Wal-Mart effect
n. The economic effects attributable to the Wal-Mart retail chain, including local effects such as forcing smaller competitors out of business and driving down wages, and broader effects such as helping to keep inflation low and productivity high. Also: WalMart effect.

Example Citations:
At Wal-Mart, ''everyday low prices'' is more than a slogan; it is the fundamental tenet of a cult masquerading as a company. Over the years, Wal-Mart has relentlessly wrung tens of billions of dollars in cost efficiencies out of the retail supply chain, passing the larger part of the savings along to shoppers as bargain prices. New England Consulting estimates that Wal-Mart saved its U.S. customers $ 20 billion last year alone. Factor in the price cuts other retailers must make to compete, and the total annual savings approach $ 100 billion. It's no wonder that economists refer to a broad ''Wal-Mart effect'' that has suppressed inflation and rippled productivity gains through the economy year after year.

However, Wal-Mart's seemingly simple and virtuous business model is fraught with complications and perverse consequences. To cite a particularly noteworthy one, this staunchly anti-union company, America's largest private employer, is widely blamed for the sorry state of retail wages in America. On average, Wal-Mart sales clerks — ''associates'' in company parlance — pulled in $ 8.23 an hour, or $ 13,861 a year, in 2001, according to documents filed in a lawsuit pending against the company. At the time, the federal poverty line for a family of three was $ 14,630.
—Anthony Bianco and Wendy Zellner, "Is Wal-Mart too powerful?," Business Week, October 6, 2003

Wal-Mart's decisions influence wages and working conditions across a wide swath of the world economy, from the shopping centers of Las Vegas to the factories of Honduras and South Asia. Its business is so vital to developing countries that some send emissaries to the corporate headquarters in Bentonville, Ark., almost as if Wal-Mart were a sovereign nation.

The company has prospered by elevating one goal above all others: cutting prices relentlessly. U.S. economists say its tightfistedness has not only boosted its own bottom line, but also helped hold down the inflation rate for the entire country. Consumers reap the benefits every time they push a cart through Wal-Mart's checkout lines.

Yet Wal-Mart's astonishing success exacts a heavy price.

By squeezing suppliers to cut wholesale costs, the company has hastened the flight of U.S. manufacturing jobs overseas. By scouring the globe for the cheapest goods, it has driven factory jobs from one poor nation to another.

Wal-Mart's penny-pinching extends to its own 1.2 million U.S. employees, none of them unionized. By the company's own admission, a full-time worker might not be able to support a family on a Wal-Mart paycheck.

Then there are casualties like Kelly Gray. As Wal-Mart expands rapidly into groceries, it is causing upheaval in yet another corner of the economy. When a Supercenter moves into town, competitors often are wiped out, taking high-paying union jobs with them.
—Abigail Goldman and Nancy Cleeland, "The Wal-Mart effect," Los Angeles Times, November 23, 2003

Earliest Citation:
The Bentonville, Ark., chain founded by billionaire Sam Walton got its start 28 years ago by opening stores in rural towns like the 5,600-population Hearne. The 1,485-store, 32-state chain is the fastest growing retailer in the USA. K mart is its chief rival.

But it also has a reputation for hurting small-town businesses that can't match the lower prices the chain can offer due to volume buying. The Wal-Mart effect has been so huge it's spawned the formation of consulting firms that specialize in advising small-town businesses on handling the arrival of a Wal-Mart.
—Julie Morris, "Store shuts doors on Texas town," USA Today, October, 11, 1990

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