Do the Benefits of Wal-Mart Outweigh Its Drawbacks?

There are a lot of mom and pop retailers out there, across America, and some that are a bit bigger than that. Local or regional chains give little towns and big cities some of their local charm. I feel bad when I see these operations fail to adapt to the arrival of the Wal-Mart gorilla. And this is true not just in the Wal-Mart market sector, but in many others as well. Traditional hardware stores that survive the arrival of Home Depot or Lowe’s do so because they are providing either levels of service or inventory that the big-box home improvement stores don’t. If I need black oxide button head 8-32 1.25” long machine screws on a Saturday, I go to the Ace Hardware store in Eagle, Idaho, because they have it. Home Depot doesn’t.

Still, for all the tears over the loss of some traditions of American retailing, it’s important to remember that Wal-Mart’s efficiency and ruthless paring of costs to the bone benefits consumers -- even consumers who aren’t shopping at Wal-Mart. Wal-Mart’s prescription program provides an astonishing number of the most commonly prescribed drugs for $4. That’s less than the health insurance copayment for many of these drugs at traditional pharmacies. If you are one of the tens of millions of Americans who don’t have health insurance, or whose plan doesn’t have prescription coverage, that’s a really big deal.

I normally fill prescriptions for my family at Albertson’s (one of the regional grocery store chains here in the Western U.S.).  On a number of occasions now, I have gone to pick up a prescription and had the pleasant surprise of paying only $4 for it. Why?  Albertson’s has adopted a policy of matching Wal-Mart’s price on many prescriptions. The motivation is not concern for consumers.  As Adam Smith’s Wealth of Nations (1776) pointed out, “It is not from the benevolence of the butcher, the brewer, or the baker, that we expect our dinner, but from their regard to their own self-interest.” Albertson’s wants to keep customers from switching to Wal-Mart’s pharmacy.

Let us not close our eyes to some very real problems that Wal-Mart brings to the retail marketplace. But we should also recognize that the company's ferocious pursuit of efficiency is also bringing some very real good to consumers as well.