You also have Aldi a very interesting German hard discounter Theyll have about

You also have aldi a very interesting german hard

This preview shows page 2 - 4 out of 6 pages.

You also have Aldi, a very interesting German hard discounter. They'll have about 800 items for sale, but you go in and there's only three people in the store working. If you want a shopping cart, you put in a dollar deposit. It's pretty ingenious. You get your dollar back when you return the shopping cart. It saves on labor, right? You don't have anyone doing parking lot reconnaissance, herding stray carts around. If you want a plastic bag, you pay for it, I think it's between 10 cents and a quarter. In exchange for these labor-saving techniques, you get significantly lower prices. A&P did something like this recently on the East Coast. They shut down their deli and their bakery, and now you have to pay for your plastic bags, but prices went down 20 percent. Hard discounters, places like Costco or Wal-Mart, used to be novelties. Now really low prices are becoming entitlements. But they're not free. Super-low prices have social costs. This is a conversation that I think the country is slowly beginning to engage in. How much does the Walton family make per year? If you're a member of Sam Walton's lucky sperm club, that is if you are one of his four heirs or his wife, Helen, your annual dividend payout -- I believe Forbes reported this in November -- is about $176,000,000. That's your paycheck just for waking up Walton. All the sibs rank in the top 10 of Forbes' richest? I know Rob Walton, who's the chairman of the board, and his sister Alice are both up there. In doing your research, what did you learn that most surprised you? Wal-Mart can enter a retail category and dominate it, and the world kind of yawns. All of a sudden you discover Wal-Mart's the world's largest jeweler. You don't think of Wal-Mart and jewelry, but because of their economy of scale, they're the largest jeweler. They also quietly enter certain areas of business. You can now get a dental plan or a healthcare plan for your employees through Sam's Club. They start slowly, but eventually they perfect things and roll them out nationwide, and boom -- it's huge. They more or less use gasoline as a loss leader to drive traffic into their stores. They use petroleum as a dancing monkey. As you point out, some of them are Wal-Mart gas stations, but a lot of them aren't. They're just charging rent. People come for the gas, stay for the shopping. Also, if you're Wal-Mart, you want to keep customers in your store as long as possible, and that has other implications. Exclusive concerts by various bands are broadcast on Wal-Mart TV; Wal-
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Mart pioneered this concept, and they call it "retail-tainment." They put on events, they have in- store radio, in-store TV, special broadcasts -- all to keep people in the stores as long as possible. The more time you spend, the more money you spend. That's generally a safe ground rule for any retailer.
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  • Spring '11
  • LBernasconi

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