Wal-Mart: the Scourge of the Retail Industry

[emaidel]

I hate Wal-Mart. I refuse to shop there. And, I hope they go out of business, and the sooner the better.

That's pretty nasty stuff, but I have a sound basis for my seemingly narrow-minded opinion of this retail giant. Please read through the following scenario, and then realize, as I will explain at the end, that it's not as far-fetched as it seems.

Let's assume that I've done a great deal of research, and have designed a radically-new automatic coffee maker that I call, "Ed's Coffee Pot." Ed's Coffee Pot has a series of unique, patented designs that allow it, at a retail price of $99.95, to outperform all others at, or above that price point, and as such is a "value" at that price.

I print out a price sheet and the dealer cost for my coffee pot is $75. Most retailers aren't satisfied with only a $25 profit, so I structure a series of different programs and promotions, and offer prompt-payment discounts, all of which results in a bottom-line price (to the dealer who pays me on time, and takes advantage of my "specials") of $50.

Now that dealers can double their money, Ed's Coffee Pot is an attractive purchase, and it goes on to be a huge success. As I can't possibly sell my coffee pot to all the thousands of independent retailers across the country by myself, I hire a series of manufacturer's representatives (reps) to sell it for me, and pay them a 5% commission to do so. And, all of this was planned for from the start so that I could afford to have dealers pay me $50 and to pay 5% commission on top of that. I'm hugely successful with this item, and sell 15,000 of them a month, generating significant, profitable volume for me.

The success of my coffee pot doesn't go unnoticed, and Wal-Mart calls me up and "invites" me to their facitilty to discuss a "unique business opportunity." As Wal-mart's no dummy, they've done their homework, and know what dealers are paying for this coffee pot, and that I also pay rep firms a 5% commission. Wal-mart flatly refuses to do business with manufacturer's reps (this is a known fact) and wants that commission deducted from the purchase price. Ultimately, they tell me that they will pay me $35 for my coffee pot, and not a penny more.

But they save the best for last: they'll buy 15,000 of them a week. Now, I have quite a decision to make: do I walk away from the opportunity to quadruple my buiness by selling Wal-Mart, or do I say, "No."

Ultimately, I agree to Wal-Mart's proposal, and in order to meet the increased production needs, expand my manufacturing facility and staff to keep up with the demand. In the meantime, Wal-Mart sells my coffee pot for $69.95 - $30 less than anyone has sold it before. Consequently, my existing dealer base all tell me to essentially, "go take a hike," since they can't afford to match Wal-Mart's price, and I'm stuck with only one customer: Wal-Mart.

Then the worst happens: my cost of goods goes up as a result of factors entirely out of my control (rising petroleum prices, which affect the cost of plastics), and a variety of other possibilties. I have no choice but to advise Wal-Mart that I can no longer afford to sell them my coffee pot for $35, and have to raise its price to them to $45, or I'll have to go out of business. Wal-Mart flatly refuses to pay the price increase, and I'm stuck with no one to sell my coffee pot to, as my original dealer base of independent retailers has walked away from me for doing busines with "the devil," and doesn't trust me any more.

As a result, I'm forced to declare bankruptcy, shut down my manufacturing facility, and put hundreds of workers out of work. If you think this is a ridiculous scenario, think again: this is precisely what happened to an Ohio-based manufacturing plant for Rubbermaid!

Add to that the fact that Wal-Mart employees are paid poorly, forced to work overtime again and again, and given truly lousy health benefits, while the top management of the organization wallows in money, and lots of it. Then there's Wal-Mart's deliberate intention of putting competing retailers out of busines, putting the employees of those retailers out of work, and then offering employment to those people at significantly reduced wages.

What a wonderul place Wal-Mart is.

[topspeed]

Certainly, if you don't want to shop at Walmart, for whatever reason, that is your perogative. I don't shop there, not because of their business practices, but because I can't stand going in there. It's like being in the middle of a cattle stampede.

That said, you can't blame Walmart for the above scenario. Why?
1) They didn't cause the price of petrol to increase
2) They didn't say they would pay for the increase in hard costs to the manufacturer
3) Legally, they only have to pay what they contracted to pay.
4) *Most Importantly* They didn't force the manufacturer to sign that very contract!

The manufacturer has to know going in that the contract terms are going to destroy any good will he has created with his reps. He consciously made the decision to do so in favor of the larger sales potential and marketing opportunities that WalMart provides. Remember, WalMart is in the business of providing goods at the absolute lowest costs to their clientele. They are not there to ensure profitability to their suppliers. That's the supplier's job. If they can't do it, where does that become WalMart or their customer's problem?

