Tuesday, November 15, 2011

Where Do You Buy Your Stuff?

Grist has been doing an expose on Wal-Mart recently, and today's installment examines the poor quality of the stuff we're buying these days. Long story short: Wal-Mart profits from selling sheer volumes of stuff, so they induce manufacturers to cut corners to lower costs. These lower costs mean people buy more, but they also mean that the quality is lessened, so that stuff wears out faster, meaning you have to buy more stuff. Buying all this stuff at Wal-Mart gives them more control over the market, making the whole thing a vicious circle:
Prices on general household goods have fallen by about one-third since the mid-1990s. Given how awash in stuff we were in those boom years, it's shocking just how much more we buy now. Since 1995, the number of toasters and other small electro-thermal appliances sold in the U.S. each year increased from 188 million to 279 million. The average household now buys a new TV every 2.5 years, up from every 3.4 years in the early 1990s. We buy more than 2 billion bath towels a year, up from 1.4 billion in 1994. And on and on.
While there are certainly factors beyond Walmart that have contributed to this ever-expanding avalanche of consumption, the company has been a major driver of the trend. Its growth and profitability rest on fueling an ever-faster churn of products, from factory to shelf to house to landfill.
In a paper [PDF] that came out last year, three business professors illustrate how inducing manufacturers to cut product quality enhances Walmart's competitive position. "Because lower quality products are usually cheaper to produce, it is often argued that discount retailers induce lower quality in order to drive down prices. Our model suggests, however, that the competitive and bargaining position effects provide incentives to induce lower quality regardless of changes in production costs," the authors write. In other words, getting manufacturers to make shoddier products doesn't just mean that Walmart can offer super-cheap wares; it also helps Walmart marginalize its competitors and gain more dominance over its suppliers.
It's one of the reasons I never shop there.

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