Thursday, December 08, 2005

On Walmart

Michael Barone has a piece on Wal-Mart with a comparison to GM.

I recently bought a winter jacket at the local market. In Ukraine you have a choice of buying a branded item at an inflated price, much more than you would pay in the west, in an exclusive shop, or pick up a knockoff at a stall in the market. I don't have the numbers but I'm pretty confident that the vast majority of clothing, hell, consumer goods, purchased in Ukraine are knockoffs.

Here's the kicker. I paid a visit to Munich and happened to stumble across a Walmart center. A jacket there very similar to what I had bought was half the price that the knockoff was in Ukraine. And it was better quality.

So the Ukrainian government has a major sector of the retail market working underground (the shadow economy) and paying little if any taxes . I wonder what effect the entry of a Walmart type chain would have on such an economy. Tax revenues would increase dramatically, buying power would increase dramatically, sales would increase dramatically. Competition would spur improvements across the retail sector. Why would you not pursue such a strategy?

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