Editorial, Wal-Mart Friend or Foe to Packaging Industry, PFFC, May 2004

Wal-Mart. The very mention of the world’s largest retailer conjures images both maniacal and redemptive.

As a converter your point of view may depend on whether your company is among Wal-Mart’s ultra-exclusive club (and I don’t mean Sam’s Club), making it an approved supplier, one that hopes to become a preferred Wal-Mart vendor, or conversely, one that has no interest in jumping through hoops held by a dictatorial—as some have described—customer. How can one retailer be both so hated and so loved…or is it just tolerated?

There’s no denying the one-time proponent of “Made in USA” products sold in Wal-Mart stores made an about-face. Can you blame them? Converters are not unfamiliar with cost controls on materials. Their natural inclination, like everyone else’s, is to buy the best quality at the most reasonable price. With price so much a factor for the consumer and brand loyalty increasingly jeopardized by lesser-known and more economically priced brands, it has pushed consumer product companies—not just Wal-Mart—to find supply sources to help them compete in the marketplace.

Other claims of an accusing sort are accumulating to cast the retailer in a less than wholesome light. Jesse Jackson recently made caustic comments about the retailer (as it considers construction of a Chicago store that would serve two predominantly black neighborhoods), describing it as “Kool-Aid and cyanide.” The Chicago Tribune’s April 20 edition quotes Jackson: “The Kool-Aid is the cheap prices. The cyanide is the cheap wages. The cyanide is the cheap health benefits.”

Not long ago, Jackson flew to California to protest the construction of another Wal-Mart near Los Angeles where voters actually rejected the ballot proposed project.

While some have questioned issues surrounding Wal-Mart employment practices and benefits, others extol the retailer. According to the April 8 edition of the Chicago Sun-Times, Wal-Mart provides jobs in low-income communities; keeps the price of goods low; and turns healthy profits for its investors among other positive arguments.

The Sun-Times brings to the consumer’s attention two more positive points: “Wal-Mart keeps retail competitors on their toes,” and it “sets standards for other retailers in using cutting-edge technology to cut costs.”

Here’s where a converter may give pause to consider yet another point of view. My mother-in-law used to say there’s always three sides to every story: “My version, your version, and the truth in the middle.” I posed the question in our E-Clips electronic newsletter on April 19: “What impact does Wal-Mart have on the packaging industry?” Two subscribers (whose identities shall remain anonymous) provided their enlightening points of view:

Wal-Mart has caused lower margins in the costing of packaging materials…their demands stretch through the whole marketing exercise. Everyone has to lower prices, from the manufacturer all the way down to the consumer, [who is] the only one benefitting from lower prices.

Also suppliers have to go to China to get better prices where labor is cheaper and equipment is state of the art. We cannot compete on a playing field which is not level. Wal-Mart has a lot of clout because of their buying power. The demands they put on their suppliers goes all the way down the line like a dominos game. Yes, consumers benefit, but what about the job losses? Sooner or later we will have to pay the piper.—L.C.

The other subscriber explained his view:

Wal-Mart has changed the flexible packaging industry completely—starting with cost cutting as the major change.

To sell to Wal-Mart you must have a great price with great supply service. Packaging is a cost to any product. Packaging has been looked at by many manufacturers as the place to start the cost cutting. This has not been all bad as it will weed out the weaker companies. The packaging companies and their suppliers out there today should be congratulated for answering the endless request and demands from manufacturers for improved cost and service, especially the ones who deal with Wal-Mart. There are many suppliers who should be proud of what they do and sell the value they bring to the relationship. The constant improvement challenge Wal-Mart demands filters down to all of the packaging companies. It is an endless battle that I enjoy competing in now. Thank you!—B.M.

Still further, Max Golter in the TLMI Illuminator writes: “Wal-Mart has made it clear that it will not pay extra for RFID [radio frequency identification] applied to the products that they sell.” Who will?

The battle wears on. What are your thoughts?

For more information on the converting industry beyond this issue’s contents, visit pffc-online.com. We offer content there you cannot find in the print issue, and it is updated weekly. Once there, be sure to e-mail your feedback to me, This email address is being protected from spambots. You need JavaScript enabled to view it..

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