Cheap: The Real Cost of the Global Trend for Bargains, Discounts & Customer Choice


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Putting It Together

Moreover, by analyzing search terms, companies can discern what information the consumer most needs next. If the late-phase consumer was using a mobile device indicating that he was probably out and about , the search engine would serve up a paid link to a dealer locator with a click-to-call feature that enabled him to easily set up a test drive. Marketers often miss this point and put their efforts into activating brand recommenders who simply focus on product features and benefits. What does trusted advice look like?

After shopping at a mall, many girls upload YouTube videos of themselves talking about their haul purchases. In the videos, they discuss not just what they bought but also why, and how they plan to mix their new items with the rest of their wardrobe. This takes the complicated world of teen clothing and accessories—a world fraught with danger from shifting trends and overwhelming choice—and simplifies it, by showcasing fashionable peers who offer trustworthy guidance.

Penney and American Eagle have capitalized on the phenomenon by hosting unbiased haulers on their sites and in their digital communications. Neither retailer requires that the haulers show only brands purchased at its store, and the haulers are transparent about their links to the companies Penney, for instance, gives its star haulers gift cards.

Cheap: The Real Cost of the Global Trend for Bargains, Discounts & Customer Choice

Information about the adviser also helps build trust. A selected group of Disney World veteran moms answer questions from consumers who are planning Disney vacations. She got perfectly tailored advice from Jackie S. With 25 Disney World trips under her belt, Jackie has the experience to make her information credible. Consumers can get a further sense of her reliability by reviewing her profile on the Disney World website and reading about her family, her hometown, and even how she met her husband. The lesson for marketers: Build cadres of trustworthy advisers rather than simply developing recommenders who will push the brand.

Then aggregate their advice and make it easy for consumers to discover and use it, as J. Penney—whose haul videos get hundreds of thousands of views—so successfully does. To help consumers evaluate choices, most brands describe their differentiating features and benefits. Some go a step further, offering buying guides containing side-by-side brand or product comparisons. For example, a bank might compile a catalog of its checking account options that lists the features of each one.

Brands need to take a different tack. Except in cases of low-value products, consumers increasingly expend most of their effort learning about and weighing their choices. Instead, marketers need to provide tools that allow customers to identify and weigh the features that are most relevant to them. However, many brands have made the weighing process harder by introducing a dizzying array of SKUs.

Buying guides of this sort make the mistake of appearing to offer guidance while actually complicating the decision process. Marketers, especially those with an abundance of SKUs, need to help customers control the weighing process. Herbal Essences does a good job with an online decision guide to its shampoos.

One-click questions about hair type, length, and texture straight, short, fine, thick and other needs color treatment, volume allow the visitor to rapidly sort through more than three dozen offerings to find the ideal one. Many brands lead consumers down confusing purchase paths. The savviest ones simplify and personalize the route.

Consumers are likely to feel confident about recommendations that are based on their own purchasing data or other past behavior, because those things are typically accurate gauges of preference. In each case, the company eliminates much if not all of the hassle of weighing choices by providing a likely best choice at the outset.

No company that we know of has fully integrated the three components of a decision-simplicity strategy—but Intuit is among those out in front. He calls it The Age of Cheap: cheap fashion; cheap travel; cheap food; cheap money; cheap beauty; cheap cities. But with it, he warns, comes cheap morals and cheap ethics - the Wal-martisation of our society. Excess, superabundance and rock-bottom prices are all part of the same phenomenon. And Wal-mart very acutely represents the paradox of globalisation and liberalisation. While customers take advantage of the mountains of bargains, Walmart's legion of workers from the USA to Asia struggle to survive on low wages with a handful of top directors earning a fortune of course.

The pressure to lower prices immediately becomes stronger, as you can always find even cheaper suppliers within China. Salaries are well below the required local minimum. Young, unskilled workers often earn barely 1 dollar a day. An 18hour working day is not unusual. Redundancies are becoming common in China, too.

