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News Link • Business/ Commerce

Could The Alibaba Model Undo The Wal-Mart Model?

•, by Charles Hugh-Smith

Longtime correspondent Bill M. reckoned I missed the longer-term story in my piece on the Alibaba IPO: namely, that the Alibaba Model of makers selling directly to buyers could undo the Wal-Mart Model of super-stores dependent on massive inventory. My essay The China Boom Story: Alibaba and the 40 Thieves addressed the China Boom rather than the Alibaba model, so let's compare and contrast the Alibaba model and the Wal-Mart model.

We all know the Wal-Mart Model: squeeze suppliers until they're gasping for air ("sure, you're losing money on every unit you sell us, but you'll make it up on volume") and then transport all this stuff across the Pacific to a vast warehousing and shipping operation that must keep hundreds of sprawling (and costly) superstores stocked with hundreds of different items.
This model gained supremacy because it lowered costs to consumers by outsourcing the production of most of the inventory. Generally built outside of towns, the superstores thrived in an era of low gasoline costs and cheap credit, i.e. the past few decades.

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