Whereas one can easily see this as ruthless, I'm sure Walmart's customers see it in an entirely different light. After all, do you think Walmart would absorb the additional $10 or pass it on to the consumer? One man's predatory practices is another's consumer protection.

Welcome to the wonderful world of business.

[emaidel]

We are clearly on different sides of the fence on this one, but I don't buy your argument. For one thing, Wal-Mart entices a manufacturer with an amount of business unattainable with existing distribution, and that's difficult for most manufacturers to turn down. I've been on the manufacturing side of the audio industry for over 30 years, and know how hard it is to tell Circuit City, or Best Buy that I don't want their business.

Retailers and manufacturers rarely enter into "contracts" with one another, unless a proprietary product is being built exclusively for that retailer. Otherwise, an "agreement" is usually all that's done, and no manufacturer in his right mind would ever enter into such an agreement with the clause, "there will never be any price increases. Ever." Just about every company I've ever worked for in my career has had a price increase at one time or another, and despite the initial dealer balking, all eventually paid the higher price, and raised their selling prices accordingly. In fact, whenever there was a price increase for any of the companies I worked for, the "suggested retail" went up accordingly, so that the dealer margin remained the same.

In the case of Rubbermaid, there were four items sold to Wal-Mart at razor-thin margins, but in huge quantities, dwarfing the previous manufacturing requirements for the business done with Rubbermaid by independent retailers. When the cost of the resins to manufacture the rubber in these four products went up, and Rubbermaid could no longer afford to sell them to Wal-Mart at the prevailing prices, Wal-Mart just decided on its own that it simply wouldn't pay the price increase. Like everyone else, all they had to do was raise the retail price to maintain the same margin, but Wal-Mart just flatly refused to budge, expecting to just weild its power and have Rubbermaid "eat" the price increase themselves. Wal-Mart didn't replace these items with some cheaper units from someone else - they just stopped buying them from Rubbermaid, and the Rubbermaid facility, all but totally dedicated to manufacturing these items in sufficient quantity for Wal-Mart's demands, shut down completely, and thousands of workers lost their jobs.

In the example I used with "Ed's Coffee Pot," Wal-Mart simply had to raise its selling price from $69.95 to $79.95, and they would have kept the same margin, and I could have continued to build those coffee pots. By refusing to pay the increased price, they just put me out of business instead. This isn't just "the world of business." This is the world of "doing business with Wal-Mart." And it stinks.

[Feanor]

.... This isn't just "the world of business." This is the world of "doing business with Wal-Mart." And it stinks.

"Monopsony" -- definition: situatution of a single buyer with many sellers; the opposite of monopoly. Although the Wal-Mart situation isn't quite a strict monopsony, the fact is that this retailer is so relatively large that they can deal differently and more severely than other buyers. Monopoly and monopsony aren't healthy situations, and if you deal with them, you deal with the devil.

[topspeed]

We are clearly on different sides of the fence on this one, but I don't buy your argument. For one thing, Wal-Mart entices a manufacturer with an amount of business unattainable with existing distribution, and that's difficult for most manufacturers to turn down. I've been on the manufacturing side of the audio industry for over 30 years, and know how hard it is to tell Circuit City, or Best Buy that I don't want their business.

It is tough, I understand that. However, no one is holding a shotgun to your head to sign on the dotted line. It's not like Walmart suddenly created the concept of Purchasing Power. This has been going on forever. GM is notorious for killing their suppliers because they buy millions of parts, not thousands. Centex, the second largest home builder in the country, purchases their lumber by the trainload (instead of truckload) and is able to sell homes at lower prices than your local builder. Nothing new there.

Retailers and manufacturers rarely enter into "contracts" with one another, unless a proprietary product is being built exclusively for that retailer. Otherwise, an "agreement" is usually all that's done, and no manufacturer in his right mind would ever enter into such an agreement with the clause, "there will never be any price increases. Ever." Just about every company I've ever worked for in my career has had a price increase at one time or another, and despite the initial dealer balking, all eventually paid the higher price, and raised their selling prices accordingly. In fact, whenever there was a price increase for any of the companies I worked for, the "suggested retail" went up accordingly, so that the dealer margin remained the same.

Right, they passed it on to their customer. WalMart won't do that. They have the purchasing power to not have to. Besides, you can bet there are other suppliers lined up out the door if the one ahead of them fumbles the ball. It's called competition, and our entire economic system is based on it. You can't condemn them for protecting their image and customer base.

