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Wal-Mart's own dollar menu

Posted May 15 2009, 05:36 AM by Douglas McIntyre
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McDonald’s (MCD) did so well with its dollar menu that Wal-Mart (WMT) decided it will create one, too. The difference is that the Wal-Mart version will be merchandise and not food.

McDonald’s philosophy of selling very inexpensive food in a clean, well-lit environment served by consistently friendly people has helped it expand its operations to 36,000 stores worldwide. Wal-Mart’s approach to retail stores is not terribly different. It may not be entirely coincidental that Wal-Mart was started in 1962 and McDonald’s began in 1955.

Millions of relatively young people, most of them parents, were only a decade removed from serving their country and not being paid a great deal for that service. It was a perfect environment for consumers to believe that something could be inexpensive and a good value at the same time.

Earlier this week, Wal-Mart, the world’s largest retailer, said that it planned to improve its second-quarter sales by offering shoppers irresistible bargains.  For the last quarter, Wal-Mart reported flat earnings of 77 cents per share and said it expected to deliver a range of 83 to 88 cents per share in the current period. Same-store sales for this quarter are expected to be between flat and up 3%. 

Wal-Mart may have an uphill fight to post strong second-quarter earnings. Recent employment numbers and shrinking access to credit will hurt retail sales, although Wal-Mart probably has its share of people who pay cash.

According to Reuters, Wal-Mart has "planned a number of merchandising initiatives to appeal to cash-strapped shoppers, including its dollar program.” The theory behind the promotion is sound. Most stores could not bring in a lot of revenue selling items at $1 apiece, nor could most restaurants, but Wal-Mart and McDonald’s have such significant scale and customer bases that getting an even slight increase in discretionary spending from tens of millions of people could make the difference between a mediocre quarter and a good one.

Wal-Mart and McDonald’s are often criticized for selling “cheap” food and merchandise and treating their employees poorly by paying them very modest sums. There may be some truth in both charges, but that truth comes with another side. Many people who eat at McDonald’s and shop at Wal-Mart are from the lower economic classes. McDonald’s and Wal-Mart do not exploit that by selling these people junk. George Soros may not want to wear shoes from Wal-Mart and eat McDonald’s hamburgers, but that does not mean that both establishments have not helped feed and clothe people who might otherwise struggle.

Workers at McDonald’s and Wal-Mart are not paid well. Waiting on people in a big-box retail outfit or cooking and serving fast food will never pay well. The jobs don’t require any special skills and so they do not come with a premium wage. Wal-Mart does employ 2 million people, which is a lot of individuals to keep on a payroll during a recession. McDonald’s has 400,000. Neither place has announced significant layoffs and neither is likely to.

Charging people a dollar for a meal or for some modest item off a retail shelf may seem like a gimmick to pick up a penny a share for the next quarter. It is a good deal more than that. When a dollar is all that someone can spend, that person doesn’t care if his purchase increases the company’s earnings.

Top Stocks blogger Douglas A. McIntyre is an editor at 24/7 Wall St.

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Comments

 

When you lose your job the 1$ menu is all that you can afford. It is high time we realise that spending 5$ on a cup of STARbucks is the kind of splurge which got us in such a mess.

Cut the price guys.....or else we wont buy !!

Ddear Mr. Editor,

   Thank you for the off-handed put down in this article. While you may think it doesn't take much skill to work at Wal-Mart, I'll guarantee that there are a lot of workers who would tell you that's a bunch of bull.

   While it doesn't take a lot of skill to do a job that just gets by, you will find plenty of people filling those positions at Wal-Mart, McDonald's and most every other company in existence. But, if you try talking to those who take delight and pride in their jobs, you will be surprised that it takes as much if not more skill than a lot of people in this country are willing to work for.

   The problem is not that Wal-Mart or McDonald's jobs don't take a lot of skill, it is just that Wal-Mart (I don't know about McDonald's) wants its workers to be just like their products, cheap (notice I did NOT say inexpensive) and quick moving. Quantity is more revered than quality.

   There are a lot of "skilled" workers out there who couldn't handle the working conditions and requirements at Wal-Mart just as there are those at Wal-Mart who couldn't handle working anywhere else. I take a lot of pride in the job I do at Wal-Mart just as I have in other industries (Truck driving, Computer Technician, Field Service Engineer and others) that I have worked in. I can guarantee that it takes as much skill to the job I have now as those other I mentioned.