At the same time, the average profit margins have dropped from 20 per cent to 5 per cent over the last 10 years. Not even the loosest code of conduct for suppliers is really adhered to. Because the Chinese are so bent on achieving economic growth, they frequently ignore even the minimum standards — hygiene at work, monitored working hours, safety regulations and a minimum of training for a workforce from a largely agricultural background. The pressure to get on and to earn money seems to take priority over all sensible limitations on sustainable development.

And the big-league retailers are ready and waiting to profit from it. We can safely assume that Chinese products, which are perhaps of only modest quality today, will increase continually in quality in the coming years and become attractive as branded goods for export to the Western nations. In many areas, we will have even more overcapacity in the West — which will force us to be even more flexible on prices. That globalization is a blessing for China and for the Chinese government is also emphasized by leading experts on China. If this development follows a reasonably stable course, China will establish itself on global markets as a cheap manufacturer, it will prosper and its people will reap the rewards long since reaped by those in the West, while any attempt to block this development politically will frustrate the people and increase the danger of instability.

The internet is primarily not a sales channel, but an information channel that empowers the customer. There is a very good book on this subject, The Cluetrain Manifesto,11 but unfortunately its publication passed unnoticed in the turbulence of media hype and the bursting of the bubble. Its main message is that markets are becoming dialogues and it is easier and easier for people to communicate with each other. And they can react swiftly and assert themselves against businesses where the need arises — Smart Mobs is the watchword.

However, this also means that customers are trained to take a more active, even aggressive, role. Slowly but surely, they increase their expectations of the products and services a company provides, and they will demand that these expectations are met. Is it not logical then that the customer should pass the pressure back to the retailer? An important question will be: where will alliances be formed? The way things are going, the manufacturing side should be feeling the heat most. But we should not underestimate them — think of the food and near-food giants. Will the customers accept a Wal-Mart that dictates the pace?

And who are the winners anyway? Who are the losers? Is it possible that all three parties might be on the winning side? Or only two of them? Or none at all? Under the leadership of the retailer, the pressure on the manufacturer is increased.

Under the leadership of the manufacturer, an attempt is made to bypass the retailer completely and communicate directly with the customer. With the help of new channels especially mobiles, the internet , the customer exerts pressure on the manufacturer and the retailer.

The axis of evil in the economy 47 The pendulum is swinging in the direction of the final consumer.

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As described above, there is historical proof of this. But in our complex, dynamic and increasingly global economies and society, it is far from certain who will play the decisive role in the axis of evil or the axis of good and for how long. Which factors are accelerating the trend? Let us summarize the most important factors.

Liberty, equality, money — political and democratic causes As the process of democratization moves forward, there is less and less that distinguishes us because all values are individually selected except money. We are free, we have equal rights and we need all our financial resources to realize our freedom and our equality. This means that the price also becomes more and more important in our political institutions. Whether political programmes are a success, whether political projects can be realized, is increasingly a simple question of price.

And today we can see that, under changed conditions, none of the terms we could substitute for fraternity will work either. Solidarity, for example, only works as long as there is a vast population of young people able and willing to support the smaller group of older people, or if economic growth is sufficient to finance ideologies. If we take a more realistic look at things and leave aside political slogans, we have to admit that money should replace fraternity in the list. The deterritorialization of competition — economic rationalization A world that is increasingly linked via internet and IT allows small and medium-sized companies to participate on global 48 Cheap markets under more favourable conditions, provided that they can carve out a niche for themselves.

In the case of the larger companies, we can see that the more mature, the richer, the more saturated the markets are, the more economic modernization will also mean increased price orientation, because the increasing liberalization and deregulation of the markets — even where it is accelerated by crises, re-regulation or catastrophes — also brings more deterritorialized competition. Large companies, especially if they are stock market listed, have no other choice but to expand into foreign markets.