In the case of Rubbermaid, there were four items sold to Wal-Mart at razor-thin margins, but in huge quantities, dwarfing the previous manufacturing requirements for the business done with Rubbermaid by independent retailers. When the cost of the resins to manufacture the rubber in these four products went up, and Rubbermaid could no longer afford to sell them to Wal-Mart at the prevailing prices, Wal-Mart just decided on its own that it simply wouldn't pay the price increase. Like everyone else, all they had to do was raise the retail price to maintain the same margin, but Wal-Mart just flatly refused to budge, expecting to just weild its power and have Rubbermaid "eat" the price increase themselves. Wal-Mart didn't replace these items with some cheaper units from someone else - they just stopped buying them from Rubbermaid, and the Rubbermaid facility, all but totally dedicated to manufacturing these items in sufficient quantity for Wal-Mart's demands, shut down completely, and thousands of workers lost their jobs.

That's too bad. Seriously. The employees should storm the mansions of the moron CEO that signed the contract. He/She was the idiot that didn't build in enough cushion for changes in their cost structure. Blame them, don't blame WalMart.

In the example I used with "Ed's Coffee Pot," Wal-Mart simply had to raise its selling price from $69.95 to $79.95, and they would have kept the same margin, and I could have continued to build those coffee pots. By refusing to pay the increased price, they just put me out of business instead. This isn't just "the world of business." This is the world of "doing business with Wal-Mart." And it stinks.

Don't do business with them. Businessmen are big boys and know what they are getting into. If they can't handle the competition, get out.

[emaidel]

[QUOTE=topspeed]

Right, they passed it on to their customer. WalMart won't do that. They have the purchasing power to not have to.

You say this as if someone (namely, the supplier) should swallow any and all price increases. Sorry, I don't now, never have, and never will agree.


Blame them, don't blame WalMart.

Oh, but I do.

I get the suspicion that you've never worked for a manufacturer. that's OK for sure, but I have, and know what it's like to deal with so-called "power retailers." Some make extraordinary demands, but accept the realities of the marketplace, such as occasional price increases. The fact that Wal-Mart doesn't is by no means a badge of honor for them. It's only a sign of their ruthlessness.

QUOTE]

[PAT.P]

Sorry guys but I shop at Wal-Mart and dont really care what anybody says.If other retailers cant compete with them and it's to hot in the kitchen ,,just get out.There many people that rely on them for employment and if on a budget a good place to save.Wal-Mart also help alot of charity.

[paul_pci]

Sorry guys but I shop at Wal-Mart and dont really care what anybody says.If other retailers cant compete with them and it's to hot in the kitchen ,,just get out.There many people that rely on them for employment and if on a budget a good place to save.Wal-Mart also help alot of charity.

Sorry, outright manipulation and predatory business behavior is not competiton. If you don't believe me consult a dictionary.

[topspeed]

You say this as if someone (namely, the supplier) should swallow any and all price increases. Sorry, I don't now, never have, and never will agree.

That's fine, I'm not asking you to agree and you certainly are allowed to your opinion. Lemme ask you a question: Say the supplier figures out how to dramatically decrease his costs either through techology, new labor contracts, or whatever...is he now expected to reduce his price to Walmart so they can pass the savings along to their consumer? All other market factors being equal, how often do you think that would actually happen?

I get the suspicion that you've never worked for a manufacturer. that's OK for sure, but I have, and know what it's like to deal with so-called "power retailers." Some make extraordinary demands, but accept the realities of the marketplace, such as occasional price increases. The fact that Wal-Mart doesn't is by no means a badge of honor for them. It's only a sign of their ruthlessness.

I never said they were nice guys . I would only question the validity of applying Mom n' Pop idealism to big business.

[EFE Speakers]

Thus the reason why I keep my business small! I can keep my cost down, offer a quality product at a competitive price and not worry about someone outside of my control dictating my production. Every company that desires to expand has had to face this problem, once they take the step to increase production, there is no turning back because of the large investment it takes. Getting in bed with the big discount retailers can be very tempting and make a manufacturer very rich very fast, but it can also make the owner of that company get gray hair before his or her time also!

Not in all fields but in audio particularly, many manufacuters who care about their reputation and product won't consider selling to big retailers, they use particularly hand picked smaller dealers and protect them by avoiding selling to the discount stores. Then there are the companies who cut out retailers all together and sell direct via the internet, they have their advantages and disadvantages. The advantage is, they can usually offer their product at a better price by cutting all the middle men out, a benefit in price to the consumer. The disadvantage of course is not having showrooms to demo, but some offer the 30 day trial to overcome that negative.

