Wal-Mart Does Not Have Lower Prices on 98-99% of What They Sell

Don't believe the pipe:How does the number-one retailer maintain an image of low prices? First, by actually making sure its prices are lower than its competitors, at least on key items. These items are called "price-sensitive" items in the industry, and it is commonly believed that the average consumer knows the "going price" of fewer than 100 items. These tend to be commodities that are purchased frequently.

A mid-size Wal-Mart supercenter may offer for sale 100,000 separate items, or stock-keeping units (skus). Wal-Mart and other major retailers believe that the general public knows the going price of only 1 to 2 percent of these items. Therefore, each Wal-Mart store shops for the prices of only about 1,500 items in their competitors' stores. If it is ever found that a competitor has a lower price on one of these items than Wal-Mart, the store manager will immediately lower his or her price to be the lowest in the area.

Price-sensitive merchandise is displayed in prominent places such as the kiosk at the entrance to the store, as well as on end caps, in dump bins, and in gondolas down the main aisles. Consequently, when Wal-Mart customers see the items of which they know the price, the ones always priced lower in Wal-Mart, they start assuming that everything else is also priced lower than at competing stores. This assumption is simply not true.

My barber has offered me a simple example. He sells a nonbreakable pocket comb for 25 cents that he procures from his vendor for eight cents. Wal-Mart sells a lower-quality comb for 98 cents, and one would assume that Wal-Mart pays less for it than the barber does. People keep buying Wal-Mart combs, however, because the average person does not know the going price of a pocket comb, and it is automatically assumed that the Wal-Mart price is the lowest.

Wal-Mart has played the consumer for a fool. We all suffer as a result.

Tags: Money (all tags)

Comments

19 Comments

Excellent Post
It's good to see that MYDD focuses on all issues that effect the public, not just political things. This would make a good consumer reports story.
by JasonGooljar 2005-03-07 12:16PM | 0 recs
Where's Ralph Nader got off to?
by craverguy 2005-03-07 01:34PM | 0 recs
Re: Where's Ralph Nader got off to?
He's been too busy helping Bush win.
by wayward 2005-03-07 02:05PM | 0 recs
Wal-Mart on NOW
People should have a look at the episode of NOW about Wal-Mart.  Good stuff.

http://www.pbs.org/now/politics/walmart.html

by skythree 2005-03-07 01:45PM | 0 recs
Re: Wal-Mart on NOW
Agreed, it's an excellent piece.  Anyone who hasn't yet made the decision to boycott Wal-Mart should view it.  And let's not forget Wal-Mart's heavy contributions to only the Republican party campaigns.  Shop Blue.
by JaxDem 2005-03-07 02:22PM | 0 recs
that's a silly claim to make
Of course they won't have the lowest prices on everything.  If they did, they wouldn't make any money.  People don't know the price of a comb because they don't buy combs very often.  But for things like a gallon of milk or a pair of jeans, Wal Mart tends to have some of the best prices.

The reason Wal Mart does so well is they have a better business model than any of their competitors.  They spent millions of dollars building the best technology infrastructure of the major retailers which cuts their costs of inventory.  They then sell products made cheaply abroad and hire low wage workers.  As a result, they can offer the best prices on the things people care about.

I think as progressives we need to quit complaining about how Wal Mart is ruining America and start focusing on ways we can reform it.  A boycott does not change the fundamental reasons why the way Wal Mart operates is successful.  Instead, we should enact laws to support unionization, which will bring up wage standards.  We can get fair trade agreements to make industrial production in the US competitive.  And maybe we need some good old fashioned regulation of Wal Mart.

The fact is that Wal Mart offers more goods at cheaper prices to rural areas than the local mom-and-pop stores did.  Rather than whine about it, we should figure out a way to turn this monstrosity into something that works for the good of society.

by hotshotxi 2005-03-07 03:25PM | 0 recs
Re: that's a silly claim to make
Sure...but Vhall-Mart is powerful. They tried to run a series of (false) ads claiming some family restaurant was going to put out of business because of Prop 72. Now, they staged it in a restaurant, they used an actress instead of a real proprieter, and oh yeah, Prop 72 (here in CA) exempted any business with less than 50 employees.

And all Prop 72 said was that employers had to provide an avenue (other than state or federal welfare) for workers to get healthcare.

