Scholarly studies show Wal-Mart’s price reductions to be sizable. Economist Emek Basker of the University of Missouri found long-term reductions of 7 to 13 percent on items such as toothpaste, shampoo and detergent. Other companies are forced to reduce their prices. On food, Wal-Mart produces consumer savings that average 20 percent, estimate Jerry Hausman of the Massachusetts Institute of Technology and Ephraim Leibtag of the Agriculture Department.
All told, these cuts have significantly raised living standards. How much is unclear. A study by the economic consulting firm Global Insight found that from 1985 to 2004, Wal-Mart’s expansion lowered the consumer price index by a cumulative 3.1 percent from what it would have been. That produced savings of $263 billion in 2004, equal to $2,329 for each U.S. household. Because Wal-Mart financed this study, its results have been criticized as too high. But even if price savings are only half as much ($132 billion and $1,165 per household), they’d dwarf the benefits of all but the biggest government programs.
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To provide anecdotal evidence for the researcher’s assertion, I will relay a couple stories from my father (who told them to me since I often defend/promote wal-mart in our conversations).
My dad recently purchased a Chevy 1500 and discovered the electrical wiring on the pickup did not match his fishing boat. He drove down the road to Elkhorn’s wal-mart and bought an adapter for about $12. Not satisfied that it was “heavy duty” enough, he stopped by Young Chevrolet to see what authentic G.M. part(s) they had to offer. The woman behind the counter brought out the only adapter they had and informed him it was $26. He told her be bought the identical part at wal-mart ten minutes ago for less than half that. She said this is a genuine g.m. part, yada yada yada. He retrieved the part from his pickup, undid the packaging (that was identical) and showed her the part was identical.
Two weeks later he decided he needed a submergible light to increase the number of fish he caught (doubtlessly part of his never-ending effort to catch up to me). So he drove down the road to wal-mart and purchased a couple different lights. Again, trying to satisfy Knight by being a well-informed consumer, he decided to stop by Scheels to be sure he was getting the most bang for his buck. As to be expected, he found one of the lights at Scheels for 45% more than he paid at wal-mart. They did not have the other.
Despite scenarios like these replaying thousands of times a day, it is wal-mart that is forced to defend itself, and not, to use a recently popular expression, the “price gougers” commonly referred to as small business.