I'm sure it REAL SKILL to mop up the floor in aisle 10. You get paid very little at Walmart because you don't need to know anything to do it.

I agree with the Old Hippie-I am college educated but I have told many a Wal-Mart employee during holiday seasons that I would'nt have their job for anything in the world and I also let them know that I admire them.  As far as McDonalds, have you ever been in there when most of America does not even know how to control their kids anymore or some jerk orders something but demands certain things be changed in their order or blesses out the cashier for something the cooks did?  You need to rephrase your message from now on.

The author is right,  It does not take significant amount of work to stock shelves, do cashier work, or clean a store-it may on the other hand take a lot of work.  People with higher educations and experience with managerial skills, engineering skills, writing skills, reporting skills, among others, do not need to take minimum-paying jobs because of their skill set.   Skills are different from the amount of work you put in.

Why do people go to university?  TO ACQUIRE KNOWLEDGE AND SKILLS.  Otherwise, they would just work any minimum paying job.  

The Old Hippie is so right!

Correction to my previous post, it was meant to read:

The author is right,  It does not take significant amount of SKILL to stock shelves, do cashier work, or clean a store-it may on the other hand take a lot of WORK.  People with higher educations and experience with managerial skills, engineering skills, writing skills, reporting skills, among others, do not need to take minimum-paying jobs because of their skill set.   Skills are different from the amount of work you put in.

Why do people go to university?  TO ACQUIRE KNOWLEDGE AND SKILLS.  Otherwise, they would just work any minimum paying job.

Having worked at Wal-Mart and managed in fast food(not McD's) I need to comment to Old Hippie.  While there are jobs at both that require skills and basic training the majority of the jobs at both places can be done by most anyone with a minimal amount of training.

Take making burgers.  Once the person is trained(normally a few hours) it is only a matter of practice to get faster.  Same as any job but not one that I would say requires great skill.  Running the register takes more skill and there are some people I have known who could not do it.  But for most of us running a register is something we can learn to do in a matter of mins.  It is a simple computer/calculator.

At Wal-Mart you have the same thing.  The basic job of cashier is harder then the fast food jobs and pays more.  But in many stores there are automatic lanes now and most anyone can figure out how to work them.  Stocking shelves is similar it requires more skill then fast food and pays more but it is a job that nearly everyone can learn within a few hours or days.  

But at both there are jobs that require greater skills.  Such as supervisors and managers.  And they get paid more.  At Wal-Mart there are even more such as claims, recieving and department managers.  All of these jobs pay more.  I know of department managers who get paid more then many assistant managers at Wal-Mart.  

Wal-Mart pays fairly for the jobs there.  In fact compared to most retail stores they pay equal or more for similar jobs.  These jobs for the most part will never be high paid because they are jobs that almost anyone can do.  Many of us get our starts in these jobs and some like my mother work them all her life.  Pay is not related to how a person feels about their work.  That is personal work ethic and most I know who work at Wal-Mart have great amounts of that.  Of course if they didn't they would be working somewhere else where they could get away with doing nothing.  But any company of that size will have good and bad employees at all levels of pay.  

The key is that these jobs pay what they are worth.  Paying these people more doesn't help anyone because the higher wages just mean higher prices.  And for people living paycheck to paycheck like the people working these jobs that would hurt them more then it would help them.

I have an engineering degree and expect to be paid well, that is why I don't work at Walmart or McDonalds. If I was lazy, expected the government to help me live, had no motivation, no math skills, and a complete idiot, those two jobs would suit me just fine. So I have to apologize for being above average intellegince and a motivated person, sorry, no. My back is hurting a lot for carrying the water around. Some folks just want to drink it,but forget that carrying it is part of the deal.

I work for Wal-Mart part-time in the TLE dept.  I take home $500/mo. working Sat and Sun.  That also doesn't count the amount I put into 401k.  For the amount of skill required I think I make a fair wage.  At my fulltime job that I have a degree for,  I do make quite a bit more, but I had to spend $50,000 on an education to get there.

I do agree that Wal-Mart sometimes would rather pay someone less money for the same work even if the quality of the work wasn't as good.  That is one thing they need to change.  Customers want to be treated right and know that the service is top notch.

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