What if Walmart (and other foreign retailers) was allowed to own 100% equity in the Philippines?

had quite an interesting discussion on Facebook last night. It was a discussion by folks who love Shoemart so much – and who said SM will crush Walmart. Well, if the constitution does not allow Walmart to own 100% foreign equity its hands will be tied by its joint venture partner – which is what happened awhile back.

Walmart was already making plans to open an outlet – but it turns out it’s joint venture partner was facing liquidity problems. Thus the plans to open Walmart in the Philippines was pushed back to a later date.

Having said that, in this post I venture into the rabbit hole and discuss with a pro-protectionism and pro-SM supporter the merits of opening the economy and allowing foreign retailers to compete against local retailers head to head.

Without further ado, allow me to post the discussion (warts and all) – and you decide for yourself.

The Shoemart vs Walmart Thread

Randy: ETO ha “SAN MANGGAGALING ANG PRODUKTO NG WALMART KUNG MAGOPEN SILA SA PINAS?”

1. Greens/vegetables/poultry – are purchased locally.

2. Fruits are purchased from all over the world.

3. US-designed consumer electronics are purchased from China.

Randy: Kung mangagaling sa ibang bansa ang produkto di ba may transit cost?? which is oil? paanong mas bababa e kung mangagaling abroad pa pala nakkatawa naman

It depends – cost of production overseas could be lower due to:

1. Lower labor cost

2. Lower taxation

3. Lower cost of raw materials

4. Lower tariffs

5. Lower cost of production

- All of which are optimized in the supply chain to offset transportation cost.

Randy: kung GREENS/VEGGIES/POULTRY FROM LOCAL PURCHASE DITO SA PINAS? WHAT WILL IT MAKE IT CHEAPER? E ANG SM SA LOCAL PURCHASES DIN YAN SO PAREHAS LANG PRICE NIYAN

1. Local suppliers will provide discounting for earlier payments – and long-term supply contracts – a practice that SM is not known for. This discounting translates to lower costs for consumers while Walmart retains revenue.
2. Employee retention policy creates lesser errors in operations – and therefore translates to reduced cost – and better revenue – which is passed on to consumers – in terms of lower prices

Randy: so kung hihingi pa sila ng discount sa local suppliers to lower the cost? e di sinong malulugi dun mga local farmers natin ang lalabas pala babaratin pa lalo ng walmart yan for the sake of long term supply contracts? so magiging slave ng foreign company ang local farmers??

No – the long term contract (one year) assures suppliers of a steady market – and steady revenue.

Contrast that to the unpredictable erratic balasubas behavior of Shoemart – which is worse.

Having better income does not necessarily make you a slave.

“Being slave of foreigners” versus “being a slave of Shoemart” – higher pay, faster compensation, stable revenue – waddya think??? ))

Randy: So kung may long term supply contracts meaning local farmers should deliver on time because of a contract and there will be earlier payment that will be made so paano kung magkabagyo at masira paninim? e di mababaon sa utang sa walmart ang mga magsasaka??

Farmers can take crop insurance – and file a claim to cover crop losses.

They can also import from Vietnam to cover their shortfall.

They can also include a stipulation in their contract on non-penalty for non-delivery due to disasters.

Randy: so ganun dn pala iimport din pala sino nanaman ang makikinabang niyan?? edi ibang bansa as always di kayang pumunuan ng local na magsasaka yan supply kung ganyan ang sistema dahil sa dami ng bagyo at eto ha sa tingin mo kayang mabayaran ng isang magsasakang pinoy ang crop insurance?? come on

CONSUMERS ang makikinabang nyan – the sellers will not profit if buyers don’t get a value.

E yung ibang bansa binabagyo din – Vietnam for instance… and are still able to produce at lower cost – which benefits FILIPINO consumers.

Of course farmers can get crop insurance – if they see a value of crop insurance – they will.

The option is not to get insurance and be left with nothing for the damage…

Can’t have the cake and eat it too.

Randy: haahah divertion nanaman una sabi mo walmart will buy it in lower prices to lower the product cost tas ngayon naman government naman ano ba talaga??

They buy based on market rates – but their processes allow them to generate savings – they automate instead of having lots of warm bodies doing nothing – they retain employees so they have tigher control of processes – all this translate to savings and lower cost to consumers

Not a diversion:

1. Govenment keeps prices low – via price control
2. Walmart – buys at market rates – but has faster reimbursement, and faster turnover – ergo higher volume – higher sales for farmers
3. Walmart provides local suppliers the possibility of selling to walmart stores worldwide – something that SM can’t match

Randy: so they will automate just to lower down the employees? kala ko ba makakapagbigay ng maraming trabaho yan?? E di useless din yan not like SM most of them are human beings manual service pero quality naman so they give out more jobs than walmart

Before Walmart comes in – people don’t have jobs.

When Walmart comes in people who didn’t have jobs – will have jobs.

Note that in Shoemart – employees are laid off every five months, Thus, twenty years ka na sa Shoemart. temp employee ka pa rin.

In Walmart, employees are employed full-time and have health benefits pa.

Randy: Im seeing the clear picture now so ang walmart papasok sa bansa by opening the market tas they will claim they have lower prices by buying cheap products sa mga magsasaka then para hindi sila magmukhang masama the govt. will be pushed to control prices so KANINO MAGAGALIT ANG MGA TAO?? SA GOBYERNO!! HAYYSST infiltration nga naman

Did Walmart impose the price controls? Last time I checked it was the NFA and the DTI who were fixing farm gate prices and giving instructions to BOC to raise tariffs on imports – at expense of consumers.

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The bottom line really is whoever delivers value to consumers will be rewarded by the market.

If Shoemart is so good, it shouldn’t fear competition from Walmart and other foreign retailers (Dollar Tree, Dollar General, Macy’s, JCPenney, Bloomingdales, Nordstrom, Ikea, Best Buy, and the Simon Outlets).

BUT, you can trust the government to keep competition out, keep prices high, keep taxes high – in the name of “protecting the Filipino”.

The question is who are “Filipinos” being protected? Is it the consumer or the Filipino retailer?

Why protect Filipino retailers at the expense of Filipino consumers?

Nosebleed question? Eat condom na lang?.

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BongV has written 421 stories on this site.