Destructive competition as a stinky enterprise.
When Toys “R” Us said in August that stiff competition from mass merchant Wal-Mart Stores was making it consider exiting the toy business, the news struck fear in the hearts of retailers everywhere.
The notion of creating giant specialty stores that cater to a particular product segment has become a staple of the US. economy. But Wal-Mart. the antithesis of a category killer with aisles stocked with a vast spectrum of products, is posing a dire threat to this way of business.
— Penelope Patsuris, Forbes.com, November 1
As an inhabitant of Middle America, I am home in a Wal-Mart store, even to the degree that I sometimes forget what city I am in. My reason for being there are commonplace: the products are inexpensive, easily available, and close to home.
The big discount store, though, is not my preferred shopping experience. I prefer shopping in stores where the sales staff are familiar with their products, and know how to make a sale. I bought this computer from Best Buy partly for that reason, partly because the choice of computers at our Wal-Mart location was very limited. Beyond the category stores I prefer the big and pricey department stores that anchor suburban malls, but these are an hour or more away from where I live. Wal-Mart (and K-Mart and Shopko and Fleet Farm) is just fifteen minutes away.
Though Wal-Mart offers the hand that feeds me, I am still going to bite it. In fairness, the evidence that Wal-Mart intends to drive competition out of business is circumstantial, so I am stating a suspicion, not a case. The news item, as always, is the occasion for my remarks, on a “that reminds me” basis; I am not arguing its substance. Some see driving a competitor out of business as fair practice, so even if my suspicion is correct, so what? This may seem to be a minor sin compared to other accusations made against Wal-Mart — poor compensation, dependence on goods produced by very cheap labor overseas (the shirt I am wearing right now should have cost at least twice as much, in order to pay a proper wage for its manufacture), and so on.
One sin at a time, please. Today the ethical lesson (ethical, not economic) is about destructive competition, whether Wal-Mart is guilty of it or not.
Ethical retailing means buying at a fair price (the fair wholesale price includes responsible compensation for those who produced the goods or services as well as profit for the owners or stockholders), then selling at a fair retail price (which includes responsible compensation for both employees and owners). No business is required to guarantee the survival of its competition.
On the other hand, the failure of any competitor should be his or her own fault, not the result of a concerted effort to shut it down. There are plenty of ways to fail without being driven out of business.
A couple of years ago I wrote that war and espionage are stinky enterprises. They have to be, since by definition they are about killing and deceiving people. Competition designed to destroy other businesses is also a stinky enterprise. It doesn’t kill people with bombs and bullets, but it intentionally kills their hopes labor, and capital.
John Wesley was preaching at the dawn of capitalism in the eighteenth century when he said, "We cannot, consistent with brotherly love, sell our goods below the market price; we cannot study to ruin our neighbour’s trade, in order to advance our own; much less can we entice away or receive any of his servants or workmen whom he has need of. None can gain by swallowing up his neighbour’s substance, without gaining the damnation of hell!" (The Use of Money).
Ethically, Wesley was right. What other kind of "right" is there?