53 pages • 1 hour read
Charles FishmanThe Wal-Mart Effect: How the World's Most Powerful Company Really Works - and How It's Transforming the American Economy
Nonfiction | Book | Adult | Published in 2006A modern alternative to SparkNotes and CliffsNotes, SuperSummary offers high-quality Study Guides with detailed chapter summaries and analysis of major themes, characters, and more.
Chapters 4-5Chapter Summaries & Analyses
Chapter 4 Summary: “The Squeeze”
Fishman writes that, in 1998, Wal-Mart began selling gallon jars of Vlasic pickles for $2.97. Vlasic representative Pat Hunn described the gallon jars to Fishman as one of Wal-Mart’s statement items (79). They used the pickle quantity and pricing to promote Wal-Mart’s alleged core values. In the late 1990s, Vlasic had no interest in building its brand around the gallon jars. However, their appearance on Wal-Mart shelves nationwide earned Vlasic a reputation that had positive and negative effects on the business, as the gallons both boosted and hurt Vlasic sales. Vlasic market manager Steve Young told Fishman that when Vlasic tried negotiating a higher unit price for the jars, Wal-Mart refused to budge. Consumers couldn’t eat the pickles fast enough, which led to high levels of waste. Fishman cites the Vlasic deal as an example of how Wal-Mart defies “the laws of supply, demand, and competition” (82). According to Fishman, this is an indication of the way in which Wal-Mart is thus a monopsony, or a corporation powerful enough to manipulate market prices.
Fishman states that he attempted to interview FedEx employees when he learned that they were Wal-Mart’s primary carrier, but his contact, Steve, backed out of the interview at the last minute. Wal-Mart forbade him to communicate with the media, and with Fishman. The same was true of Fishman’s attempts to communicate with IBM representatives, who supplied Wal-Mart with computer hardware and software (86). Fishman’s contact refused to speak about Wal-Mart, although he appreciated Fishman’s attempts to get suppliers to talk about the corporation. Fishman holds that Wal-Mart controls its suppliers behaviors while refusing to let them discuss their business relationship.
Fishman says that he did, however, talk to John Mariotti, the former president of the Huffy Corporation. Mariotti accepted a deal with Wal-Mart, although he knew he couldn’t meet their supply demands. He tried his best to do so but ultimately failed, and Huffy Bicycles died not long later. John Fitzgerald of the French yarn company DMC told Fishman a similar story. Wal-Mart imposed demands on them that impacted the company and hurt their product and sales. Michael Roth of Playtex, Revlon, and Warner Lambert also told Fishman about his negative experiences with Wal-Mart. Wal-Mart changed their contract with Lambert, ultimately pulverizing sales (97).
Sherrie Ford of Welch’s told Fishman about her experiences with Wal-Mart, too. Wal-Mart promoted a happy environment, but she noticed violence and aggression at the Welch’s warehouse because of Wal-Mart’s supply demands. Mark Ingersoll of Philips electronics relayed similar observations about Wal-Mart’s effects on factory floor operations and culture, sharing that, in order to maintain Wal-Mart’s low prices, Philips had to compromise on its design and standards. The same was true for Levi Strauss, who began supplying Wal-Mart in 2002. Once a high-quality denim brand, Levi’s had to change their product to match Wal-Mart’s pricing model. In turn, they devalued their own product and philosophy.
Finally, the L. R. Nelson sprinkler company’s former president Dave Eglinton also told Fishman about his experience working with Wal-Mart. Wal-Mart’s low-cost demands forced Nelson to outsource labor and production overseas. The quality of their products went down as a result, ultimately costing Nelson employees their jobs.
Chapter 5 Summary: “The Man Who Said No to Wal-Mart”
Fishman writes that the Snapper lawn-mower factory is located in McDonough, Georgia, and has learned to operate “literally, in Wal-Mart Time” (113). Snapper CEO Jim Wier talked to Fishman about the history and future of his company. Wier used to supply Wal-Mart with lawn mowers and snowblowers, but pulled out of his contract when Wal-Mart demanded lower prices and thus lower quality products. Wier knew the decision would cut Snapper’s sales dramatically, but didn’t like the idea of skimping on production. His product might work well the first year after the customer bought it, but it wouldn’t have the same lifespan if he accepted Wal-Mart’s demands. So he ended his Wal-Mart contract because Snapper and its parent company Simplicity valued high-end and high-quality products (119).
Wier relayed an anecdote about his decision to Fishman. He was getting his haircut and told his barber about the situation, explaining that although they could both give haircuts, they wouldn’t be the same quality. Snapper’s lawn mowers and Wal-Mart’s other lawn mowers could both cut grass, but not in the same way (122). Snapper remains devoted to sourcing high-quality materials and to devoting time, energy, care, and labor to the production of its products.
Wier told Fishman that the day he broke his contract with Wal-Mart was one of the strangest days of his life (129). The Wal-Mart representatives he met with tried to convince him to keep the deal, but Wier didn’t back down. Wier shared that although he doesn’t regret the decision, he sometimes wonders if he’ll think about it differently in years to come.
