal-Mart economy. The ‘value’ line of Levi jeans are both inexpensive and cheap; they also turn completely inside out exactly what, for 150 years, has made Levi’s jeans so valued.”

Fishman cites Wal-Mart’s relationship with Levi Strauss of an example of how Wal-Mart’s low-cost preoccupation compromises the quality of its products. In order to meet Wal-Mart’s price standards, Levi’s had to alter the materials it used and thus betray its founding philosophies.

“Jim Wier looked into the future and saw a death spiral. So he pulled out. It’s one reason every Snapper product continues to be made in the factory in McDonough, Georgia, one reason Snapper products are still made in the United States. But Shane Sumners has to spur his factory on with the same tirelessness as if it were supplying Wal-Mart—the efficiency of every factory worker measured every hour of every day—because Wal-Mart is setting the pace, even if you're not working for them.”

Fishman uses Jim Wier and Snapper as examples of what happens when a supplier backs out of a business relationship with Wal-Mart. Wier and Snapper are as anomalous as Fleck and Makin Bacon in Fishman’s reporting and Wal-Mart’s story. This is because suppliers like Wier normally cannot afford to value their brand over their relationship with Wal-Mart, who is in most cases their biggest account.

“It seems like an obvious logical outcome: Incessant pressure to reduce the retail price of manufactured products, year after year, must eventually lead to cheaper materials or fewer features because at some point a company has taken the inefficiencies out of its operation, and has thinned its profit margin as much as it can bear. And yet it is virtually unheard of to hear any Wal-Mart supplier ever acknowledge that Wal-Mart’s pressure reduced the quality of any product.”

Fishman argues that the effects of Wal-Mart’s policies on suppliers are far reaching. Although he doesn’t give examples outside of Wier and Snapper to support his claim, Fishman holds that the Wal-Mart effect dictates that Wal-Mart’s policies impact all of its suppliers in the same way.

“These are classic Wal-Mart controversies: Does Wal-Mart put smaller retailers who carry similar merchandise out of business? Does Wal-Mart generate so much traffic that existing nearby stores actually do better with Wal-Mart’s arrival, at least if they don’t compete head on? Finally—and just for fun, presumably—Basker looked at whether the opening of a Wal-Mart had any measurable effect on retail jobs in neighboring counties.”

Fishman cites various economic and scholarly studies in order to better understand the true implications of the Wal-Mart effect. He incorporates questions into his writing in this passage, affecting the same open and inquisitive tone as the studies he’s referencing to formulate his arguments.

“It’s a complicated question, but for businesspeople, it is the essential question about Wal-Mart: Will doing business with Wal-Mart help my business or hurt it? It’s an important question for consumers too. Reasonable profitability is what allows companies to hire talented people, pay them well, do research and development, and roll out wave after wave of innovations.”

Fishman uses familiar, conversational, and interrogative language in order to maintain an open, exploratory voice. Fishman does make assertive claims throughout the text, but he is careful to incorporate questions like those above in order to give nuance to his tone and convey his desire for truth.

“Pizarro is thinking not of child labor in particular, but of the widespread public outrage when American shoppers connected clothing they were familiar with, a well-known personality, and sweatshop factory conditions. Says Pizarro, ‘Increasingly, the American consumer is aware of these types of working conditions, and the salmon is the same as the clothes. The only difference is, what is being produced by these workers is something the American consumer is feeding to his children.’”

Fishman’s conversations with Rodrigo Pizarro grant him insight into Wal-Mart’s impact on the global supply chain. Pizarro reveals how hostile the work environment is in Chile’s salmon farms and factories, and he expresses his surprise that American shoppers continue to buy their product.

“In fact, the lawsuit goes a step further. The problem isn’t callous, greedy, and inhumane factory managers. ‘Wal-Mart is itself the reason for the inhumane conditions,’ the suit alleges. ‘It uses its vast market power to insist on low unit prices that are possible only if workers are squeezed to such an extreme degree that they can barely survive the long hours and low wages they are forced to endure.’ Wal-Mart’s insistence on low-cost merchandise, the lawsuit alleges, ‘makes it impossible for suppliers to comply with even the most basic laws where they operate, including wage and hour laws.’”

Fishman cites this 2004 lawsuit against Wal-Mart in order to argue that Wal-Mart has been exempt from legal accountability. In spite of the lawsuit’s damning allegations, Wal-Mart did little to amend its unethical workplace practices.

“Southwest Airlines isn’t just cheap, it’s fun. Wal-Mart isn’t just cheap, it’s joyless, when it’s not downright vexing. Wal-Mart takes its duty to lower prices so seriously, there’s no room for any other attitude, for them or us, except duty. Even without doubts about wages, suppliers, local business, American jobs, and quality, Wal-Mart has done such a superb job of austerity from start to finish that austerity is all that’s left.”

Fishman compares and contrasts Wal-Mart to Southwest Airlines in order to illustrate the unprecedented nature of Wal-Mart’s corporate policies, business model, and company culture. While Southwest and Wal-Mart offer similarly affordable prices, their primary difference is their level of self-awareness. Fishman argues that if Wal-Mart were more like Southwest, they would receive less criticism and engender more trust from their suppliers, workers, and customers.

“Wal-Mart has no way of thinking about style, of effectively adding fashion to the frugality equation. Style is just like salmon or factory working conditions abroad. It involves adding costs back into the system for something intangible, something almost immeasurable. In the case of style, it’s adding costs back in to get something fashionable.”

Fishman cites Wal-Mart’s 2005 advertising campaign in Vogue to argue that Wal-Mart’s low-price model isn’t sustainable. The company has thrived for decades on this model, but their Vogue ads reveal Wal-Mart’s attempts to rebrand itself in order to boost sales and growth. This is just one example illustrating Fishman’s claim that Wal-Mart’s founding philosophies have not aged well.

“The behavior of a boy that is charming, or at least harmless, when he is four years old is inappropriate when the boy is fourteen. When the boy grows to the size and power of a twenty-four-year-old NFL linebacker, the four-year-old behavior would be worse than inappropriate, it would be dangerous, perhaps even hostile.”

Fishman uses this metaphor in order to argue that Wal-Mart’s founding principles, policies, and philosophies are both irrelevant to its current size and dangerous to its current clientele and market. Wal-Mart’s mission may have been clever when it first opened, but Fishman holds that in light of its current global reach, it can no longer operate under the same principles.

“The most certain way to avoid a warped debate, of course, is to have at hand for everyone a wealth of data, of information, of analysis. Markets, market economies, democracies, even individual industries like the world of snack cakes all require information to work, and they work better and better—for everyone—the more information they have.”

Fishman demands transparency, action, and change from Wal-Mart at the end of Chapter 9. He places this call to action directly after he presents excerpts from Lee Scott’s 2005 letter to Americans. He is therefore addressing Scott’s words specifically, while arguing in defense of the collective over the singular corporation.