wal-mart, should it have this much power? Options

[timeflies51]

Here is Wal-Mart's latest stunt:

Apple recently announced that they are going to have movies available for downloading at a price of $14.99 for new releases and $9.99 for regular flicks. Wal-Mart sells 40% of all of the DVDs that are sold anywhere at a price of $17. Obviously, this is going to have a large impact on their profits. Wal-Mart is also planning to have their own download site to compete with Apple.

Wal-Mart is threatening Hollywood companies and telling them to cut their prices for DVDs lower so they can compete with Apple, (edit) or telling them not to have their movies available for download at all. They've gotten nasty about it, too; they didn't want to sell "High School Musical" because Disney let it be available for download on iTunes.

(EDIT) If certain companies in Hollywood do not comply with Wal-Mart, Wal-Mart will not sell that companies' DVDs.


Do you think Wal-Mart has the right to do this? Not only that, what do you think of Wal-Mart in general? Discuss.

[alysaphobia]

Walmart is available in 15 other countries outside the U.S. iTunes, on the other hand, is available in 20 countries not including America... plus, for some of us, isn't it easier to get on a computer and download something rather than going to a Walmart? (which could potentially be pretty far away depending on where you live)

[Spirited Away]

Walmart is available in 15 other countries outside the U.S. iTunes, on the other hand, is available in 20 countries not including America... plus, for some of us, isn't it easier to get on a computer and download something rather than going to a Walmart? (which could potentially be pretty far away depending on where you live)

You know, Wal-Mart wasn't always available in those 15 countries, but the stores became available didn't they? What makes you think they'll stop growing at 15 countries? Hey, I'm no economist nor do I make very good forecasts, but something tells me Wal-Mart won't go into sudden decline or stop expanding anytime soon. Well, "something" didn't tell me--that was sarcasm, historical data can be used to predict future growth trends, obviously.

I think you missed the part where the topic starter wrote "Wal-Mart is also planning to have their own download site to compete with Apple." Why drive Wal-Mart when you can go to virtual Wal-Mart? Distance wouldn't be a problem.

You said no one should compete with itunes as a source of legal downloads, yet competition is one of the biggest reasons for low prices. So compete away, I'd say. If itunes can do better to compete, I'm for that, too.

[*kryogenix*]

You know, Wal-Mart wasn't always available in those 15 countries, but the stores became available didn't they? What makes you think they'll stop growing at 15 countries? Hey, I'm no economist nor do I make very good forecasts, but something tells me Wal-Mart won't go into sudden decline or stop expanding anytime soon. Well, "something" didn't tell me--that was sarcasm, historical data can be used to predict future growth trends, obviously.

I think you missed the part where the topic starter wrote "Wal-Mart is also planning to have their own download site to compete with Apple." Why drive Wal-Mart when you can go to virtual Wal-Mart? Distance wouldn't be a problem.

You said no one should compete with itunes as a source of legal downloads, yet competition is one of the biggest reasons for low prices. So compete away, I'd say. If itunes can do better to compete, I'm for that, too.

I agree in the sense that Walmart has the right to compete with iTunes. As the consumers, we have everything to gain when there is competition. However, isn't it illegal for Walmart to use it's command of DVD retail as leverage in the online movie market?

[Spirited Away]

I agree in the sense that Walmart has the right to compete with iTunes. As the consumers, we have everything to gain when there is competition. However, isn't it illegal for Walmart to use it's command of DVD retail as leverage in the online movie market?

Wal-Mart has been doing just that to all their suppliers though. If it's illegal, somebody would have already busted them long ago.

This is how Wal-Mart works. The company says "I will pay $5 for one case of widget, no more. Make it happen". If the supplier can't sell the widget at that price, then Wal-Mart simply jumps to someone who can and ditch the old supplier. Suppliers must compete for their business. It's hostile, but that's how they became a low-price leader. Though Wal-Mart has many legal problems, using their power as one of the world's largest retailer as leverage in negotiation isn't one of them.