Of course, it is true that any company that has acquired the corresponding skills and an appropriate capital basis through economies of scale on the domestic market will have to expand abroad sooner or later.

Free AutoPilot, FSD, Discounted Price Tesla Model 3 - Tesla Madness

But a smaller company — as we have seen in the food service sector — takes a smaller risk than a large-scale provider such as Wal-Mart. And so we can conclude that, as far as expansion into foreign markets is concerned, the discounters offer the most rational business model for the coming years, irrespective of economic fluctuations. They are less vulnerable with their cost structure: they have important costs such as IT and personnel firmly under control and they are therefore strategically more flexible, can implement decisions more quickly and are economically more adaptive.

The most impressive example of this is perhaps the cut-price airlines. Deterritorialization means the intensification of competition. Shrinking populations in the First World — demographic time bombs With the exception of the United States of America, we in the richer countries are facing the grave phenomenon of dwindling The axis of evil in the economy 49 population figures. In Old Europe, migration predominantly affects unskilled work in the service sector, work that is now carried out by people from ever more exotic cultures.

We can assume from this that it is going to become more and more difficult to boost demand. While the generation of baby-boomers grew up with inflation and rising prices, Generation X and Generation Y are learning that prices are falling and deflationary tendencies are normal in many fields. All you have to do is wait, and things will be even cheaper! Japan can be seen as the test laboratory for this development, a country from which Old Europe could learn a lot. As an insular nation that over previous centuries learned to live in cultural independence and isolation, Japan in the last 10 years has seen economic stagnation, realestate crises, structural problems in banking, deflationary tendencies in many product areas and an advanced ageing of its population.

It seems unlikely that we can rely on the capital factor as a motor for growth over the next few years. Who is going to be prepared to invest in national economies in Old Europe where the population figures are going to shrink in the coming decades — unless, of course, people change their ideas about family planning radically and soon? It seems more likely that, with time and almost unnoticed, Europe will become a kind of glorious museum where we permanently celebrate our past: our political and cultural history together with the art and the religion of past centuries — Venice is one of the possible models here.

Nowadays the pressure is felt 50 Cheap further up in the value creation chain, in the region of exclusive services. Why should the computer analysis that decides whether I need an operation or not be carried out in Germany or Switzerland when I can get the same quality much cheaper elsewhere? A young, well-trained Indian researcher with a university degree costs eight times less than a colleague with the same qualifications in Germany, France or the USA. And we see the same picture if we compare the services of a senior researcher. The outsourcing potential is vast. In the financial services sector alone, various studies and projections indicate that, of the 13 million jobs in the more mature markets of the USA, Europe and Japan, around 2 million are likely to have been outsourced to the Pacific area by And on the other hand, we can see that the people of the Western world are less and less prepared to render services of an unskilled nature.

In the countries exporting labour to us, this trend triggers an increasing lack of the so-called love services, which are mainly The axis of evil in the economy 51 carried out by women nannies, cleaners, providers of erotic services, nursing staff — these are the jobs that are exported. Every year, millions of women leave countries like Mexico, the Philippines or Sri Lanka to work in households, brothels, nursing facilities and restaurants in the First World. This does give women in the First World more individual freedom, but at the same time it means an increasing lack of labour in the countries from which these love service providers come.

Re-globalization — globalization works! Globalization has arrived — not quite as easily as the leading consultants would have had us believe at the end of the s, but nevertheless in a very robust and continual development. The WTO has its work cut out, and the Cancun summit in autumn provided an indicator of all the coming problems. Dictators, fundamental ideologists and other fanatics may slow things down temporarily, but once the Age of Cheap and the desire to get a slice of the action have been awakened, they cannot simply be made to go away again.