I mean their contempt for the democratic process, their desire to support substanding working conditions in China, not to mention their aversion to unions...it all adds up to a company that will go down with Standard Oil as a suffocating octopus.

by risenmessiah 2005-03-07 06:59PM | 0 recs
Re: that's a silly claim to make
I found ALDI is pretty cheap for Milk etc.  They pay their employees well too.  Their cashiers start around $11 PH in my area (Chicago suburbs).  It is a European company though, so I expect them to treat their people better.
by yitbos96bb 2005-03-08 05:41AM | 0 recs
Re: that's a silly claim to make
"But for things like a gallon of milk or a pair of jeans, Wal Mart tends to have some of the best prices." Milk is basically the same price everywhere because of price floors, so that's not a very good example. This is Walmart's marketing genius to make people think that there are less choices than there actually are, while the fact is there are many stores that have cheaper prices than Walmart for the same products instance ALDI and Big Lots to name a couple.
by Painter2004 2005-03-08 08:49AM | 0 recs
Re: that's a silly claim to make
Aldi kicks ass for cheap items.  Their generic brands aren't too bad.  I love their Salsa.  Plus the way they treat their workers is refreshing.

Anyone know how Big lots is on employee treatment?

by yitbos96bb 2005-03-08 10:32AM | 0 recs
I don't shop at walmart.
It's embarassingly ghetto. Kind of like Kmart or Target. It's one thing to pick up a tube of toothpaste, but who the hell buys clothes or electronics at such venues?
by Vote Hillary 2008 2005-03-07 04:14PM | 0 recs
Re: I don't shop at walmart.
Was this tongue-in-cheek?  Because some folks have no option but to buy clothes at WalMart.  And, sorry to burst your bubble if you were not being ironic, but my teenager has had two pair of W/M brand jeans for near on 2 years now which are worn at least 4 times a week, and are still in disgustingly good shape.  Those suckers just won't develop trendy worn or torn places, dadgummit.  Oh!  just to let y'all know, I bought those jeans in April of 2003 - at Goodwill.
by dksbook 2005-03-07 04:28PM | 0 recs
Hillary would be ashamed of you.
Hillary would be ashamed of you.

People shop at Walmart because it is cheap--cheaper then the local grocery and cheaper than Target.

If you live paycheck to paycheck and you have kids you go where its cheap.  Kids are expensive.  Life is expensive.

We live in a materialistic society.  Maybe that's the problem.

by aiko 2005-03-08 04:11AM | 0 recs
Re: I don't shop at walmart.
Don't know where you live, but Target isn't the same as Walmart or Kmart, with the exception of the super Targets which compete in that realm.  Target views itself more as a department store or the level of Sears and Penny's and Kohl's.  Remember, the company used to own, Dayton-Hudson, Marshall Fields etc, before they changed their name and decided to concentrate on the Target brand.  They have Levi's, Lee etc.  You will probably see K-Mart go in this fashion after the Sear's merger...Sears will make it more on a target level than a Walmart level.  
by yitbos96bb 2005-03-08 05:46AM | 0 recs
Target is more upscale in interior design
But all three carry the same stuff, for about the same amount of money.

K-Mart-Urban low class store.  Failing as big cities become less important.
Walmart-Rural low class store.  As the exurbs grow in power, so does it.
Target-Suburban pretends-to-be-high-class-but-really-is-the-same-as-the-other-two store.  As the suburbs grow in power, so does it.

They all have stores in each other's markets, of course, but that is the traditional breakdown.

by Geotpf 2005-03-08 03:08PM | 0 recs
Re: I don't shop at walmart.
Look at all the defenders of Walmart! I caught you people!
by Vote Hillary 2008 2005-03-08 10:09PM | 0 recs
Interestingly...
...I just started to do a price comparission of various items at Target, Walmart, Kmart, and various grocery and big box electronic chains.  I was planning on doing it all at once, but I pooped out after just going to Target.  I picked twenty items or so more or less at random.  I'll finish it up going to a couple stores a day.
by Geotpf 2005-03-07 06:46PM | 0 recs
Wal-Mart Parodies
I saw two really good parodies.  This weeks Simpsons had a great thing with Sprawl-mart (Not a walmart parody as the sign says) and the labor practices.

South park I believe was a re-run but their Wall-Mart was hysterical.  I recommend it.  

Also for those who were Animaniacs fans, the Boondocks comic Sunday had a great comic about Walmart.  It features Pinky and the Brain as Walmart employees.  THose of you who know it can see the logical conclusion.  Very funny.

by yitbos96bb 2005-03-08 05:50AM | 0 recs
Re: Wal-Mart Parodies
South Park was great.  They blamed everybody for everything.
by aiko 2005-03-08 06:20PM | 0 recs

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