Anyway, Costco is my store. *plug*

[*kryogenix*]

Wal-Mart has been doing just that to all their suppliers though. If it's illegal, somebody would have already busted them long ago.

This is how Wal-Mart works. The company says "I will pay $5 for one case of widget, no more. Make it happen". If the supplier can't sell the widget at that price, then Wal-Mart simply jumps to someone who can and ditch the old supplier. Suppliers must compete for their business. It's hostile, but that's how they became a low-price leader. Though I'm sure Wal-Mart has many legal problems, using their power as one of the world's largest retailer as leverage in negotiation isn't one of them.

Anyway, Costco is my store.

Nononono, that's different. What you're describing is not illegal as far as I know. Walmart can refuse to stock whatever they want in order to leverage prices in the same product category. What they can't do is use a monopoly to leverage DVD sales with an online service.

Microsoft's been busted on this, I don't see why Walmart can't be.

No Walmart's arond here, so it's Shoprite for me.

[Spirited Away]

I'm just a tad confused then. What monopoly?

I've never heard of Shoprite, but if it's anything like Costco...

[*kryogenix*]

I'm just a tad confused then. What monopoly?

I've never heard of Shoprite, but if it's anything like Costco...

I suppose they have a monopoly is certain areas. They lack a full horizontal monopoly, but they are using their large chunk of market share as leverage for their decisions. I don't really know much about these laws, just that Microsoft got busted with the monopoly law.

I think ShopRite's only in the tristate area. They aren't exactly like Costco since it's not a club, but it's near our house and the price on groceries isn't that bad.

[Spirited Away]

I suppose they have a monopoly is certain areas. They lack a full horizontal monopoly, but they are using their large chunk of market share as leverage for their decisions. I don't really know much about these laws, just that Microsoft got busted with the monopoly law.

I think ShopRite's only in the tristate area. They aren't exactly like Costco since it's not a club, but it's near our house and the price on groceries isn't that bad.

I didn't see a monopoly because there is presence of competition for what we are discussing and Wal-Mart is trying to lower prices, not raise them. Monopolies try to raise prices, I've always thought. Anyway, I haven't really analyzed or even researched the details to know for sure, and I wouldn't want to. The whole thing is a mess of economic and business jargons that I didn't understand in class, so I doubt I'd understand it researching on my own. I do know that Wal-Mart's strategy has been labled as monopsony and the suppliers who gets kicked out can't get sympathy from any court. At least, none that I've heard so far.

Yea, there are a lot of Costco's in the north. There's only one in Houston. That's a shame.

[*mipadi*]

I didn't see a monopoly because there is presence of competition for what we are discussing and Wal-Mart is trying to lower prices, not raise them. Monopolies try to raise prices, I've always thought.

Actually, this situation fits quite nicely into the definition of a monopoly. The classic economic definition of a monopoly is a market in which one entity can control the prices of products. If Wal-Mart is able to control the retail price of DVDs, it is engaging in a monopolistic practice.

Monopolies don't necessarily try to raise prices; rather, they try to maximize their profits. Even in a monopoly, prices can only rise so high before people a) won't buy the product or b) can't afford the product, so even a monopoly is limited in how high it can raise prices. Wal-Mart is trying to use its power as a major reseller to maximize its own profits and discourage competition, which is monopolistic in nature.

[Spirited Away]

Actually, this situation fits quite nicely into the definition of a monopoly. The classic economic definition of a monopoly is a market in which one entity can control the prices of products. If Wal-Mart is able to control the retail price of DVDs, it is engaging in a monopolistic practice.

Monopolies don't necessarily try to raise prices; rather, they try to maximize their profits. Even in a monopoly, prices can only rise so high before people a) won't buy the product or b) can't afford the product, so even a monopoly is limited in how high it can raise prices. Wal-Mart is trying to use its power as a major reseller to maximize its own profits and discourage competition, which is monopolistic in nature.

