Last night PBS presented an excellent show about Wal-Mart, details of which can be found here. The show addressed my concern about how Wal-Mart shifted from "Buy American" to selling stuff produced mostly overseas, stating that the change came when Wal-Mart started to see its stock price drop and wanted to increase profits. They flooded their stores with hundreds of cheap imported items with high profit margins. The strategy worked, and continues to this day.

What the show also made clear is that Wal-Mart now ropes its suppliers into a deal with the devil that can hurt ill prepared companies who cede too much up front. Former Rubbermaid executives discussed how that company originally enjoyed a great relationship with Wal-Mart, one in which their sales skyrocketed. When Rubbermaid's costs skyrocketed due to the cost of raw materials going up, they tried to pass this on to Wal-Mart. Wal-Mart advised Rubbermaid that they would either have to eat the costs or see their shelf space dwindle. When Rubbermaid refused to lower the prices Wal-Mart went elsewhere to get similar products and cut its shelf space devoted to Rubbermaid way down.

As a result, Rubbermaid lost lots of money, and eventually was taken over by Newell. THe town of Wooster, known as the home of Rubbermaid, lost its plant, which was sold in pieces, with much going to overseas producers.

Of course, you can argue this was Rubbermaid's fault. After all, someone was able to step in and do what Rubbermaid did cheaper and better. And you wouldn't necessarily be wrong. But, as this story and one about Vlasic on Fast Company (here) demonstrate, Wal-Mart forces the hand of companies both big and small to play ball or suffer. Wal Mart believes that prices should go down, not up, and believes its suppliers should help its "rollback" policy by lowering or keeping their prices the same year in and year out. They even go as far as to suggest that they move their production overseas to keep the costs low.

The end result of this is anyone's guess. You have to think that low prices aren't necessarily good if more and more of the country has less disposible income, especially in the small towns that Wal-Mart made its bones in.