Good Essay On Retail Revolution: Sears, Wal-Mart, Amazon
1. Explain and compare the stunning success of each of these three companies (each dominant during different historical times) in terms of the deployment of new technologies, the mastering of the supply chain, marketing/advertising strategies, and most importantly, the privileging (or pampering) of the Customer/Consumer (and the rhetoric that goes with it). You are free to use other factors to explain and compare how each of these retailers succeeded so dramatically in the marketplace.
Supermarkets and retails stores are sprawling across the United States today. Most of these retail chains are optimizing their market share by extending their operations; establishing stores in almost all cities and communities. The retail industry offers one of the most competitive environments in the business community and North America has witnessed to the revolution of these retail giants such as Sears and Wal-Mart. Sears began as a catalogue retailer in the early 1890s focusing on mail-to-order business. At this time, there were no huge department stores in the US yet and most retail businesses follow traditional retail models commonly referred to as mom-pop stores. In 1910, Sears eventually set up distribution centers to cater for their increased mail-to-order sales. These distribution centers were set up in Dallas, Seattle and Philadelphia. As their consumer base began to grow incrementally, the company began to cater retail customer in their distribution centers in 1925 and began to expand phenomenally. Sears opened its first retail outlet in 1930 in New York City. Evidently, the company survived the Great Depression and by 1941, it has already established more than 600 stores nationwide.
Just like Sears, Wal-Mart’s business model is based on retailing but unlike Sears who started out small, Wal-Mart started out as a big retail outlet when Sam Walton opened the first Wal-Mart store in Arkansas in 1962. Its first store was about 106,000 square feet and is manned by about 200 associates (Wal-Mart Stores, Inc 2014). Since it started, Wal-Mart overtook established retail store chains such as Target and Costco and eventually exceeded Sears as the leading retail company in sales and revenues. The company also stayed on top of the Fortune 500 companies consequently and is the only retail company on its top four lists that is not a major energy company. While both are retail giants, the major difference between Sears and Walmart is on their business strategy. Wal-Mart’s strategy is it targets low-income to middle-income customers by offering the lowest price in the industry. Wal-Mart’s supply chain management is also one of the most efficient supply chains in the world as they operate their own truck fleet within different distribution centers in different regions of the U.S.
With the advent of the internet technology, a new retail model emerged using the internet as a platform. Amazon was founded by Jeff Bezos as an ecommerce site in 1995. By comparison, Amazon is like the modern version of Sears when it started out as a mail-to-order retailer. Amazon is like a virtual department store where one can shop and order items. These items are then delivered right at the customer’s doorstep. However, in order to complete the process of ordering and delivery, the company has to maintain distribution centers or warehouses where the goods coming from suppliers are repackaged and processed and sent to couriers for delivery. Some people regards Amazon as the future of retail since it offers a convenient option for consumers to shop without even leaving their homes. And yet it appears that some people still prefer to visit department stores to shop as evidenced by the steady increase of revenues of department stores such as Wal-Mart.
2. This revolution is characterized in the Frontline documentary on Walmart as the domination of the ‘pull economy’ over the ‘push economy.’ What does this exactly mean? What are the key features of the ‘pull economy’ as exemplified by Walmart as a brick-and-mortar retailer and by Amazon as an ‘on-line’ retailer?
The pull economy is characterized by responding to customer demands while push economy is characterized by the supply that is being pushed by suppliers for consumption. The term ‘push’ and ‘pull’ economies have been popularized following the success of the Japanese Lean management system wherein the production of goods is based on visual signals also known in Japanese as ‘kanbans’. But the history of ‘push’ and ‘pull’ economies have originated and inspired by retailers such as Sears and Wal-Mart. The concept of ‘pull’ as it relates to retailing can be observed in the shelving of goods. In a department store setting, the shelves will only be replenished once it has already reached a certain level of stocks. The levels of stocks also serve as a signal for managers to order for new stocks. In a push economy, however, manufacturers and suppliers produce goods in excess or in anticipation of future demand. Often times, this type of manufacturing create inventory issues and waste. In an online retailer such as Amazon, the applicability of the push and pull systems is also observed. In fact, the monitoring of customer demands is even easier because of the application of new technologies in computing.
3. What are the negative economic, political and cultural consequences of this retail revolution in terms of decimating the competition, squeezing the suppliers for reduced prices, forcing the suppliers to ‘outsource’ production, treatment of low-end employees, and questionable ethical practices (bribery and unsafe working conditions in factories managed by vendors in poor countries)? Here focus on Walmart and Amazon.
In his congressional report, Representative George Miller exposed the unfair labor and business practices of Wal-Mart toward its employees and suppliers. According to Miller, Wal-Mart’s everyday low-price comes at the expense of underpaid employees and strongly influence suppliers to lower their prices. Wal-Mart’s growth has also taken a toll on smaller retail business in the local market. One of its corporate strategies is to dominate the local and international markets. Most local retailers were complaining about the influence of Wal-Mart on their business and some are even forced to close since their prices could not compete with Wal-Mart’s. According to Zenith Management Consulting, most of the competitor’s attitude towards Wal-Mart is that it would be impossible for them to overpower and compete with Wal-Mart and all they can do is to “co-exist by accepting the business conditions Wal-Mart determines”. Just like Wal-Mart, Amazon is also accused of unfair labor practices. Just recently, Amazon workers in Germany conducted a strike demanding that their wages are raised. Wal-Mart has also encountered similar labor conflicts causing it to backed out of Germany in 2006 .
4. Finally, who are the ‘winners’ and who are the ‘losers’ of this revolution? Is the privileging of the ‘Consumer’ at the expense of the ‘Producers’ good for America?
Economists and scholars believe that the rise of the retail industry was a big boost to the economy as well as provide enormous social changes to American society. As observed by Tamilia, “the department store was marketing’s contribution to the Industrial Revolution”. Retail giants such as Sears and Wal-Mart generated huge revenues, which are in turn taxed by U.S. government. Thus, in a way, America benefits economically from these retail industries. Aside from that, the retail industry has opened numerous employment opportunities. Despite criticisms of low wages that are being offered in retail companies, the fact that these companies offer a lot of jobs, they significantly decrease the number of unemployed persons in the U.S. Consumers are also benefiting from the price wars that these retail companies engage with. As a result, consumers can have enormous savings unlike in specialty stores where prices are significantly higher. Convenience is also a major benefit of retail stores on consumers. Housing all life’s necessities in just one building, consumers do not have to go around getting their provisions. On the negative side, because of the enormous power that retail companies wield towards suppliers, suppliers are pushed to look for alternatives to lessen their manufacturing costs. As a result, they outsource their manufacturing to other countries and eventually transferring their facilities outside the U.S. Perhaps further research must be conducted on this concept in order to determine if the cost of the leaving manufacturing industry can be compensated by the revenue generated by retailers such as Sears, Wal-Mart and Amazon.
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