The bottom line in my opinion is, competition is getting greater and more fierce and big corporations are trying to squeeze the little independent stores out of existance. The small manufacturers have to figure out a way to compete, and I believe they can by keeping their overhead as low as possible, producing a quality product at a competitive price and giving personal attention to all their customers, something big manufacturers do not and cannot do! I believe this is how America was built in the past and it can still work if greed and the desire to get rich are put aside and replaced with good old fashion business ethics from the past - "the customer is our main concern!"

A few years ago I was offered a deal by an independent retail audio store who wanted to sell one particular model of my EFE speakers. I would have had to sign an exclusive contract with him but he guarantied to buy more speakers than I presently sell direct to customers. It would have been a big financial gain for me and him, but to the customer it would have almost doubled the price of that particular speaker. I had a choice, more money in my pocket or less money but happier customers??? Those familiar with EFE TECHNOLOGY know there are no retail stores to this day that sell my speakers and as long as I'm in business there never will be. The particular model I spoke of is my T-36 MTM tower, it sells for $1590pr. I was offered that actual price for the exclusitivity to this dealer, in turn he would have marked it up to almost $3000pr, and he felt he could sell tons of them to his clientele world wide. He probably could have, but that would have eliminated myself from selling one of my most popular speakers to customers who in no way would be able to afford them at his price point, I couldn't do that to customers and it went against my whole business philosophy that I built my company on!

Some of you may remember gas stations back in the 1960's and older? They had attendants who came out to your car, filled your tank, checked under your hood and even your tire pressure if requested. They didn't require tips and that kind of service was the norm. Oh yes, and gas was $.23 to $.29 a gallon! ) ;

What do we see today? Impersonal drive up to the pump stations, get out and pay a person usually in a bullet proof shed, fill up and then drive out. Why is this? Because it is cheaper for the gas station to operate, they can make more money and that is all they care about! The only thing the customer represents to them is the almighty dollar!

Here in Arizona there is a project under way and planned to be finished within two to three years. The entire development has a theme going back 50 years, it will consist of an old fashion gas station with service attendants once again, several old fashion car dealers with a number of historical cars and their history up to date, recreational vehicles and a complete theme park for the family. To visit this development will be like going back in time. The project has rich and famous investors from all over the country and it will take people back to what America was once like, a time and place that many have fond memories of.

I know from personal experience over the last ten years, many people still like personal attention from businesses they support. They still demand a good value, but once they receive that old fashion attention as aforementioned, the less they desire to deal with the big boys who only count them as a number. I can completely relate to the original posters feelings and understand how the business world all around us is changing. I think the oil companies are a prime example of corporations monopolizing the market and then sucking the life out of Americans! Unfortunately we don't have any choices with that product other than the five major suppliers who supply all the gas to every station in the country. They've succeeded in controlling the market and our useless government is in bed with them! Fortunately, in other fields of business we still have lots of competition and the consumer has the power to "choose" what he or she feels is still a good value and a good company to deal with, that's the American way! Sorry for rattling on so long.

EFE TECHNOLOGY Speakers
Ed Frias

[kexodusc]

There's a fine line between competitive business practices and extortion. Wal-Mart walks that line as well as anyone.

The unfortunate reality is that Wal-Mart can't be blamed for behaving as they do, protecting their margins by nickel and diming suppliers is their nature. I can't believe anyone in America, or the world for that matter, is still oblivious to how Wal-Mart operates. The manufacturers have a responsibility to themselves too. It's easy to blame Wal-mart for acting how they do, and they are ruthless, but that's the game they're in.

It's not all peaches and roses for Wal-Mart. Companies that size are absolutely dependant on profitability and sustainable growth. Wal-Mart has an added dynamic in that the business they are in is typically one of low-margins and low profitability. Being cheap and tough is the only option they have to survive. Wal-Mart isn't a charity. If they slip up, things can go sour really fast.

Funny thing is, a few decades back America was worried about K-Mart and the likes as well...As Topspeed pointed out, the world largest company, General Motors, is a notoriously ruthless partner to its suppliers. When competition gets fierce, that's always been their last stand. Aside from the lousy cars they've made the last 2 decades or so, their business model is similar to Wal-Marts in that they'll either make a lot of money or lose a lot of money. It forces them to use their size to squeeze the suppliers and the competition. Now they're on the verge of bankruptcy...it happens fast.

In the case of the small suppliers getting squeezed, well, eventually the market will wisen up, and Wal-Mart will realize nobody wants to do business with them...then they'll be forced to choose between being better partners with suppliers or lose a lot of products. I'm positive they'll have strong direct competition someday, too. No empire lasts forever.

