Why Winco Will Eventually Destroy Walmart


Unlike diamonds, dominant market shares and/or monopolies never last forever without state protection. This is exactly was some are noticing about Walmart's dominant market position, where Winco, based in Boise, ID, is slowly eating away market shares in the West. Through various strategies — not accepting credit cards or employing baggers, having minimal decoration, buying directly from farmers and factories – Winco is being dubbed by retailing expert Burt Flickinger III as "Walmart's worst nightmare."

Should governments let the market run its course, then it won't be the first time that a dominant player gradually loses its shares because new, more efficient players come in. Microsoft, once unfairly accused of dubious business practices because Windows included Explorer rather than letting people use Netscape, has less and less market shares, be it for its share of the web, computing devices, or video game consoles.

It also happened to Standard Oil. Its market share had steadily declined to competitors such as Texaco and Gulf before government tore it apart in 1911; it was clearly not a monopoly.

Or rather: when it dominated the market, it was an efficient monopoly. It was so dominant because it bested all its competitors and because it was able to dramatically reduce refining prices, which allowed Rockefeller's corporation to expand. The accounts of the perfect market that supposedly was before Standard Oil's rising influence are just wrong. The market is a dynamic place; businesses go in and out as much as we breath air, as can be seen by a comparison of the Fortune 500 in 1990, 2000, and 2013, or even the number of cars sold through the years. To paraphrase Darwin a little: "It is not the strongest of (corporations) that survive but the ones most responsive to change."

Now, compare that to a coercive monopoly such as the U.S. Postal Service. If you want to send first-class mail, regular mail, or use your letter box, you have to use their service since the law forbids other alternatives. You have to despite their chronic inefficiency, their increased costs for small businesses, or their lack of customer care for Christmas, when they encourage people to send gifts in advance for December 25 delivery — UPS and FedEx don't impose that kind of constraint. This inefficiency is easy to understand: Since there is very little competition, USPS has no incentive to improve their service. This is comparable to state-owned liquor stores in Canada, where employees receive unusually high salaries for retail (and with little eduction requirements), which translates into outrageously high alcohol prices and much less choice compared to Alberta's privatized liquor stores.

So next time you hear about unfair business practices, monopolies, and price fixing, look carefully at who brings forward the accusations. It's either a government (a monopoly) or a jealous competitor incapable of winning the game on its own — it's actually what brought forward anti-trust laws. If only a few players are in a given industry, it only means that it's more efficient that way; it's not like there can be 1,000 efficient car makers on the planet.