In what surely must be an April Fools’ joke, the former CEO of Walmarts complained that Amazon was too big and was putting small competitors out of business.
Which small competitors?
Toys R Us and J C Penny.
No, really he said that with a straight face.
Just a reminder for those not living in a country without a Walmart or one of their subsidaries; Walmart is a retailer with $500 billion annual revenue. It’s also the largest private sector employer in the USA with 2.3 million staff.
Ask the owner of an independent local store in small town USA how they feel about the prospects of a Walmart’s outlet being built in the neighbourhood and you’ll hear opinions not dissimilar to those expressed by Bill Simon;
Let’s examine those claims, shall we?
If we take a narrow view of the economy, the jobs lost at Toys R Us for example, this statement seems true. However, the products purchased online at Amazon rather than at a Toys R Us outlet are still required to be manufactured (mainly in China in both cases, but let’s ignore that as applying equally), packaged and distributed to the consumer. In addition, the consumers who have saved money by purchasing the same product at a cheaper price will now have the product PLUS some extra dollars which they will spend elsewhere in the economy, thus creating employment.
“Destroying value in the sector”
This is a quite vague statement and leans very heavily on how one defines “value” and from which subjective viewpoint one is looking. From the point of view of the CFO of Walmart, yes value is being destroyed, in terms of balance sheet and share price. In terms of the consumer, value is being created with savings, convenience and increased choice.
Simon’s comments were in response to President Trump’s tweet on the subject;
….which seems to be claiming Amazon is a bad actor for using a government service (the postal service) that happens to be provided at a loss.
Bill Simon and President Trump should really know better than to spout these economic fallacies. Perhaps they do and are being mendacious.
Simon was perfectly at ease with using the size of the corporation he ran to undermine the business models of hundreds if not thousands of smaller competitors. In fact, what a wonderful advertisement for the creative destruction of the free market that even companies as powerful as Toys R Us, JC Penny and Walmart can have their business models disrupted to the benefit of the consumer.
If President Trump doesn’t like the way the US Postal Service is run or the rules under which it operates, he should probably write a stern
letter tweet to himself describing which changes he should make.
Special pleading, especially when using unemployment as a reason, is always at the detriment of the consumer who, by the way, has already unanimously-voted with their wallets.