Why Walmart Managers (can) Make $620,000 A Year

a single Walmart store is such a large commercial operation that it statistically changes the local economy around it with an influence that could be felt at a range of up to 50 mil it's a business that only works because of Devotion to efficiency massive economies of scale and a willingness to operate right on the edge of financial viability if a process can be improved it must be improved if sales can be optimized they must be optimized and if costs can be cut well they must be cut everyday low prices goes for more than just the

products that line their shelves which is probably why it's raising so many eyebrows that the company is now paying its store managers as much as $620,000 a year Well many people get jobs at Walmart to make some quick money but the company wants you to know you can make real money there too the largest private employer reveals store managers earn an average salary of $175,000 a year more people at Walmart get food stamps rental assistance Medicaid and Medicare than work at any other Corporation in America a lot of them have two maybe three jobs John

we talked yesterday about the fact that a Superstore manager now at Walmart can earn over $400,000 a year that stock many economists consider Walmart to be the most powerful private economic institution in the world within America it has so much control over prices employment and business business activity that it arguably Rivals a lot of government agencies but to what end this power serves is a little bit more questionable by Revenue Walmart is the single largest company in the world in 2024 it made 637 billion in sales which is almost double that of Apple who only

made $395 billion in sales yet despite bringing in more than a quarter of a trillion dollars a year more more than Apple Walmart is only a fifth as valuable the reason for this discrepancy is down to a general investor preference for technology companies but more importantly because Walmart basically keeps nothing of what it makes Apple makes a lot more money selling their own computers phones and services than Walmart does on fast moving consumer goods that are primarily supplied by other businesses Walmart has built its entire brand on everyday low prices an unspoken agreement with consumers

that it's basically impossible to find lower prices anywhere else so don't even bother looking it's a compelling Market strategy that's clearly worked but to keep cost so competitive the entire Walmart Empire runs on razor thin margins most of their sales go back to paying for the items that fill their shelves despite its immense size and the pressure it can put on suppliers to give it the best deals on bulk purchases the company on average only makes a 20% markup on the Goods it sells but the outgoings don't stop there from that 20% cut of sales

the company has to maintain their stores and warehouses fuel their trucks pay their insurance maintain their website run advertising campaigns and above all else pay their millions of Staff members after that from initial sales of more than $640 billion the company only ends up with a net profit margin of around 3% now according to my rigorous calculations 3% of 6 $40 billion is still a shitload of money but even the slightest disruptions to their business could wipe out that margin in an instant now it could be argued that this is a win for consumers over

the decades the cost cutting and raise Ain margins that Walmart operates on have had a noticeable deflationary impact on consumer prices but that's not without some serious tradeoffs in certain communities Walmart controls as much as 95% of the grocery market and that didn't happen by AC accident as far back as 2006 a new Walmart store opening on the outskirts of Chicago caught the attention of a few local economists in the months before the store opened the team conducting the research counted a total of 306 businesses in the surrounding areas 2 years later 82 of those

businesses had closed and a very interesting pattern emerged somewhat like a bomb going off the new Walmart store had a blast radius of business destruction stores less than a mile away closing at a rate of 35 to 60% and the further away they were the more likely they were to survive follow-up studies found that in locations more remote than the outskirts of Chicago the economic blast radius could be as large as 50 Mi or 80 km in every direction since these reports the economic impact of a new Walmart opening has become so well documented that

local economists and city planners have named it the Walmart effect now this despite the name this effect can be seen with other Mega stores in other countries as well but nobody truly Rivals the sheer scale of Walmart's retail dominance in the USA it must be noted however that the company itself have argued that this is not all bad in multiple studies that they themselves have funded they point out that their stores attract local development and while some local businesses May close other businesses that support their chain will open so local economic activity Remains the Same

or actually improve now of course they would say that realistically any research that they paid for which said the contrary would be buried alongside the recipe for Coca-Cola and the Epstein list which will be released any day now I'm sure but what it really all comes down to for most people is good paying jobs if a local Walmart can provide more jobs to local residents than the businesses it replaces then it's going to be much easier to get the necessary approvals to build a store After All For Better or Worse we live in a free

market economy where the most competitive businesses should win and here Walmart has a lot of negotiating power it's the largest private employer in the world falling only behind the Indian ministry of Defense the American Department of Defense and China's people's Liberation Army the reason that salaries are such a large expense for the company is not only because it employs so many people but also because it pays a lot of them surprisingly well now normally working at Walmart is synonymous with low pay and benefit the company has continuously raised controversies by paying their floor staff so

