Thursday, November 30, 2006

Wal-Mart Saves Consumers Two Ways

Research shows that Wal-Mart saves consumers billions of dollars in annual savings from the discount retailer's everyday low prices.

One study, by the economic consulting firm Global Insight, calculates that Wal-Mart saves American households an average of $2,300 a year through lower prices, or a $263 billion reduction in the cost of living. That compares with $33 billion savings for low-income families from the federal food stamp program.

In another recent study, MIT economics professor Jerry Hausman (former students include Fed Chairman Ben Bernanke) estimates that Wal-Mart has shaved 0.75 percentage point off annual inflation in food prices. "These guys have done much more than any antipoverty program," he says.

Wal-Mart gets all of the attention and publicity both favorable (consumers save billions) and unfavorable (Wal-Mart pays low wages, although they are about the same or more as Target, Borders, Barnes and Noble, McDonalds, etc.). What has received less attention is the additional cost savings to consumers from other non-Wal-Mart discount retailers, who compete with Wal-Mart with their own everyday low prices.

Today's WSJ has an article about the French retailing giant Carrefour (second largest retailer globally next to Wal-Mart), which started discount retailing in France in 1963, around the same time Wal-Mart started expanding across the U.S.

Carrefour's new CEO, 42-year-old José Luis Duran, is trying to whip the retailer into shape. Since taking over in February 2005, he's slashed prices in Carrefour's core French market to combat the rise of discounting rivals. He hopes to make the company quicker and nimbler.

Carrefour faces a bigger threat than ever from Wal-Mart, which is pushing overseas as its growth slows down in the U.S. Wal-Mart has a greater presence in North America and Latin America, while Carrefour operates in more European and Asian countries. But they face off in three of the world's biggest markets: China, Brazil and Argentina.

Bottom Line: Wal-Mart saves consumers billions of dollars annually all over the world who shop AT Wal-Mart, and the intense competitive pressure FROM Wal-Mart, saves consumers billions of dollars annually all over the world who shop AT non-Wal-Mart stores like Target, Carrefour, K-Mart, etc. So even those consumers who might hate Wal-Mart and shop at Target or other discount retailers, STILL benefit from Wal-Mart, because without Wal-Mart, Targets prices would be HIGHER.


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