[emaidel]

This has turned into an interesting "off-topic" thread with people on opposite sides of the fence, and no straddlers in the middle. With all that's said and done, I still refuse to shop at Wal-Mart, find their treatment of their suppliers inexcuseable, and am thoroughly disgusted at their claim for the "lowest prices" all the time, when that's just not so. Their employees are paid poorly, are often forced to work overtime and get lousy health benefits, yet the top execs are filthy rich.

One might make the argument that "no one forced anyone to work there." That may be so, but when Wal-Mart enters a market, and puts other retailers in that market out of business, and then offers those out of work due to their stores having closed a new job, but at a much lower salary, I simply can't see any good to that. Wal-Mart claims they "have" to pay their people poorly in order to keep prices low. That's absolute B.S.! Their margins are as great, or much greater, than anyone else's.

Lastly, does anyone remember how Wal-Mart used to proudly proclaim, "Buy American!" all over the place, when just about everything in the stores at the time was made in Korea? (Today, it's China.)

[GMichael]

I'm on the fence but haven't posted till now. I've just been reading.

I worked at a large company for many years and have seen how we pushed the little guys around. At times, I was embarrassed. But I have also seen how much extra crap large companies must deal with. Taking a hard line is sometimes the difference between just making it and just failing. Sometimes, business sucks.

[topspeed]

Some of you may remember gas stations back in the 1960's and older? They had attendants who came out to your car, filled your tank, checked under your hood and even your tire pressure if requested. They didn't require tips and that kind of service was the norm. Oh yes, and gas was $.23 to $.29 a gallon! ) ;

I still have a full service station near my office. Gas is about .05/gal more expensive, but when your windshield is splattered with bugs...like right now...it sure is nice to have someone else scrape that crud off the screen. Ugh, I hate this time of year. Not because of the weather, but because it's impossible to keep my car clean !

I know from personal experience over the last ten years, many people still like personal attention from businesses they support. They still demand a good value, but once they receive that old fashion attention as aforementioned, the less they desire to deal with the big boys who only count them as a number.

Exactly. I already mentioned I don't shop at WalMart. Whenever I can, I like to keep my money local and buy from locally owned stores. I buy relationships, not products.

[shokhead]

Ma and Pa places are a thing of the past and thats the way it is. I dont have any problems with Walmart,Target,K-Mart. Nobody is forced to shop or work at any of those places.

[emaidel]

Say the supplier figures out how to dramatically decrease his costs either through techology, new labor contracts, or whatever...is he now expected to reduce his price to Walmart so they can pass the savings along to their consumer? All other market factors being equal, how often do you think that would actually happen?

.

I doubt the supplier would pass along his savings, but then, why should he? In today's marketplace, it's the retailer, and not the manufacturer who makes the largest profit, so if a manufacturer can earn a few extra bucks (in order to pay for the increased demands of his retailers) then, more power to him.

Forgive me if I'm wrong, but your posts all seem to side very much with the retailer, and not with the manufacturer, and that any and all increases in costs should be absorbed by the manufacturer alone. If he can't do that, then that's just tough. I've said this before, but I disagree and disagree strongly.

Also, your statement that Wal-Mart is in a position to afford not to pass along a price increase to the consumer seems to imply that their intentions are altruistic. Nothing could be further from the truth: Wal-Mart's only interest is Wal-Mart, and profit for Wal-Mart.

In my hypothetical example of "Ed's Coffee Pot," and in the real-live disaster involving the Rubbermaid facility in Ohio (built exclusively to keep up with the demand created by Wal-Mart for those items they were purchasing), Wal-Mart's refusal to pay more for either product(s) was most definitely NOT in the best interests of the consumer, but rather, just Wal-Mart flexing their muscle and refusing to pay a penny more than the price originally negotiated, even if it means thousands of people losing their jobs. A $10 increase in price for "Ed's Coffee Pot," or a commensurate increase in the retail price of those four Rubbermaid items would not have rendered any of these products non-competitive.

When a manufacturer makes a product, a very involved procedure is used to come up with the cost of the product to the dealer, and for the retail price for that item. Numerous factors including shipping, warranty, advertising & promotion, commissions, overhead, etc. are factored into the cost of a product first, and then a profit margin is factored in, resulting in a dealer cost , which, after the dealer haggles and negotiates, results in a "net" cost that's usually 1/2 of the retail price for the item. ("Promotion" that was factored into the initial dealer cost is designed to cover the cost of these dealer negotiations.)

The key to this procedure is the retail price: if the product is not competitive at a price that allows the dealer to double his money, then that product rarely ever makes it to market. I've worked for numerous manufacturers who, by using this procedure after their cost of goods increased precipitously, had no choice but to discontinue the product, as the resulting retail price point would render the item non-competitive. The examples I used with Wal-Mart don't follow this at all, but only serve to illustrate that retail giant's insatiable greed.