Then my question would be can't a competitor set up a similar strategy and compete with Wal-Mart (DVD sales wise)? The answer is yes, of course, there are many, many competing retailers, supermarkets, drugstores...etc. If suppliers can't get their stuff on Wal-Mart's shelves, they have many other options. Barrier to entry is close to none, and isn't the opposite a classic condition to be a monopoly? Whereas in the case of Microsoft, how many systems compete with Windows? I think people have made this point before though and I'm just reiterating it. Lame, I know. (I'm bringing Microsoft because James brought it up, but I don't know much about it. Hah!).

They are not able to control prices at the end of the supply chain because the demand for DVDs will always be elastic. They try to control prices at the begining/middle of the supply chain, which is closer to a monopsony. I was thinking of antitrust when I said "raise prices", and I don't much about that either.

I'm sure Wal-Mart will become more and more monopolistic, but I don't think it's quite there yet... damn close though with the reasons you already stated.

[*mipadi*]

Then my question would be can't a competitor set up a similar strategy and compete with Wal-Mart (DVD sales wise)? The answer is yes, of course, there are many, many competing retailers, supermarkets, drugstores...etc. If suppliers can't get their stuff on Wal-Mart's shelves, they have many other options. Barrier to entry is close to none, and isn't the opposite a classic condition to be a monopoly?

There are numerous retailers, but Wal-Mart is by far the biggest. (It is the largest company in the world, if I recall correctly.) A company would really be going out on a limb by saying "We're not going to sell our goods through Wal-Mart anymore." If every Hollywood studio did it, it could work. But Hollywood studios aren't a single entity like Wal-Mart is; if even a few crack under the pressure, they won't have a unified front.

[Spirited Away]

There are numerous retailers, but Wal-Mart is by far the biggest. (It is the largest company in the world, if I recall correctly.) A company would really be going out on a limb by saying "We're not going to sell our goods through Wal-Mart anymore." If every Hollywood studio did it, it could work. But Hollywood studios aren't a single entity like Wal-Mart is; if even a few crack under the pressure, they won't have a unified front.

In the case with Microsoft again, who could compete with Windows? Compatibility made it impossible for Apple to cater to Microsoft's market. That's a monopoly since it deals with controlling prices at the end of the supply chain while creating a barrier to entry. Wal-Mart doesn't have that control. Though it is the largest in retail, it can't stop Target or Costco, or Walgreens from grabbing its target market. I understand what you're saying with the controlling prices by demanding its suppliers to sale at a lower price so that it can sale at a lower price, but that's control at the begining of the supply chain.

Also, you mentioned Walmart being a price maker because it's a monopoly. A company can only be a price maker if it's the only company serving the total demand for output (the end of the supply chain). We all know Wal-Mart is not. There's Target, Costco..etc doing the same thing.

[*kryogenix*]

In the case with Microsoft again, who could compete with Windows? Compatibility made it impossible for Apple to cater to Microsoft's market. That's a monopoly since it deals with controlling prices at the end of the supply chain while creating a barrier to entry. Wal-Mart doesn't have that control. Though it is the largest in retail, it can't stop Target or Costco, or Walgreens from grabbing its target market. I understand what you're saying with the controlling prices by demanding its suppliers to sale at a lower price so that it can sale at a lower price, but that's control at the begining of the supply chain.

Also, you mentioned Walmart being a price maker because it's a monopoly. A company can only be a price maker if it's the only company serving the total demand for output (the end of the supply chain). We all know Wal-Mart is not. There's Target, Costco..etc doing the same thing.

Microsoft isn't doing anything illegal by making software/windows incompatible with MacOS/PPC. That would be like nailing a gas company because their unleaded doesn't work with diesel cars. What Windows did was unfairly use its favorable position in the OS market by bundling iexplore with Windows and make it work more efficiently with windows.