poorly that they were reliant on government assistance to make ends meet and minimum wage laws are a lot like minimum age laws you know the Bad actors would go lower if they were allowed to perhaps this is to be expected from a company with such an obsession with cutting down in expenses wherever possible but it makes it all the more confusing that just a few rungs up the management ladder the pay goes from below the poverty line to putting people into the 1% in a release to the Wall Street Journal earlier this year the company

announced a new pay structure for store managers that would see their salaries starting at $128,000 a year with increases based on experience and bonuses that could more than double the base pay depending on performance the real headline Grabber though was Market managers which under the company's new pay structure could earn as much as $620,000 a year for any professional this is a lot of money and for someone who's basically the Michael Scott of Walmart stores it seems almost hard to justify when the bulk of the staff they'll be overseeing will earn less than a tenth

of that all in the name of cutting costs wherever possible but the reality is that these incomes have been decided by simple practical economics how much someone gets paid is simply a function of how much money they can make the business and how hard they are to replace if someone doesn't make or save the business that much money then no matter how hard they are to replace they can't justify that much pay unless the business they work for is effectively operating as a charity likewise if someone making the business billions of dollars but basically anyone

could do their job then they're easy to replace and they don't have that much negotiating power over their income but if an employee both makes the business a lot of money and is hard to replace the opportunity to earn a lot of money is practically Limitless so what is it that makes Walmart managers so special well on the making money side a Walmart manager is a far cry for most retail managers the reason Walmart stores have such a huge impact on local economies is because each individual location is a simply massive business in its own

right the average store brings in $130 million a year and employs 300 staff in various roles if just one of these locations was counted as its own business it would be a medium-sized Enterprise where the chief executive would probably make a lot more than even the rather generous salary of a Walmart store manager the headline grabbing Market managers on average oversee 11 stores that are often spread out across state lines that means they're effectively overseeing a business operation employing roughly 3,000 staff and $1.5 billion in annual revenue assuming that they're all completely average locations these

11 stores are roughly equivalent to the global operations of Crispy Cream Donuts and according to public company records their CEO made1 .2 million in cash and bonuses last year so suddenly that $620,000 a year doesn't sound so crazy by comparison these managers also only get that bonus by maximizing the profits of their locations so not only do they need to maximize their store sales they also need to further the company's mission of cutting costs wherever possible this makes the person doing that job very unpopular with the people they work with every day but it does

mean that they can tick the box of making the company a lot of money but what about being easy to replace surely there's a long line of Walmart employees that would kill for the opportunity to work in such a lucrative role right well not exactly managing these locations by all reports is extremely demanding and the company specifically looks for people willing to travel constantly between locations and put in extremely long weeks the roles are rarely advertised externally because the company tries to promote existing store managers into these roles which sounds s like a good opportunity

but the jobs go to staff that demonstrate outstanding performance in their current location and there's no guarantee these jobs won't require a successful applicant to move to a completely different corner of the USA even still there is a reason they do this and it's the same reason why they've gone on a press tour to talk about how much they're paying their middle managers most jobs at Walmart kind of suck and the company employs so many people that a significant portion of the American Workforce has been employed by them at some point in their career with

an aging population and declining labor force participation finding people that want to work at Walmart is getting harder and harder every year and the people who do join are on average less loyal to their employers so if they get a better job offer they're going to take it this means that the company spends a significant amount of money on constantly hiring and training new staff as far back as 2006 a publication from the Harvard Business Review dubbed this the high costs of low wages the best way to cut these costs is to improve staff retention

and the best way to improve retention is to promote the life-changing salaries that workers can earn if they go above and beyond for the company in business this is often called the halo effect and for the company it's more effective than just paying and treating employees better because eventually they get used to that there are plenty of bad workers making lots of money but someone chasing a job is going to put up with a lot more this strategy Works outside of the company as well the reality is that a new Walmart location has a downward

impact on wages in the local area because if they force out local business they become the only place for people to get an entry-level job and when they're the only place giving out jobs they don't have as much of an incentive to offer better pay and benefits economists call this a monopsony which is like the opposite side of the Monopoly coin instead of being the only business selling a product they're the only business buying buying a product this monopsony power not only lets them negotiate the best deals with their suppliers it also means that they

get the best deals from their employees a 10-year study into new Walmart locations found after centers opened local wages dropped by an average of 6% in surrounding communities poverty also increases by 8% compared to communities with no local Walmart the company again commissioned their own studies to try and refute these findings but the best that could come up with was that the lower prices offered in their stores helped to offset the lower incomes households would be receiving not exactly encouraging the wages of those store managers and regional managers might be competitive but they also work

as a cost effective marketing tool for the company to point to as an example of the great jobs they can create a big salary number gets a lot more attention from the general public than an econometric study conducted over decades they know that talking about these figures will get them the right kind of attention kind of exactly like what I did with the title of this video subscribe