Your turn! (This is fun!)

[paul_pci]

Sorry Kex, but extortion, predation, and egregious manipulation are categorically different than competition; of course the difference between the words should be the first clue. Wal-mart does not walk the fine line, but rather deploys further manipulation, extorion and sheer financial and political power to evade legal responsibility for deplorable practices. We can debate whether or not the demise of so-called mom and pop stores is a lamentable phenomenon; however, it seems clear that our current commerce legislation is horribly obsolete in that it does not account for the rise and behemoth-style power of these mega-corporate retailers and that is how folks like you can imagine that Wal-mart walks a fine line between healthy or aggressive competition and extralegal business practices. Perhaps they straddle the lines of the letter of the law (and we all know they don't even do that), but in no way are they even within the same time zone of the spirit of the law.

[topspeed]

I doubt the supplier would pass along his savings, but then, why should he? In today's marketplace, it's the retailer, and not the manufacturer who makes the largest profit, so if a manufacturer can earn a few extra bucks (in order to pay for the increased demands of his retailers) then, more power to him.

True. Conversely, why should Walmart change their contract price? Just to maintain the manufacturer's margins? I can see both sides of this, can you?

Forgive me if I'm wrong, but your posts all seem to side very much with the retailer, and not with the manufacturer, and that any and all increases in costs should be absorbed by the manufacturer alone. If he can't do that, then that's just tough. I've said this before, but I disagree and disagree strongly.

I'm for neither manufacturer nor retailer. I'm for honoring your contract...period. If you say you are going to provide a product at X price, you should do what you say you are going to do. If outside forces alter your ability to maintain margins, it shouldn't be the retailers problem and it sure as shootin' shouldn't be the retailer's customer's problem. We're talking about two separate entities, both with obligations to not only their customers but also their stockholders. They are in business to make money. Companies go out of business everyday because of mismanagement.

Also, your statement that Wal-Mart is in a position to afford not to pass along a price increase to the consumer seems to imply that their intentions are altruistic. Nothing could be further from the truth: Wal-Mart's only interest is Wal-Mart, and profit for Wal-Mart.

Your point being? Pssst...I've got a secret for ya: Business' are supposed to make $. I never meant to imply Walmart's hardline price stance was altruistic. The simple fact is that they have the purchasing power to replace any supplier with a dozen others chomping at the bit for the opportunity to work with them. By doing this, not only do they maintain their margins, but the avoid the possible catastrophic affect of alienating hundreds of thousands of customers. Again, Walmart should only be accountable to Walmart. If the supplier is suddenly unable to profitably provide their product, that's their problem, not Walmart's. Two companies, not one.

In my hypothetical example of "Ed's Coffee Pot," and in the real-live disaster involving the Rubbermaid facility in Ohio (built exclusively to keep up with the demand created by Wal-Mart for those items they were purchasing), Wal-Mart's refusal to pay more for either product(s) was most definitely NOT in the best interests of the consumer, but rather, just Wal-Mart flexing their muscle and refusing to pay a penny more than the price originally negotiated, even if it means thousands of people losing their jobs. A $10 increase in price for "Ed's Coffee Pot," or a commensurate increase in the retail price of those four Rubbermaid items would not have rendered any of these products non-competitive.

Websters: Risk; The possibility of suffering harm or loss, The variability of returns from an investment

You're looking to place blame where there is none. Rubbermaid took a calculated risk and came up short. Happens everyday. That's why it's called "risk"...not "sure thing"...not "slam dunk." Did people suffer because of it? Why not ask the 80,000 employees that have been laid off by GM and Ford in the last year because these two behemoths put all their money into 14mpg trucks and SUV's right when gas hit $3.50/gal.

When a manufacturer makes a product, a very involved procedure is used to come up with the cost of the product to the dealer, and for the retail price for that item. Numerous factors including shipping, warranty, advertising & promotion, commissions, overhead, etc. are factored into the cost of a product first, and then a profit margin is factored in, resulting in a dealer cost , which, after the dealer haggles and negotiates, results in a "net" cost that's usually 1/2 of the retail price for the item. ("Promotion" that was factored into the initial dealer cost is designed to cover the cost of these dealer negotiations.)

Really? And here I thought they just pulled a price out of their ass. Silly me.

The key to this procedure is the retail price: if the product is not competitive at a price that allows the dealer to double his money, then that product rarely ever makes it to market. I've worked for numerous manufacturers who, by using this procedure after their cost of goods increased precipitously, had no choice but to discontinue the product, as the resulting retail price point would render the item non-competitive. The examples I used with Wal-Mart don't follow this at all, but only serve to illustrate that retail giant's insatiable greed.