And increasing unrest and the potential for conflict between nations — consider terrorism — means less peace of mind, which is a further topic that will dominate in the years to come. Cheap and easy access to information also makes it easier to engage in terrorist activity. In the Age of Cheap, warlike activities also become cheaper: we have discount wars in the double sense. The fact that engaging in warlike activities is becoming cheaper demonstrates more effectively than anything else how competition 52 Cheap is increasing in the economy and trade while, at the same time, we have less and less peace of mind.

In the Cold War, we had the immense economic and socio-political advantage of an age of civil peace in that we were able to externalize our conflicts. Now we have exactly the opposite situation. While conflict is hardly possible between the saturated countries — just take Europe, with the exception of the potential crisis area of Kosovo, as an example — our interest moves to civil insecurity: never before have so many countries been potential targets for acts of terror or warlike activities.

That means that our power-political situation resembles that of Ancient Rome. Even though the Americans are indisputably the number one military power and in spite of all their advanced technology and their vast financial and personnel resources, there is no way they can guarantee world peace. The IT revolution — price consciousness is on the increase The fact that information is easier and easier to acquire and at increasingly low cost further fuels competition.

Everyone wants to participate in our economic prosperity. In a connected world, it is no longer possible to hide. As they arise, new opportunities become available to all players on the market at the same time. It remains to be seen whether the Next Big Thing that the Americans are so eagerly anticipating really will arrive and, if so, when. But if there is not a pretty strong kick from the IT sector soon, the situation is going to get much more difficult.

And even if we do believe in technology cycles, another quantum leap in the IT sector will undoubtedly also mean rationalization and thus the destruction of existing jobs. And it is unlikely that the end result will be qualitative and quantitative progress. The axis of evil in the economy 53 The pressure for continual optimization of individual risk allocation When calculating and deciding whether to take risks or not, what counts for the individual is personal survival.

Large-scale risks such as meteorological catastrophes or terrorist attacks on skyscrapers may seem more imminent than ever, but as a risk for the individual they are perceived as less threatening as they increase in scale and frequency. The survival of the individual, and making that survival as comfortable as possible, is much more real. The less the state and companies can guarantee security, the more the onus is on people to take care of themselves. And thus they are more interested in a more personal form of business organization: the insourcing of the familiar.

When the welfare state is in a process of reprivatization, it is natural that people want to spread their risks and get rich as quickly as possible. You need money to be able to hoard for the future. And so the aim is for everyone to do his or her own individually controllable risk management. But how should people invest their money? And in what? In gold again? In bonds? Should I invest in funds?

Or shares? These all involve a high risk. Not many people believe that we are going to see a stock market boom such as that experienced in the second half of the s in the next few years. Should people put their money in real estate? The example of Japan shows us what that might bring. All these are indications that the pressure on the individual is going to increase. And our willingness to consume?

Perhaps this is even the most important argument: the more trust and loyalty are eroded, and the more scandals give the consumer the feeling that suppliers are all out purely to make more money, the more ground the discounters will gain. An ageing Western society is also more pragmatic, harder to instil enthusiasm into than a society where the age pyramid is reversed. There is no rational reason for those who have no descendants to invest in the future. Why should they?

Families or, to put it more simply, couples with randomly conceived or, to put it in even more basic terms, randomly produced children have a variety of reasons to have faith in the future. Logically, they want their children to have a good life;23 they want to be able to spend quality time with their children or simply to have some money to leave to them when they die. The dream becomes cheaper — the bulldozer rolls on Finally, let us not forget that there are further, deeper reasons for the Age of Cheap. From to , we had the two contrasting systems in Germany and the West Continental Europe.

This was in fact what really made the development of the welfare state with its many benefits, possible in the first place. From this situation arose a historical compromise, an important stabilizing factor between politics and the economy. And now we see that, when the system against which the West was competing was removed in , this also removed its motivation to finance the welfare state.

