09 January 2010

I came across this article on a forum; it's about how Wal-Mart and H&M threw away unsold goods (clothes, mostly) and ruined them beforehand so that no one could profit from their loss by dumpster diving. The person who posted the article wanted to know: do you have a problem with this, and why? He also posted a fairly reasonable defense of Wal-Mart's actions (I'm not going to keep saying "Wal-Mart and H&M) on purely pragmatic grounds.

It's pretty simple reasoning: if they give their unsold goods to Goodwill, Goodwill will turn around and sell these totally undamaged, brand new goods at a small fraction of the prices Wal-Mart is asking. Since people don't generally buy the same good for a high price that they can have at a low price, Wal-Mart would basically be undercutting themselves, and encouraging people who would otherwise have bought their products at full price to wait until the same thing is available at low price. Keeping the goods around isn't very feasible, either, since Wal-Mart would end up paying taxes out of proportion to the expected return on the leftover stock.

Now, morally speaking, does the business Wal-Mart might lose from reduced demand really outweigh the benefit to people who don't have enough clothes? I don't think so, but Wal-Mart is a business, and we understand that businesses don't really care about people, so we'll let it slide.

However: does the cost to Wal-Mart of giving away the clothes really outweigh the benefit to Wal-Mart? Even supposing that they give the goods to Goodwill and not an organization that will give them directly to needy people, how many people are there, really who shop at both Goodwill and Wal-Mart? How many more would start shopping at Goodwill once they realized they could get Wal-Mart goods there? The numbers probably aren't negligible, but Wal-Mart will always have better selection (not just in terms of products, but in terms of having items in the right sizes and styles). And if Wal-Mart finds that they're eroding demand for their products by giving away too much stuff/giving stuff away too consistently, they can always order less product. Let's not forget, also, that there will always be people who are willing to pay extra money to have things now; stores already offer goods at reduced prices, but there are lots of people who don't wait for the sales.

Obviously, giving away unsold products still involves some cost to Wal-Mart, however small, but giving away products to competitors (as far as charities are competitors) isn't all they'd be doing - they would also be creating positive press. There's a lot of hate for Wal-Mart, and I know not everyone who dislikes Wal-Mart refuses to shop there because of it, but some do. If Wal-Mart did more things like give away excess goods to charities, they might win over some of those people - and I think that would put doing the right thing ("") at least even, fiscally, with what they're doing now.

I suspect, though, that the reason Wal-Mart didn't give away the goods isn't because someone performed a similar analysis and came up with different results. I suspect that someone looked at the costs of giving the goods away vs. the costs of destroying them, and didn't imagine that there could be practical benefits to helping other people.

That was probably unfairly cynical - but I can't always help my nature.

35 comments:

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