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The Wal-Mart Weekly: Is "always low prices" accurate?

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Welcome to the fifth installment of The Wal-Mart Weekly -- a new weekly column dedicated to bringing you insight, wit, facts, results, opinions and just a bit of everything else when it comes down to a very hot topic these days: Wal-Mart.

Last week I looked at Wal-Mart Stores' (NYSE:WMT) associates through three field trips to see what actual store employees were like, what they had to say and what impression they left with me as a representative of the company that employs them.

This week I'll be comparing prices on several items found at Wal-Mart and a few other retailers to see if Wal-Mart indeed has "lower prices." It's interesting to note that Wal-Mart does not advertise or promote that it "always has lower prices," but that it has "always low prices" -- which is a direct way of saying the retailer has low prices, just not the lowest price on everything, all the time. I've even known family members who take competitor's ads to Wal-Mart regularly and have the retailer match prices -- which they always seem to do. So, let's move on, shall we?

A little background


In what could be described as my second field trip for research purposes to Wal-Mart in as many weeks, I decided to look at several grocery items to determine where Wal-Mart's pricing sat compared to the competition. I had to almost completely focus on grocery items, since comparing general merchandise (exact same items) across retailers is exceedingly difficult these days (or so I found out). There are brands and lines made specifically for retailers by Chinese vendors these days, so one must find a brand name (and model) to really get a comparison that's 100% equal.

Sure, I could compare flat-panel TV prices across retailers, but there would be differences (in features, etc.) that would make a true comparison nearly impossible. I'm quite sure retailers want it this way to confuse customers and make it hard to compare pricing. I know that electronics manufacturers produce the exact same item for many retailers, with only small feature changes here and there, along with different model numbers to appease retailers who don't want consumers making "apples to apples" comparisons -- and hence, exposing the real pricing and related comparisons. On we go ...

Shopping like a normal consumer

Upon entering the first Wal-Mart store to do some competitive price hunts (one of two), I immediately went to the grocery aisle (these were Supercenters, of course) to pick out some very popular grocery items. I based this "popularity" ranking on my own experience of looking for certain grocery items on days when Wal-Mart grocery aisles are as packed as sardine cans.

I had already reached some conclusions by researching flat-panel TVs in Wal-Mart's electronics department -- three of the four models were ones I could not find at any other retailers in the area (Best Buy and Circuit City) and the fourth, an iLo model, must be exclusive to Wal-Mart, as iLo is a private label brand for the retailer (made by LG Electronics, at least for flat-panel TVs, I believe). When all there is to compare is a technology (plasma TV) and a size (42"), comparisons -- while still valid -- lose the cache of trying to "really" see which retailer has the lowest price at any given time on any exact item.

Anyway, here is the list of six grocery items I located at Wal-Mart that I would later compare to an Albertsons grocery store in the area:

Wal-Mart price, Albertsons price
  • Honey Nut Cheerios, 18 oz. -- $3.39, $3.29
  • Hunt's Ketchup, 24 oz. -- $0.88 , $0.99
  • Kraft Macaroni and Cheese, 7.25 oz. -- $0.39, $0.49
  • Naked Juice, 15.2 fl. oz. -- $2.38 , $2.99
  • Silk Soy Milk, half gallon -- $2.49, $2.79
  • Triscuit wheat crackers, 15 oz. -- $2.50, $2.79
  • Hershey's chocolate bar, 1.25 oz. -- $0.33 , $0.50
As you can see from the comparison above, Wal-Mart took home the prize for lowest price on every grocery item I looked at -- except one. Albertsons was having a "sale" on Honey Nut Cheerios, so that chain had a lower price. On Wal-Mart's shelves, I saw no "On Sale" tickets or promotions at all on any grocery item, in keeping with standard Wal-Mart marketing. The chain never has "sales," but claims to always have "low prices" every day. Fair enough, because in this example, it did have the lowest price on six out of seven items, with the largest margin being on the "Naked Juice" item -- a discrepancy of $0.61.

Looking at pricing strategies

As I mentioned, Wal-Mart has had a habit (ever since I can remember) of never advertising "sales" or "specials" except during top shopping seasons like the end-of-year holidays. The chain simply displays an "everyday low price" on all items and does not use gimmicks like "double coupons" and frequent sales to lure in shoppers. Maybe it should, to help it revive flaccid U.S. sales. With grocery retailers like Albertson's, Kroger, Pathmark and Safeway constantly rotating "sale items" through circulars and in newspapers, I am pretty sure there are shoppers who plan shopping sessions around multiple retailers in order to get the best price on everything on that list.

Meanwhile, Wal-Mart doesn't advertise "sales" (except on special occasions) and lets the "everyday low prices" angle do the talking. Is this enough? Perhaps it is not. But, to a point, it doesn't need sales, as evidenced from the seven grocery samples referenced above. The problem? This marketing angle is stale and boring, even though in this case it is right on target.

Wal-Mart's actual prices -- what is the deal?

Something else I noticed was the oddness of actual Wal-Mart pricing. I never did see a price ending in ".99" while shopping. Instead, I saw prices ending in what seemed to be random numbers, like ".38", ".62" and ".76". I've read (and I believe) that Wal-Mart prices items throughout its stores (not just in grocery) in apparently random (but actually carefully selected) numbers to give the appearance of lower prices. The thinking is psychological and subliminal: Customers will think Wal-Mart really is giving them the absolute lowest prices when the price tags don't always end in the standard ".99". This makes perfect sense from a psychological marketing perspective.

Turning the tails on other retailers, all I saw were prices ending in ".x9" on almost every item (unless it was on sale), with the price ending in ".x8" or ".x7" sometimes thrown in for good measure. By the way, that "x" stands for some other number, like 2, 4 or 9. Common retail practice is to price items with the ending of 9 so as to not tip the consumer's mind into the next dime-based price bracket -- and therefore, influencing their thinking.

It does hold true after all

From this experience, Wal-Mart's claim of "everyday low prices" really does hold true from a grocery perspective. The retailer does have everyday "low prices," but perhaps that image is not enough for the retailer to continue goosing more sales from existing consumers and winning new (and former) customers into its stores. Prices alone, as we all know by now, are not the only criteria for informed shoppers these days. Style, experience, image, traffic -- all of these items can play into gaining a customer and making him or her loyal to shopping at a particular location. Ask Target about this after the second-largest discount retailer saw impressive quarterly gains all last year compared to year-over-year fiscal quarters.

Next week, I'll be looking at Wal-Mart's image problem on multiple fronts right now, and how the retailer can fix things (if it is not too late). I've mused on this in past columns, but there is so much to a much-needed Wal-Mart image makeover that a dedicated column seems appropriate. Until then, have a great week!

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Last updated: November 24, 2009: 02:30 PM

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