And unfortunately, its economic prospects are at the same time overshadowed by falling population figures and the fact that the next leap in technological development is overdue. Continual economic growth The axis of evil in the economy 55 in the Cold War was underpinned ideologically. Now, our desire for growth is fed solely by the motivation of the markets to generate prosperity. Ideological motives have evaporated or dwindled to individual concerns. Growth for its own sake is weak, especially in an ageing culture, and is not sustainable.

Politicians are at a loss as to how to deal with the problem. The important question will be: can we stop the bulldozer, and do we want to? What is the price of letting it roll on? What is the price we pay if we stop it? Who can halt it and how without violating basic rights in a liberal democracy?

In the end, we are all probably condemned to consumer democracy and thus to suffer economic and social rationalization. Peace among people and among nations always means that a certain material basis is a given.

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Time Series Analysis for Business Forecasting

The period between and in Germany taught us that. The social and material security that was created then as a historically necessary compromise between politics and the economy is now being eroded and responsibility delegated back to the individual. The bulldozer is at the same time both good and evil, bringing as it does both prosperity and its opposite. On the other hand, we have started to turn a screw that is pushing the great majority of people downwards. When prices are low, wages are also low. When wages are lower, we are more dependent on lower prices.

For many of the emerging nations, the situation is on the whole better than it is for the old-established nations of the West with their saturated markets and poor motivation. These traditional markets have, to a large extent, taken on a museum-like character. Everyone can dream, but at a different price. Michael Yahuda from the London School of Economics. If development is relatively stable, China will develop from a manufacturer to a consumer nation.

And that will trigger the real revolution. The axis of evil in the economy 57 13 14 15 16 17 18 19 20 21 22 23 24 Philosopher Leo Strauss said this in connection with political systems — the health produced on the one side causes the disease to break out on the other. I hope the wholesale trade will forgive me for reducing the subject to just three stages in order to simplify things. See also the section on Venetianization in Chapter 4. Source as quoted above.

I will refrain from giving an overview of the over-optimistic and lyrical publications on the subject of globalization in the second half of the s. On the other hand, more recent publications, those of the last two or three years, are over-pessimistic, a sign of the deep scars left by various acts of terror.

The next really big development will probably be the biotechnological revolution. And that is not likely to take place in the next few years. A lot of legal paperwork will have to be done before it can reach its full potential. This, by the way, is another reason why well-functioning family businesses probably do have a future. A family business naturally deals with capital and company interests in a way that is different from that of a company that is driven by shareholder value alone.

They are the logical counterparts to an ascetic form of business management: be faster, better, cheaper. They are also the quintessential expression of the paradox of globalization. The same can be said of the excesses in the downward spiral in discounting: if you are right at the bottom of the wage hierarchy, you will never earn decent money, no matter how fast you run. On the contrary, you will need low prices because your wages will fall.

To understand Wal-Mart is to reach a basic understanding of an economy that is in the process of becoming global. Why Wal-Mart concerns us all Business schools make their money by continually tracking down new success models in business life and then teaching them in The Wal-Martization of our society 59 courses. Thus they teach students what real success is. The more a company is considered a model case, the more likely it is to be the subject of a so-called case study today.

And if the big business schools use your company as a case study, all the other schools immediately follow suit. Case studies are rituals every student has to go through today. However, the last five years have seen a change. For a long time, retailers were not taken seriously and university chairs for retail trade were rare. Hardly anyone paid them much attention. But now the retail trade has become the focus of attention. The Harvard Business School now sells Wal-Mart case studies to other business schools all over the planet — Wal-Mart has become a bestseller!

In March , an indepth study of the strategy of neighbourhood markets was published, ie the strategic expansion of the Wal-Mart model that declares war on the smaller local chains over shares of the food market. Wal-Mart is the star today, and there is far more interest in Wal-Mart than there ever was in the classics of industry.

