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| No | 64% | 159 votes | Total: 247 votes | |
| Yes | 36% | 88 votes |
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Add to FavoritesThe idea of Wal-Mart taking on banking makes me quake in my shoes, or maybe that's in my bank account? No, that's not it. Anyway, Wal-Mart has grown into a company that surpasses any of its competitors by a wide margin. It has almost become a monopoly and that leaves little room for competition.
I love Wal-Mart and shop there often, but sometimes I wonder if we're not going to face problems in the future as smaller companies give in to the pressure of such a large organization that can keep its prices lower. In other words, I think Wal-Mart is big enough, and going into banking might push them over the edge of a monopoly. All we need is for it to become a part of the banking industry as well.
Since Sam died, Wal-Mart has gradually gone down hill. Many of the workers are good, but a lot of them are surly and unhelpful, that is if you can find them. They used to be a 'people oriented' company, but they are quickly becoming just like all the other businesses - hard-hearted, bottom line focused and more.
Wal-Mart still has a lot of good things about them, but I predict they will go down even faster if they enter the banking business. What happened to our anti-trust laws? Wal-Mart needs to focus its energy on being the best department/grocery store it can be and keep its fingers out of banking.
Wal-Mart is forcing out the competition because they've grown so large that they have everything you could ever need. You can buy your groceries and your pet food at the same place and save time and gas money by one-stop shopping. Because Wal-Mart is so big, they can keep their prices lower than the competition. The one-stop shopping lures in even more people who might be willing to pay a little more for the convenience.
That's the way business works, but in stretching out its fingers into even more markets, such as banking, Wal-Mart is going much too far. They already have banks set up in their stores, offering convenience for customers, so they need to stick to improving the service at their stores and offering an even better shopping experience to those who support them with their shopping money.
Wal-Mart, I suggest you look inward at improving some things that have gone south in your stores instead of seeking ways to grow even bigger and possibly offer even less service and employee benefits than you do right now. Stay out of banking!
Learn more about this author, Angela S. Young.
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Yes
Wal-Mart is already involved in banking. Sure, its application to open a bank that offers the full range of services is on hold for a year due to lobbying from the banking association, however, it already offers cheque cashing, money transfers, and pre-paid Visa debit cards to its members. These are profitable lines of business for Wal-Mart and are desired services by its customers, so where is the harm done?
The reason why the American Banking Association (ABA) has spent so much time and effort in blocking Wal-Mart's application is due to fear that with Wal-Mart entering the banking industry that profits for the existing banks will decline. Again, where is the harm done, when a company with a low mark-up reputation enters a new line of business and offers the lowest price in the industry?
There are millions of Wal-Mart customers in America without a checking or savings account. Given that Wal-Mart's target market is people who shop on price, isn't Wal-Mart one of the best positioned companies to offer such services to people who are already likely part of its existing customer base?
There could even be a synergy effect that would result in even lower prices for Wal-Mart's customers. Currently, Wal-Mart pays a banking entity to do its banking. Therefore, Wal-Mart makes its profits off of its merchandise and services. If Wal-Mart is permitted to be a full service bank that offers mortgages and loans, then not only does Wal-Mart get profit out of the item that it sold, but also makes additional profit from the financing. This provides an opportunity for Wal-Mart to lower its profit on each item sold by lowering the retail selling price, yet be more profitable overall.
For example, say Wal-Mart sells a pair of shoes for $10, and that $3 of the $10 is profit. If Wal-Mart is also a bank, then what it can do is lower the price of the shoes to $9. As a result, its profit for the pair of shoes is reduced to $2. However, because of financing the purchaser's loan, or line-of-credit, or credit card, let's say that Wal-Mart makes a $1 profit. That way, when Wal-Mart is also a bank, it earns $2 profit from the sale, and $1 from the financing, so it has $3 total profit. "But wait", you say, "your example is only breaking-even. Wal-Mart was only making $3 profit before it was a bank, and it is only making $3 after it is a bank. Your claim was that Wal-Mart would be more profitable". True, I did.
Wal-Mart will make more money than before because the shoes are now at a lower price than before. A basic rule in business is that you can expect to sell more units of the same item, when it is sold at a lower price. So, if Wal-Mart was making $3 profit on a pair of $10 shoes before it offered banking services, and had say, 500 sales, that is a total profit of $1,500. Now, after offering banking services, it sells the same pair of shoes, for $9, sells say 550 pairs, and the total profit is $1,650. The result, more profit due to more units sold. And the customer gets the same pair of shoes at a lower price. In this fictitious example, the profit appears to be small, however, Wal-Mart is the largest retailer in the world, so every percentage point equates to big dollars.
The only downside that I can think of is that people fear that Wal-Mart is already too big and powerful, so this foray only enlarges its grip of dominance. However, looking at Wal-Mart's recent profits, all is not so rosy. It has failed to penetrate the upscale market, like Target has; Tesco, a large UK retailer has now entered Wal-Mart's territory in America, creating greater competitive pressures; and finally, Wal-Mart has been recently slashing prices due to decreased consumer demand allegedly due to the slumping housing market and rising fuel costs. The fear is misplaced.
So, don't criticize Wal-Mart for attempting to offer a lower price alternative to existing products, instead congratulate them.
Learn more about this author, Steve Jones.
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