Narconomics

Narconomics

Tom Wainwright

In the same way that a monopolist can dictate prices to its consumers, who have no one else to buy from, a monopsonist can dictate prices to its suppliers, who have no one else to sell to. If you want to reach a really big audience of consumers, the theory goes, you have to be in Walmart. The store knows this and is therefore able to squeeze suppliers hard. A survey by Forbes magazine found that suppliers that sold a high proportion of their goods through Walmart on average had lower profit margins than those that did less business with the store. The difference was most pronounced in the apparel market: clothing manufacturers that sold less than 10 percent of their products through Walmart were able to maintain an average margin of 49 percent, whereas those that sold more than 20 percent through the store averaged only 29 percent.4

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