For the past hundred years, the power lay with the manufacturers. It was the manufacturer who had the power and the know-how, particularly in the sector of consumer goods, while the retailer was simply a distributor of goods, often also dependent on intermediaries, a relatively insignificant link in the value creation chain. The distributors of goods needed 60 Cheap them in order to reach their customers. This has changed drastically since the s. First of all, the retailers who were traditionally active only at a local or regional level expanded geographically and made a name for themselves at a national level.

And over the last few years, a consistent if not always simple process of internationalization has taken place, a process that goes beyond the mere conquest of neighbouring markets. The French Carrefour group was the spearhead, followed in France by Auchan and Casino, in Germany by Metro and in Britain by the late starter Tesco, which is now pushing towards the east. These companies are all examples of the shift in power in distribution — from the manufacturer to the retailer, a shift that will tend to cut out the intermediary, since the big retailers can buy direct global sourcing.

The question today is: who has privileged access to the customer? They have direct contact with the customer and, over the last few years, have learned how to handle IT systems and how to make better use of the advantages of customer communication. With the help of ECR efficient customer response , they have steadily expanded their know-how and made themselves more independent of the manufacturers.

Today, Wal-Mart is the company to watch for strategy, pricing, logistics, IT, dealing with rivals, relationships with suppliers, cost structure and advertising. The fact that, here, cost cutting is an integral part of company culture may be the most striking. Of course, Wal-Mart is also talked about because, as a representative of a traditional sector, it has the most amazing growth The Wal-Martization of our society 61 history and is now gaining in significance internationally and in connection with the battle for globalization.

Wal-Mart sells goods we all need. Twenty years ago, the teachers at the business schools ignored Wal-Mart because, in accordance with the will of its founder, Sam Walton, it concentrated on the unsophisticated needs of customers in rural areas, but when the chain expanded into suburban, more prosperous areas hardly anyone could ignore Wal-Mart any more. Moreover, many former MBA students are now among the losers in this expansion process: small, independent retailers in the non-food and more and more frequently also in the food sector were forced to give up when they lost the price battle to the giant Wal-Mart.

Nowadays, unlike just 10 years ago, Americans grow up with Wal-Mart — it sells everything you need for everyday life. What bank or software company could make that claim? What is Wal-Martization? Wal-Mart is a symbol we customers have been trained to react to, which has become such a part of our consciousness that we intuitively and ritualistically call it up whenever we go shopping.

Wal-Mart cuts prices because it can. All the time. And much more — Wal-Mart is an expression of the paradox of a world involved in a process of globalization and liberalization.

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While we profit as customers from the mountains of low-priced products, at the same time we are accelerating the process of 62 Cheap downsizing, which tends towards a system where you have badly paid, unskilled jobs with poor career prospects on one hand and a few extremely well-paid and exciting top jobs on the other — with nothing in between the two. The emotional area of superstores and discount stores provides the clearest example, because it affects such an everyday occurrence as shopping.

Wherever Wal-Mart appears on the scene, the landscape changes: economically, socially, culturally. According to Retail Forward,4 for every Supercenter that Wal-Mart opens in the next two years two existing supermarkets will close and disappear from the scene. This makes Wal-Mart the most prominent and authoritative expression of the paradoxical and insoluble link between excess, superabundance and discount.

How does the company see itself? Interestingly, Wal-Mart sees itself first and foremost as a distributor of goods for its customers and not as a retailer. Accordingly, the parameters for success are the low distribution costs it achieves in cooperation with its biggest suppliers. Wal-Mart has the lowest prices because it has the lowest distribution costs. In the Age of Cheap, logistics is the key.

What counts in the end is logistical intelligence, the mastery of routes and a corresponding IT architecture. Everything else follows on from that. A faster turnover of consumer goods, meaning better inventory management with the FMCGs fastmoving consumer goods , is the basis for success, because The Wal-Martization of our society 63 fast-moving consumer goods mean fast-moving consumers. A faster turnaround of goods means a faster turnaround of customers. We have said that it stands for the paradigm of globalization and deregulation.