...and the manufacturer's utter incompetence to factor in changes to their cost structure without securing long term contracts of their own to ensure profitability. I guess I didn't realize it's Walmart's job to not only run their own business, but also every single supplier they deal with. Wow. Now there's a tough job!

[PAT.P]

Sorry, outright manipulation and predatory business behavior is not competiton. If you don't believe me consult a dictionary.

So if they as as bad as you make them look why are'nt they getting spank?Oil ,Utility and Cable company and the Goverment are worst.

[paul_pci]

So if they as as bad as you make them look why are'nt they getting spank?Oil ,Utility and Cable company and the Goverment are worst.

Post #17 hints at why I think they are "getting away wtih it." As with any new cultural development/phenomenon, the law is always playing catch up, but when mega-corporations control the process of the law making, even playing catch-up doesn't quite describe what's going on.

Addendum: I would also encourage you to refresh your historical knowledge, especially the relationship between the 1929 market crash and the Securities Act of 1934.

[emaidel]

[QUOTE=topspeed] I'm for neither manufacturer nor retailer. I'm for honoring your contract...period.


...and the manufacturer's utter incompetence to factor in changes to their cost structure without securing long term contracts of their own to ensure profitability. QUOTE]

Your claim that you aren't taking sides isn't exactly so, as your postings clearly indicate a bias towards the retailer, and very much against the manufacturer. You also repeatedly use the term "contract," and imply that if and when a manufacturer increases his prices (for whatever reason), he is breaking that contract. That's just not the way it works. When a retailer and a manufacturer agree upon a price for an item, there is no contract. Instead, there is usually an "agreement" between the two, covered in writing, and requires a commitment from both parties: the manufacturer agrees to provide the product at the agreed-upon price as long as he is able, and the dealer agrees to purchase a specified amount of that product. Nowhere in that agreement is there any stipulation that the manufacturer is forbidden to raise his prices, if his own cost of goods increases. If a manufacturer is dumb enough to agree to an agreement that he won't raise his prices - ever - then he deserves whatever happens to him.

Prices go up all the time. Why is it that the manufacturer and only the manufacturer is the one who needs to swallow it? As I've stated previously, if the necessary increase in retail to accomodate the increase in cost relegates the product to being non-competitive, then that product eventually ceases to exist. Otherwise, everyone in the chain pays for it - manufacturer, retailer and consumer alike. There's nothing inherently wrong with that, nor is it the result of a manufacturer being short sighted.

I'll ask you several questions:

1.) Did you ever work retail?
2.) Were you ever a manufacturer's respresentative?
3.) Were you ever a manufacturer, or did you work in the sales department for one?
4.) Are you degreed in marketing?

I don't think your answers to these would be the same as mine.

[GMichael]

[QUOTE=emaidel]

I'm for neither manufacturer nor retailer. I'm for honoring your contract...period.


...and the manufacturer's utter incompetence to factor in changes to their cost structure without securing long term contracts of their own to ensure profitability. QUOTE]

Your claim that you aren't taking sides isn't exactly so, as your postings clearly indicate a bias towards the retailer, and very much against the manufacturer. You also repeatedly use the term "contract," and imply that if and when a manufacturer increases his prices (for whatever reason), he is breaking that contract. That's just not the way it works. When a retailer and a manufacturer agree upon a price for an item, there is no contract. Instead, there is usually an "agreement" between the two, covered in writing, and requires a commitment from both parties: the manufacturer agrees to provide the product at the agreed-upon price as long as he is able, and the dealer agrees to purchase a specified amount of that product. Nowhere in that agreement is there any stipulation that the manufacturer is forbidden to raise his prices, if his own cost of goods increases. If a manufacturer is dumb enough to agree to an agreement that he won't raise his prices - ever - then he deserves whatever happens to him.

Prices go up all the time. Why is it that the manufacturer and only the manufacturer is the one who needs to swallow it? As I've stated previously, if the necessary increase in retail to accomodate the increase in cost relegates the product to being non-competitive, then that product eventually ceases to exist. Otherwise, everyone in the chain pays for it - manufacturer, retailer and consumer alike. There's nothing inherently wrong with that, nor is it the result of a manufacturer being short sighted.

I'll ask you several questions:

1.) Did you ever work retail?
2.) Were you ever a manufacturer's respresentative?
3.) Were you ever a manufacturer, or did you work in the sales department for one?
4.) Are you degreed in marketing?

I don't think your answers to these would be the same as mine.

