“The Squeeze” is one of the chapters from the article “The Wal-Mart Effect” written by Charles Fishman. The ability of Walmart to resist the law of supply and demand not only affects the competitors and the consumers, but also the entire economy . The company focuses on pricing strategy to hold the suppliers’ business hostage to its personal agenda and distort markets in such a way that the customers don’t realize and suppliers can’t encounter. The biggest advantages of Walmart are its deflationary effect on the prices of the goods and its persistent promotion of goods all through the supply chain of production, distribution, and sale. Walmart priced a gallon of Vlasic pickle for $2.97 and stated the product as “A year’s supply of pickles for less than $3” . The low price of the pickle created a great demand for gallon jars of pickles.
In his essay, Fishman explains that customers bought the gallon jar instead of one or more practical size jars due to the lower price. The scenario of the Vlasic pickle explains the impact of Walmart in a market economy. It describes the impact of how the low prices affect the companies that supply goods to Walmart. The gallon jar concept reshaped the pickle business of Vlasic. Though the huge volume of sales gave strong growth numbers and sales numbers to Vlasic and made it powerful in the world of pickles, it affected the profit margin of both Vlasic and Walmart . Business with Walmart was indispensable to Vlasic and the gallon jar concept of Vlasic was central to Walmart. Walmart and other similar companies influence the market forces by not only shaping the products and prices, but also by reaching the operations of the companies and modifying the way they pack and present the products .
The low price of the gallon jar pickle was a lie to attract the buyers and irrelevant to both the supply of cucumbers and the demand for pickles. Walmart imposed a lower price as a fiction. While the consumers saw bargain, Vlasic could not find a way out. It implies that both were a part of the price gimmick employed by Walmart and not responding to the market forces. The consumers validate their expenditure choices that they prefer products that are lower in price . They enjoy benefit both from the direct price effect and the indirect price effect. However, Walmart relies on relatively large and bulk purchases for much of its sales. In the case of Vlasic, Walmart threatened to drop the product if Vlasic did not accept the conditions imposed by them. Though neither of the companies benefited from the lower price of pickles, Vlasic could not drop out considering the market dominance of Walmart .
Walmart observes the trends of customer behavior and analyzes the impact of sales promotions in purchase decisions.The company impacts the customer’s behavior by influencing the perceptions of the customers on price research, memorizing prices, promotional coupons and response to prices. Walmart focuses on low and medium income customers by offering discounted prices and promotions . When compared to the competitors, customers respond to Walmart as it emphasizes on low prices. Wal-Mart possesses the power to squeeze huge concessions from the vendors, which kill the profits. In order to survive in the market of pricing demands, the manufacturers of goods ranging from groceries to bicycles and electronics had to lay off their employees and close the manufacturing plants. Walmart is well aware of the behavior of the consumers; however, it must focus on the actual buying process in terms of habitual buying, which requires less involvement.
The scale and power employed by Walmart does not limit to the delivery of goods at lower prices, but the way Walmart manages to get the prices low and the impact of the lower prices beyond the shelves of Walmart. The lower price strategy employed by Walmart also impacts the companies that supply goods to Walmart and the people working for such companies. With the lower prices mentioned on the gallon jars of pickle manufactured by Vlasic, the companies could make only a few cents as profit . The gallon jar concept became a devastating success for Vlasic. While the concept worked out in the initial years, the gallon jars remained in the shelves of Walmart for two and a half years. Though the business grew, Vlasic lost million dollars of profit. Walmart is so large that it can flexibly defy the laws of supply and demand.
References
Fishman, Charles. The Wal-Mart Effect: How the World's Most Powerful Company Really Works--and HowIt's Transforming the American Economy. Penguin, 2006.
Wiederman, Adam J. "The Consumer Trends That Are Slowly Killing Walmart." 26 03 2012. Daily Finance. 20 11 2014 <http://www.dailyfinance.com/2012/03/26/the-consumer-trends-that-are-slowly-killing-walmart/>.