And globalization and deregulation can only be had with a resulting paradox. While on the one hand customers have a high degree of faith in the company and the basic message of low prices sounds positive, step by step Wal-Mart is destroying not only organically grown trading landscapes, but also social networks.

There are websites, case studies and books on this subject, too. And then, using the profit thus generated and together with its British base Asda , it can continue to invest in the global markets, after first exploiting its synergy potential in the USA, for example by creating new distribution channels. For example, in February , the Grocery Supercenter channel opened, a cross between the well-known General Merchandise Stores the traditional channel of the discounters and the Supercenters, which rely heavily on food.

It is thus in direct competition with Californian supermarkets like Vons 64 Cheap which belongs to Safeway , Albertsons or Ralphs Kroger group , which are on average 14 per cent more expensive. This has led to mass protest, as these other chains are only too aware that, in the last 10 years, Wal-Mart has already driven more than two dozen national supermarket chains bankrupt.

And the social insurance system, for example health insurance, is much worse. Because of this many employees fear it will bring to an end their modest middle-class standard of living. And in the end, it is the state that is called upon to solve the problems created by the company. Today they quit after only a few months. And the pressure is increasing. As wage costs are high in the supermarket branch Supercenters , cuts are being made in social insurance and, of course, the employers want no truck with the unions.

But since WalMart follows its philosophy so relentlessly, its competitors are forced to string along in order to remain competitive, for at least a little while. Most economists in the USA argue that the Wal-Martization of labour is simply evidence of a functioning free market economy. They argue that, if Wal-Mart helps its customers to save billions of dollars every year, all its rivals have to follow suit.

The company that makes its mark by taking the cost of manufacturing products and services up will lose, and the country that promotes that will lose. It stands paradigmatically for the economic and social trend towards cheaper products and services and it stands for the last 25 years of the US way of rationalizing our way of life. Let us now summarize the most important points.

It does not only sell low-priced products, but proceeds from the premise that price and value are increasingly important. What value do I get for what price? Potentially, every product could be included on its list if its value can be made attractive. In other words, Wal-Mart will continue to develop wherever it has something to offer for customers from all levels of society. But the traditional big-name credit cards are not accepted!

He wanted to get bonus miles for the sum, a sort of incentive to make such a big purchase at Wal-Mart — free flights to the Bahamas for himself and his wife. How did he solve the problem? The favourable price is more important. And the emotional pull of the low price is such that they are more than happy to do without the sales patter.


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  • FACE OFF: Buy Local VS Buy Global.

In the battle for financially strong but price-conscious customers, Wal-Mart, Costco and Target are always adding new products and ranges. You could say that premium articles are rapidly becoming mass merchandise. Wal-Mart — like Aldi — adheres strictly to its own set of principles. They include keeping to agreements, being honest, settling invoices punctually and not cheating. The first effect of such a cooperation is a disciplinary one. Let us return to the example of the pickled gherkins The Wal-Martization of our society 67 mentioned in Chapter 2. But the bottom line is that Vlasic and Wal-Mart earn next to nothing on this product.

Consumers who used to buy their gherkins in the supermarket now buy them at Wal-Mart, because they are far cheaper there. The deal has given Vlasic celebrity status on the WalMart shelves, but at the same time the company is forced to buy and produce much more cheaply, as margins have been eroded. Companies like Vlasic that make 30 per cent of their turnover at Wal-Mart are not to be envied.

Unless they have done some careful strategic planning, they will run into difficulties. However, the area where most adaptability is required is management. Suppliers that want to work with Wal-Mart have to be leaner, more focused and more efficient. Their whole organization has to be brought into line with these aims. If they want good growth rates, they have to consider whether they will be able to keep pace with Wal-Mart and its conditions in future.

Many cannot resist the temptation to try. A supplier that loses the Wal-Mart account is going to have to find several new retailers to get anywhere near the same volume of 68 Cheap orders. If you do business with Wal-Mart, you become a Wal-Mart double. Take the example of Levi Strauss.

