Behavior of the consumers
For example, Wal-mart sells pillows for $3. By the end of the month, they management decided to further lower down the prices of pillows to $2. 5. This decrease in the price of pillows would trigger for more customers to buy the said good. It is already part of the behavior of the consumers to buy more of a good if its price declined. But if the scenario was the price increased to $3. 5, then consumers will buy less in Wal-mart and find other stores that offers cheaper pillows in the market. These types of good that are price elastic are coined as “normal goods”.
This is the reason why Wal-mart has been receiving good sales status due to the lower priced of their good. Consumers want to buy to them since they offer the cheapest goods in town and this improves the welfare of the consumer group. Price elastic goods are only beneficial if the retail store could maintain it in its lowest price. Once the store could no longer hold the said price level, then, problem arises in terms of sales decline and revenue. This scenario must be prevented by Wal-mart in order to preserve their prosperous operation in the market.
They have been known for being the only one store that could offer the lowest possible price for most of the commodities in the market and they must be able to withhold this reputation in order to maintain their customers and to attract more customers. Monopoly/Monopolistic Competition In order for monopoly to exists it is necessarily requires only one producer. There are times wherein there are a few producers in the market but one of them operates in the market as if it is the only one producer, and the case of Wal-mart is a great example for this situation.
Aside from Wal-mart there are still other few retailers in the U. S. market but in terms of the market influence and the size of the market as well as the operation of Wal-mart one could already say that they monopolizes the retail industry in the U. S. market due to the incapability of their competitors to compete in par with them and to impose threats to the said Giant retail store. In the United States alone, Wal-mart still serves to be the largest grocery retailer with about 20% retail grocery and ‘consumable business’.
Around 100 million customers visit Wal-mart stores every week and that almost equivalent to a third of the total U. S. population. Wal-mart also has numerous subsidiaries that contributed much on income generation of the company. Some of its competitors are Target, Kmart, ShopKo, Giant Tiger and Winners. Based from the above statements, the fact that Wal-mart has 1/3 of the U. S. market would be enough for it to be considered performing monopolistic competition since there are still competitors present in the market.
With the monopolistic behavior of Wal-mart, they were able to have the influence to prevent the entry of other companies in the retail store industry as well as to prevent its current competitors to overtake them in the market. Although monopolists are known for their negative impacts on the welfare of the consumers, Wal-mart seems to be working on the opposite since they alleviate the welfare of the consumers by providing them with cheap goods in the market not to mention the promotional offers of Wal-mart like discounts and gift certificate to some of loyal customers of the store (“Wal-Mart’s Social and Economic Impact” 1).
As for the government, it may be detrimental to them since there would be less taxable companies in the market since Wal-mart prevents the entry of new retail store companies in the market. For the competitor of Wal-mart, it would be hard for them to compete with the prices of the goods of Wal-mart and this is the reason why the profits of these competitors are not that enough for them to compete on par with the Gain retailer.