Strange, whenever I have negotiated a contract with a supplier (something I have been doing for over 20 years with large & small companies) price is the first thing I make sure is in there. Not sure what kind of Buyer would leave that out. It sure wouldn't be anyone I would employ for long.

[emaidel]

Strange, whenever I have negotiated a contract with a supplier (something I have been doing for over 20 years with large & small companies) price is the first thing I make sure is in there. Not sure what kind of Buyer would leave that out. It sure wouldn't be anyone I would employ for long.

I didn't mean to imply that price was left out, and you're absolutely correct in stating that if a buyer left it out, he'd be out on his a** in no time flat. What I'm trying to say, and perhaps didn't say clearly, was that unforseen increases in the cost of goods for a manufacturer, that would necessitate an increase in his price to any retailer is a normal, and entirely accepted manner of doing business. And, as your posting indicates, if a contract were indeed signed, then I'd expect a timeframe to have been placed on that contract (perhaps one year) and that in that instance, the manufacturer is indeed bound to hold up his end of the bargain.

This is turning into qute a mess, isn't it?

[topspeed]

Your claim that you aren't taking sides isn't exactly so, as your postings clearly indicate a bias towards the retailer, and very much against the manufacturer.

Examples? I've merely stated that retailer shouldn't be liable for the manufacturer's profitability. You apparently think differently.

You also repeatedly use the term "contract," and imply that if and when a manufacturer increases his prices (for whatever reason), he is breaking that contract. That's just not the way it works. When a retailer and a manufacturer agree upon a price for an item, there is no contract. Instead, there is usually an "agreement" between the two, covered in writing, and requires a commitment from both parties:

Websters: Contract; An agreement between two or more parties, especially one that is written and enforceable by law...in which both parties have promised to perform

Sound familiar? Call it what you want, if it's a promise for a promise...it's a contract.

the manufacturer agrees to provide the product at the agreed-upon price as long as he is able, and the dealer agrees to purchase a specified amount of that product. Nowhere in that agreement is there any stipulation that the manufacturer is forbidden to raise his prices, if his own cost of goods increases. If a manufacturer is dumb enough to agree to an agreement that he won't raise his prices - ever - then he deserves whatever happens to him.

Now show me where it says the retailer must purchase the products at the increased price.

Go ahead.

I'll wait.

I'll ask you several questions:

1.) Did you ever work retail?
2.) Were you ever a manufacturer's respresentative?
3.) Were you ever a manufacturer, or did you work in the sales department for one?
4.) Are you degreed in marketing?
I don't think your answers to these would be the same as mine

1) Yep
2) Nope
3) Nope
4) Real Property Development, USC baby!

Without hesitation let me state that my viewpoint would not change. This isn't about experience nor is it about educational background. This is a philisophical difference. I believe that you are solely responsible for your destiny, good or bad. Blaming others does nothing. People need to take responsiblity for their choices and live with it. You're not going to hit one out of the park everytime, so man-up to your mistakes and failures. It's OK. (note: I'm not implying "you" as specifically you emaidel. It's a general "you.") To blame Walmart for not wanting to purchase goods that were at a price higher than the "agreed" to price (or whatever you want to call it) is akin to blaming McDonald's for serving coffee that is too hot.

[GMichael]

I didn't mean to imply that price was left out, and you're absolutely correct in stating that if a buyer left it out, he'd be out on his a** in no time flat. What I'm trying to say, and perhaps didn't say clearly, was that unforseen increases in the cost of goods for a manufacturer, that would necessitate an increase in his price to any retailer is a normal, and entirely accepted manner of doing business. And, as your posting indicates, if a contract were indeed signed, then I'd expect a timeframe to have been placed on that contract (perhaps one year) and that in that instance, the manufacturer is indeed bound to hold up his end of the bargain.

This is turning into qute a mess, isn't it?

Not so bad of a mess,

Yes, a time frame is also included. 1 year is common. 2 years with a 3rd option sometimes too. When I was with a big company, anyone who wanted to raise their price before the contract was up got laughed at. When I was with small companies we couldn't really act the same way. We could kick & complain but ultimately, we had little choice & just tried to get as much compensation as possible. It's normal for big companies to take a hard line. And the little companies get the shaft. I'm not saying that what Wal-Mart did is nice. But it's typical of big business.
I remember a meeting I was in years ago. The Buyer in charge of a supplier had told them, "if you don't stock 50,000 gallons of this chemical, we won't buy it from you." When we stopped using that chemical, the company was very upset that they were getting stuck with all of this extra crap that they had no other customer for. Our Buyer told them, "we never told you that we would take any excess inventory off your hands." There was nothing in writing and that company got a screwin'.