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2000-08-06
Wooster, OH. Wal-Mart Bounces Rubbermaid

The Akron Beacon Journal (www.ohio.com) carried a 4 part series on megastores in mid July, including an insight to Wal-Mart's power over its manufacturing vendors. A full page story profiles what Wal-Mart did to Rubbermaid, one of the country's most ubiquitous makers of kitchenware. In 1994, Rubbermaid was one of the best-known plastic companies, says the story, but by 1999 Rubbermaid was bought out by a lesser-known company called Newell Company. A former Rubbermaid manager calls the takeover "a sad story", the gist of which is that Wal-Mart did Rubbermaid in. In the mid 1990s, Rubbermaid was dealing with skyrockeeting prices for resin, a key ingredient in its plastic products. In fact, the company lost $250 million in 1995 due to resin prce hikes. When Rubbermaid tried to pass a higher price for its products on to Wal-Mart. Wal-Mart warned that if prices rose, Rubbermaid products would be dropped. At the time, Wal-Mart was as much as 20% of Rubbermaid's business. Rubbermaid executives told the Akron Beacon Journal that Wal-Mart's selling of products as loss leaders also hurt Rubbermaid, because other stores wanted Rubbermaid to lower its prices for them also. "They backed us into a corner," one Rubbermaid manager admitted. "We couldn't recoup our product-development costs before they'd slash prices. That led to less innovation." When Rubbermaid raised the prices of some of its toys to Wal-Mart, the retailer dropped Rubbermaid toys, and dropped the kitchen products also, going with another company "adept at making Rubbermaid look-likes at a lower cost." In 1995, Rubbermaid earnings plunged by 30%. Wal-Mart also insisted that Rubbermaid get its products to Wal-Mart within 2 days of being ordered, and if it didn't, it was fined for each dollar Wal-Mart said it lost, and was required to buy back unsold wares. Finally, Wal-Mart dictated to Rubbermaid what types of products it should make, and how it should make them. The former Rubbermaid manager said Wal-Mart "squeezed too hard." In 1998, the Newell Company bought out the troubled Rubbermaid company, and their products started to reappear on Wal-Mart shelves -- ostensibly because Newell Company agrees to do things 'the Wal-Mart way.'

What you can do: The Akron Beacon Journal article suggests that Rubbermaid suffered by standing up to Wal-Mart demands, and the Wooster firm's "fall" was due, in part, to Wal-Mart's decision to pull Rubbermaid products from its shelves. Even a plastics company proved to be unable to bounce back from such an impact. So Wal-Mart's power over its manufacturers and its own employees are a testament to the consequences of "everday low prices". Wal-Mart pushes down the cost of labor and production -- but they are prices to pay all along the way, from sweatshops to manufacturing bankruptcies. Most consumers have no idea where cheap prices come from -- a world-wide chain of exploitation










 
 
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