Chapters 4-5 Analysis
Chapters 4 and 5 examine the ways in which Wal-Mart’s devotion to offering low-priced goods negatively impacts suppliers, product quality, and consumer expectations. Hence, in these chapters Fishman is essentially framing the Impact of Corporate Policy on Suppliers and Competition at Wal-Mart as a Trade-Offs of Low-Cost Consumer Goods. In Chapter 4, Fishman details Wal-Mart’s contracts and relationships with companies including Vlasic, FedEx, IBM, Huffy, DMC, Welch’s, Philips, Levi’s, and Nelson. In some cases, Fishman presents his interviews with representatives of these companies in order to better understand their historical relationships with Wal-Mart. In other cases, Fishman encounters obstacles in excavating such information, as supplier representatives have been forbidden by Wal-Mart to speak about their relationships. Fishman includes his difficulties to communicate with representatives from companies like FedEx and IBM to launch a journalistic investigation into the company’s opaque practices and the impacts of such corporate opacity.
In Chapter 5, Fishman narrows his examination of Wal-Mart pricing models and demands to Jim Wier and Snapper’s fraught dynamic with the corporate box store. This particular journalistic subject allows Fishman to angle his arguments and claims from Chapter 4 via a different avenue of exploration. Unlike Vlasic, FedEx, IBM, Huffy, DMC, Welch’s, Philips, Levi’s, and Nelson, Snapper refused to continue working with Wal-Mart when Wal-Mart’s demands threatened to undermine the quality of their product and to compromise the culture, efficiency, and atmosphere of their factories and workplaces. Chapters 4 and 5 therefore compare and contrast Wal-Mart’s various supplier relationships, with the effect of further reinforcing Fishman’s image in the text as a trusted and impartial observer.
In Chapter 4, Fishman uses his findings in order to aver that Wal-Mart’s cheap pricing model harms suppliers and manufacturers. For example, Wal-Mart’s decision to use “Vlasic’s gallon jar of pickles” to tell consumers “this represents what Wal-Mart’s about” negatively impacted the Vlasic brand and its sales (79). Vlasic lost control of its own product branding, pricing, and distribution, because they felt compelled to satisfy Wal-Mart’s demands, as Wal-Mart was their largest account. The same phenomenon occurred with companies including Huffy, Levi’s, and Nelson. In the case of Huffy, Huffy couldn’t produce the quantity of bikes Wal-Mart demanded as per their contract, a failure which led to the death of the company itself. Levi’s and Nelson were similarly squeezed by Wal-Mart, and in turn forced to skimp on quality in order to satisfy contract terms. Fishman’s detailed descriptions of these supplier relationships support his claim and offer yet another example of how the Wal-Mart effect impacts “the very sales and profits” of its suppliers’ businesses (91).
Furthermore, the aforementioned examples support Fishman’s argument that Wal-Mart “can open and close plants,” “can put companies in and out of business,” and can directly undermine the quality, reputation, and history of suppliers’ brand names (93). By carefully outlining such details, Fishman presents the case that Wal-Mart has the kind of far-reaching and unrivaled power that is characteristic of a monopsony, raising Ethical Concerns in Global Supply Chains. Thus, the chapter’s focus furthers Fishman’s overarching questions about how one corporation might control economic trends and product standards, showing that, while Wal-Mart customers expect Wal-Mart’s promised everyday low prices, Wal-Mart suppliers suffer as a result.
In Chapter 5, Fishman uses Wier and Snapper’s story to consider the possibility of evading Wal-Mart’s comprehensive control of the retail market. The chapter’s telescope focus on Wier and Snapper manifests Fishman’s belief that Wier’s decision not to work with Wal-Mart is anomalous. Like his fellow suppliers, Wier knew that terminating his contract with Wal-Mart would negatively impact his company. At the same time, he “looked into a future of supplying Snapper lawn mowers and snowblowers to Wal-Mart,” and didn’t like what he saw (113). He imagined “lower prices, collapsing profitability, offshore manufacturing, and the gradual but irresistible corrosion of the very qualities for which Snapper was known” (113, 114). His foresight compelled him to stop supplying Wal-Mart and thus to attempt working both outside Wal-Mart’s ecosystem and in resistance to it. Fishman devotes the entirety of Chapter 5 to detailing Wier’s unexpected decision in order to explore the possibilities of competing with Wal-Mart and thus standing up to Wal-Mart’s often crippling pricing standards. He is using Wier and Snapper as an example of what more suppliers would like to do in the face of Wal-Mart’s impossible contracts but are too afraid to do because of the risks to their profits and longevity.
Altogether, the picture Fishman paints in Chapters 4 and 5 reinforces the idea that he wants to steer clear of the popular narrative that demonizes Wal-Mart as a corrupt or villainous corporation. Instead, Fishman employs the techniques of investigative journalism to present a more nuanced and well-grounded account of the problems with Wal-Mart. Thus, rather than falling back on claims that Wal-Mart’s leadership is corrupt or indifferent to anything besides their own self-interest, Fishman instead looks to concrete mechanisms to make sense of Wal-Mart’s negative impact. On the one hand, Chapter 4 examines how Wal-Mart’s commitment to low prices puts Wal-Mart’s suppliers in a vulnerable and risky position. On the other hand, Chapter 5 demonstrates how difficult and unlikely it is for a supplier to get free of their dealings with Wal-Mart once they entered into a contract with them. These chapters therefore work in tandem to tell a larger story about how supplying for Wal-Mart comes with significant risks and downsides, but at the same time it is difficult for suppliers to extricate themselves from their Wal-Mart contracts. In effect, Fishman therefore confirms the popular narrative that Wal-Mart embodies a dangerous new corporate model, but he does so in a way that steers clear of reductive narratives and instead engages with robust, concrete data.
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