March 7, 2005

NYTimes Paean to Wal*Mart

If you live long enough, you really do see it all. David Akst writes a story on Wal*Mart that is not apocalyptic and the Grey Lady publishes it.

These investors must be charitably minded because they aren't the main beneficiaries of Wal-Mart's business.

For several years now, the shareholders, who have more than $200 billion tied up in the company, have not done especially well. Since the end of 1999, Wal-Mart stock is off 23 percent, while Target is up 43 percent and Lowe's is up 95 percent.

The big winners during this period were the juggernaut's customers, who gained by having Wal-Mart drive down the price of consumer goods. Assuming that Wal-Mart investors are more affluent than its shoppers, the system offers a progressive transfer from rich to poor - from capital owners to less prosperous American consumers and hard-working Chinese factory hands. It's like Robin Hood, only with parking.
It's tempting to say that some of the benefits to shoppers come at the expense of Wal-Mart's roughly 1.2 million employees, but it's a tough case to make. Many Wal-Mart employees presumably can't get better jobs; if they could, they would. By continuing to work at the chain, they are showing that they prefer the jobs they have to no jobs at all. If Wal-Mart vanished, in fact, they would be in big trouble indeed.
If you don't have much money, Wal-Mart is a godsend, and, in a way, that's the trouble. Wal-Mart's hold on its shoppers is largely mercenary, and therefore tenuous. To me, shopping at Wal-Mart feels like a chore, and Sam's Club is better only if there's no Costco nearby. In other words, I think the juggernaut is vulnerable. It may well be, for the foreseeable future, that it's smarter to buy stuff at Wal-Mart than to buy stock in Wal-Mart. The stock may or may not be a good deal. The stuff is a sure thing.

I hope some of the activists who succeeded in depriving the folks in Queens of the price, selection, and job opportunities that a Wal*Mart would have provided see this.

Boy, Bush was right and Wal*Mart isn't completely evil. Tough days for the Times...

Hat-tip: Virginia Postrel

On the web Posted by John Kranz at March 7, 2005 6:27 PM