The giant jeans manufacturer has been having serious problems on all fronts over the last few years, and sales have been falling steadily. Should Levi prostitute itself and crawl to Wal-Mart? The answer is yes, because then it will be forced to bring its chronically unpunctual organization, which almost always delivers late, into line with rigid WalMart standards. What Levi stands to gain by this is volume and attention.

The rest, however, could mean the beginning of the end for the brand — look at Vlasic. Wal-Mart expects its suppliers to deliver at prices that are in the lower price segment, unknown territory to Levi Strauss, which has only produced premium jeans so far. Here, too, it is the symbolic significance of the deal that is more important: anyone who enters into a cooperation with Wal-Mart automatically gets an image transfer free of charge. And the new image is unmistakable: cheap. And so one of the icons of US consumer culture closed its last two US production sites in , both of them in San Antonio.

Two thousand five hundred jobs were lost, and this once proud company, a company with a well-developed sense of social responsibility, now produces all its goods in Asia and sells them at rock-bottom prices at Wal-Mart. Either Wal-Mart does the job itself verticalization or it The Wal-Martization of our society 69 finds another manufacturer for the product. This, however, is not a path that automatically guarantees success, because the others will all be trying to do the same thing in order to gain more freedom of action.

The change in the labour force As described above, this naturally has its effect on a labour force carrying out skilled and well-paid work, as, for example, was typical in the automotive industry. This kind of labour force disappears. Today you can find the same people working on the checkout at Wal-Mart for half the wage. One thing seems certain: Wal-Mart will have to continue cutting its operating costs. For many skilled and qualified workers, the fact that they have to work for Wal-Mart symbolizes their failure. A good selection of goods at good prices. But they pay for this with hard work and low wages.

And with this logic, it seems inevitable that, if you look closer at the organization, you are going to find it employing illegal immigrants. And this in turn produces the unavoidable double moral standard of a world in the process of globalization. While our work processes require us to exploit our personal resources more and more — time, money, mental and physical energy — in a deregulated world of leisure we get to do whatever we want in our free time.

Uninhibited hedonism and inhibited work standards meet in an insoluble paradox. This Wal-Mart with its low prices in the sense of value plus price and its low wages is in an increasingly polarized position in contrast to a world of premium values with exorbitant wages in top management. Here, too, the question is how long this can go on. If anything, the opposite is the case.

Cheap: The Real Cost of the Global Trend for Bargains, Discounts & Customer Choice Cheap: The Real Cost of the Global Trend for Bargains, Discounts & Customer Choice
Cheap: The Real Cost of the Global Trend for Bargains, Discounts & Customer Choice Cheap: The Real Cost of the Global Trend for Bargains, Discounts & Customer Choice
Cheap: The Real Cost of the Global Trend for Bargains, Discounts & Customer Choice Cheap: The Real Cost of the Global Trend for Bargains, Discounts & Customer Choice
Cheap: The Real Cost of the Global Trend for Bargains, Discounts & Customer Choice Cheap: The Real Cost of the Global Trend for Bargains, Discounts & Customer Choice
Cheap: The Real Cost of the Global Trend for Bargains, Discounts & Customer Choice Cheap: The Real Cost of the Global Trend for Bargains, Discounts & Customer Choice
Cheap: The Real Cost of the Global Trend for Bargains, Discounts & Customer Choice Cheap: The Real Cost of the Global Trend for Bargains, Discounts & Customer Choice
Cheap: The Real Cost of the Global Trend for Bargains, Discounts & Customer Choice Cheap: The Real Cost of the Global Trend for Bargains, Discounts & Customer Choice
Cheap: The Real Cost of the Global Trend for Bargains, Discounts & Customer Choice Cheap: The Real Cost of the Global Trend for Bargains, Discounts & Customer Choice

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