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Tuesday, September 04, 2007

Wal-Mart's High, High Prices

First there was poisoned dog food, then lead paint on toys, toothpaste with antifreeze in it, on and on. It's easy to blame China for these things and we should, but the US shares part of the blame. Asked about the safety crisis with chinese imports by Chris Matthews on Harball, CNBC's Erin Burnett did a little truthtelling.

A lot of people like to say, uh, scaremonger about China, right? A lot of politicians, and I know you talk about that issue all the time. I think people should be careful what they wish for on China. Ya know, if China were to revalue it's currency or China is to start making say, toys that don't have lead in them or food that isn't poisonous, their costs of production are going to go up and that means prices at Wal-Mart here in the United States are going to go up too. So, I would say China is our greatest friend right now, they're keeping prices low and they're keeping the prices for mortgages low, too.

Of course, the way she put it suggests that Erin has the priorities of a pre-ghost Ebenezer Scrooge and the value system of a serial killer. I mean, how low can you really say these prices are when they're accompanied by a casualty count? Who's out there brushing their teeth with antifreeze and thinking, "At least it's cheap?"

The truth is that those low prices come with hidden costs. They're artificially low, because of pressure from US retailers. And those hidden costs are environmental, as well. Writes Dave Zweufel, Editor for The Capital Times, "A recent Wall Street Journalstory, for instance, told of a surprise inspection Chinese investigators pulled on a textile plant in southern China, a plant that makes textile material for the likes of American icons Wal-Mart, Nike and Lands' End."

"Villagers near the plant complained that the factory was turning their nearby river water a dark red," he writes. "The inspectors found a pipe buried underneath the factory floor that was daily dumping 22,000 tons of waste water contaminated with dye from its shirt-making operation."

There's really no such thing as "chinese water," any more than there is chinese air. Eventually, that polluted air and water is distributed around the globe. If you don't wind up with poisoned food, you'll wind up with polluted water eventually. And China's water is incredibly polluted. Believe it or not, these multicolored liquids in these bottles are water samples from lakes and streams.

Water in pastel shades

"Decontaminating the water would have cost big money -- hundreds of thousands a year -- and undoubtedly jeopardized the contracts with the Americans," Zweifel writes. "Dumping the dye into the river was much cheaper." Is drinking whatever the hell that red stuff is worth a couple bucks off on a Barbie doll?

The chinese government admits it has a problem, saying that more than 70% of China's rivers and lakes were polluted in 2005. According to a BBC story at the time, "The China Daily newspaper said that about two million people had suffered diseases caused by drinking water with high arsenic content, including cancer."

Speaking to Stefan Stern of the Financial Times, Mary Teagarden, a professor at the Thunderbird school of global management in Phoenix, Arizona, explained things this way, "Wal-Mart squeezes Mattel [the toy maker], Mattel squeezes its supplier, that supplier squeezes its supplier, and at the end of the chain you have a remote business far out in the countryside that takes a different approach. They don't put lead in paint because they are wicked, it's just what works for them. China is so large, and industrialisation has been so rapid, that maintaining any control over multiple sites is extremely difficult." Everyone puts the squeeze on the guy down the line and, eventually, you wind up with a supplier with no one to squeeze -- so they cut costs in other ways or lose the business.

If you keep cutting corners to cut prices, eventually you'll be forced to cut too deep. And that means environtmental disaster, sweat shops, or lax consumer safety concerns --in many cases, in combination.

Luckily, US consumers understand this. A recent AP-Ipsos poll shows that most americans understand that US companies share some og the blame. According to the report, "[T]here was widespread consensus that plenty of blame can be spread on both sides of the Pacific. Eighty-four percent said Chinese manufacturers and the U.S. businesses which sell Chinese products in this country deserve some or a lot of culpability for the problem."

For its part, mega-marketer Wal-Mart has promised to make changes to its toy safety program. They promise that toys will be tested for safety. But Nu Wexler of Wal-Mart Watch says these promises don't go far enough. "Wal-Mart's not addressing the larger problem of why Chinese toy suppliers are cutting corners with lead paint and melamine," he told the Washington Post. "It's because they're under enormous pressure from buyers like Wal-Mart, and they're sacrificing child safety to keep costs low."

And adult safety, pet safety, worker safety, and the environment. As long as american marketers have the same attitude toward consumer safety and China as Erin Burnett -- putting artificially low prices above every other concern -- these problems will continue.

There's an old saying, "You get what you pay for." If you pay crap for something, you get crap -- like antifreeze in toothpaste and water in lovely pastel shades.


Technorati tags: ; ; ; ; ; ; Marketers like force to cut costs, then pass the savings on to you -- and not in a good way



What about when wal-mart sold nothing but items made in the Good Ole U.S.A. ? I think we should go back to producing and making our own money, and let China make theirs.

Anonymous said...

I work for a company that distributes hardware nationally. We used to pride ourselves in the quality of our merchandise and built the company on that reputation. We sold at a higher cost than many competitors but, despite that, were able to slowly build a strong, passionately dedicated customer base. Now, with our new, up to date, management team, we are throwing that whole paradigm out the window, buying the cheapest possible crap from China, aggressively sweeping up new markets with our lower prices and making the mass marketers very happy with their margins. We just had our first recall of Chinese hardware. e-mail complaints from end users are on the rise. In just 4 years we have managed to piss away of fruits that 30 years of honesty and care bore. I'm ashamed to be in the business any more and am looking for new work with a smaller, quality driven company that makes or distributes US made products. Unfortunately, the only products still made in the USA that there's any money in is rockets, bombs, guns, and drugs. What a fucked up mess we have left for our children.


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