Why Is Walmart Evil, But Amazon Isn't?

By Stephen D. Simpson, CFA | Updated May 31, 2013 AAA

If you really want to generate some hate mail, say something nice about Walmart (NYSE:WMT) in a public forum. According to the critics and self-appointed guardians of America's conscience, Walmart is an evil company that kills American business (by sourcing from overseas), kills American retail (by undercutting other retailers on price) and kills the American worker (by offering low wages and benefits). What's interesting to me, though, is how Amazon (Nasdaq:AMZN) gets none of this hate. While Amazon and Walmart are in many respects using the same model (offering customers the lowest prices available), you garner no shame, opposition or lectures in boasting about being an avid Amazon customer. So why is it that Amazon is "good," but Walmart is "evil?"

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The Case Against Walmart
The complaints against Walmart have gone on for so long now, they will be familiar to most readers. Walmart has been accused of playing a major role in undermining U.S. manufacturing and simultaneously supporting/fostering unsafe and unpleasant working conditions among foreign suppliers, all in the name of saving money. Likewise, Walmart has been accused of pushing "mom and pop" retailers out of business and of mistreating workers by offering low wages and few benefits.

Let us examine these accusations briefly. It is true that Walmart sources from outside the U.S. ... as does almost every retailer. In many cases, it's all but impossible to find American manufacturers of certain consumer goods, and that's a process that began long before Walmart was large enough to influence it. Likewise, the rise of the mall was pulling consumers out of the city centers and away from "mom and pop" before Walmart came on the scene in a big way; Walmart may have been the coup de grace for local retailing, but the damage was already done by others.

Admittedly, the question of Walmart's labor policies is more controversial. While some critics point out that Henry Ford saw to it that his workers could buy a Ford car (and were paid above-normal wages), that overlooks an important detail - car-building demanded highly skilled workers. Walmart offers hundreds of thousands of jobs that require no schooling and virtually no skills. So, while it is true that Walmart does not pay high wages, a job at Walmart is still the best job that many workers can get on the basis of their skills and abilities. For those who believe that Walmart should nevertheless pay more, I ask this - when is the last time you told your dentist, lawyer or mechanic "no, that's too little ... let me pay you more?"

SEE: Minimum Wage: Good Cause Or Economic Pariah?

The Good That Walmart Does
Fairness dictates that if Walmart is going to be criticized for the bad things it does, then it should also be praised for the good it brings. Walmart pays a large amount of tax to the U.S., state and local governments - in the form of income tax, property tax and so on. In fact, Walmart is consistently one of the largest taxpayers in the country, with nearly $6 billion in taxes paid in 2012 (not all to U.S. governments, though).

Second, while people complain about the pay Walmart offers, it is nevertheless the largest private employer in the world, and the leading private employer in most states. Hundreds of thousands of Americans have jobs and pay income taxes because they have a job at Walmart. Moreover, the second largest employer in the U.S. ((McDonald's (NYSE:MCD)) is not exactly famous for great wages either.

Last and not least, Walmart's low prices enable consumers to buy more with their money. Walmart is not solely (or even mostly) responsible for the minimal wage growth in the U.S. in recent history, but Walmart's obsession with low prices has allowed shoppers to take their slow-growing paychecks and stretch them farther. Try telling a stressed-out Walmart customer that they're evil for going there and putting 10% more food on the table.

SEE: 15 Jobs That Have Increased Salary During The Recession

The Case Against Amazon
Contrary to what many Walmart opponents would like you to think, Walmart is hardly unusual in sourcing products from China and other emerging economies - Amazon does plenty of that too. While books are still largely published in the U.S., the electronics, clothes and other consumer products that Amazon sells come from the same countries and factories as the products that Walmart sells.

If Walmart has killed smaller retailers, what has Amazon done to the bookselling and book publishing industries? The family-owned bookstore is largely a memory now, and Amazon has also crushed Borders - a big-box bookseller that simply could not compete. Amazon has also put Best Buy (NYSE:BBY) under major stress in electronics and this phenomenon is spreading across other product categories. Perhaps the only reason that Amazon is spared from the charge of killing Main St. is that Walmart had already started the process before they showed up. Even still, Amazon is in the process of "Walmarting" numerous big-box stores - stores that employee thousands upon thousands of workers.

Amazon is also not necessarily the best corporate citizen in the world. Though there are fewer complaints about worker treatment at Amazon (perhaps because they employ so many fewer workers), there have been OSHA complaints and the warehouse jobs Amazon offers are not exactly white collar either. Moreover, Amazon pays minimal property tax and no sales tax - saving customers money, but taking away much-needed revenue from states. While Amazon has been lauded for its ultra-efficient operations, that efficiency means that Amazon needs far fewer workers - so what is worse, to have a low-paying job (like Walmart) or have no job at all because the company is built around systems and technology and not labor (like Amazon)?

SEE: 5 Alternatives To Expensive Textbooks

Why Does Amazon Get a Pass?
I suspect there are at least a few reasons that Amazon gets spared from the criticism that dogs Walmart. For starters, Amazon offers a very easy and very appealing customer experience - you can quickly find what you want, you don't have to rub elbows with other shoppers and everything looks nice. Compare the shopping experience at Amazon with Walmart at 2am and you will see what I mean.

Also, Amazon makes it absolutely clear how much money you're saving and everybody loves a bargain. Similarly, I believe that the Amazon's shopping experience makes a shopper feel as though they're somehow "getting away" with something - the product often carries a significant discount, there is no sales tax and the shipping is waived in many cases.

Lastly, but probably most controversial, I think there could be issues of class at work. Amazon is still all about the internet and still carries that cache - shopping at Amazon and saving money is "cool," or at least normal. By contrast, a lot of people believe that Walmart is where the poor people shop and nobody wants to have anything to do with that.

SEE: Four Online Shopping Alternatives To Amazon

The Bottom Line
Vibrant debate about business policies and ethics is essential to a free society, and there is nothing wrong with holding companies to high standards. All I question is whether critics and ethicists are being fair and consistent in how they apply their standards. Accordingly, I fail to see how Walmart is so exceptionally bad for America, but Amazon is somehow immune from the same criticisms and concerns.

At the time of writing, Stephen D. Simpson did not own shares in any of the companies mentioned in this article.

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