Welcome to the 56th installment of The Wal-Mart Weekly, a 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.
This week's Wal-Mart Weekly will be focusing in one a rather high-stakes claim Wal-Mart Stores Inc. (NYSE: WMT) is now advertising into the mainstream media. The claim? The retailer saves the average American family $2,500 per year. To coin a phrase, them's fightin' words, yes?
Either Wal-Mart likes abuse from the media or it has substantiated facts to back up such a claim. In fact, there's so many variables that could conclude (or disprove) the retailer's claim that it could boggle all our minds collectively. So with that, let's start boggling.
Wal-Mart's claim to savings
When the world's largest retailer changed its corporate motto from "Everyday Low Prices" to "Save Money. Live Better" over a year ago, the shift was probably engineered to get the average American consumer to change the perception of Wal-Mart from a bargain store more to a money-saving assistant (without the fees). Just think about the difference: "Everyday Low Prices" immediately summons up a visual picture of a bargain hunter's paradise -- nothing more. Of course, that is what Wal-Mart had wanted its image to be for quite some time, even as it tried to recruit new shopper demographics into its stores to buy higher-end goods.
Well, that didn't work out so well (yet), and Wal-Mart either had a premonition or was finely tuned to the impending downward trajectory of the U.S. economy that really showed its ugly face in 2008. About a year ago, the mortgage industry was starting to show signs of impropriety, energy and gas prices were spiking ever upward, large car and SUV sales were plummeting, and the U.S. consumer was feeling the pinch. In a way, Wal-Mart changing its tune to "Save Money. Live Better" was uniquely positioned to take advantage of the "dollar stretching" attitude of the mainstream U.S. consumer that would not go away at all in 2007.
Even if you're not a Wal-Mart shopper, you save
A commercial that depicts a father and son preparing to buy a used car or a family taking off on a vacation doesn't sound all that unusual. Until you see Wal-Mart bags in both situations to help plant the idea that Wal-Mart's money-saving ability helped these families get to things they may have not afforded if they had shopped at other retailers. Yes, it's that mental connection that marketers want to make with consumers and shoppers -- but is it true? Does Wal-Mart's claim of "we can help you save $2,500 a year" based in reality or smoke and mirrors?
Try this on for size -- as you may have noticed, Wal-Mart's claim here is that it saves the "average American family $2,500 per year." Even if you're not a Wal-Mart shopper, you can enjoy your annual $2,500 savings? What? Huh? What economist team came up to that conclusion? Wal-Mart is making that claim based on the retailer's calculation on the average American household and the impact it has on those households -- even if they don't regularly (or ever) shop at Wal-Mart. Adam Smith, you have been vindicated.
Can Wal-Mart really claim that its impact on the average American family -- Wal-Mart shoppers or not -- really is affected by such a large savings amount per year (even indirectly)? While Wal-Mart Watch pretty clearly disagrees with the retailer's claim (not surprising), the National Advertising Division of the Council of Better Business Bureaus also didn't agree with Wal-Mart's claim here. In fact, it found that the "implied claim" in the retailer's advertisements is indeed misleading.
Is Wal-Mart really out to lunch, or is it just me?
A claim like "we save the average American family $2,500 per year" is bound to draw instant criticism from all sides, so what is amazing is the fact that the study from the Council of Better Business Bureaus stated that Wal-Mart's message was displayed in a way "for which the advertiser provided no support and, in fact, conceded that there was none." But we're not talking here about Wal-Mart's $2,500 claim to fame. We're talking about its implication that those savings could be used to help families struggling with everyday items like transportation or vacation expenses.
Which brings up the question -- does Wal-Mart just want the short-term face value of the message up for as long as possible before critics have it yanked off all advertising channels, or does the retailer really not think that a single challenge will arrive from such an outlandish claim in the first place? Surely the PR folks in Bentonville are not this clueless, so it makes one think of ulterior motives. Short-term advertising can sometimes generate long-term consumer sentiment, and maybe that was Wal-Mart's goal.
Wal-Mart's commissioned study in 2005 found that the retailer emphasis on low prices led to a 3% overall decline in consumer prices. Not Wal-Mart prices, but overall consumer prices. So then, the onus goes back to that study -- how was that fact determined? The conclusion was that Wal-Mart had a $287 billion impact on the American economy. Divide that by the number of U.S. census households and there's your claim, right? Cut and dry. Well, not so fast according to many Wal-Mart critics.
The beef was not in the "express claim" itself. In fact, it was found that Wal-Mart provided enough information to lead to a rightful conclusion that its impact on the U.S. economy can be translated into a $2,500 savings for the average American family per year. But when it comes to the "implied claim" that those savings can help families take overdue vacations and buy used cars, that goes over the line. Wal-Mart responded by stating that it "would be proud" to possibly change its implied claim in its advertising to ensure that the "positive impact we have for all American families is even more explicit."
Indirectly, Wal-Mart claims that it helped your family save $2,500 in the last year. How about directly? Can you attach a dollar figure to the savings amount that Wal-Mart helped you save in the latest shopping year? Without a precise, comparative journal of everything you bought at retail, that would be virtually impossible. But then again, I would posit that the consumer economy -- which churns two-thirds of the American economy -- is ruled by emotion and media more than logic and data. What do you think?
Stay tuned right here at BloggingStocks next week for another edition of The Wal-Mart Weekly. Shop safely and carefully this week!
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Reader Comments (Page 1 of 1)
4-12-2008 @ 4:04PM
Gary E. Sattler said...
Yes Brian, the American consumer experience is rooted mostly in emotion, desire and reaction, not common sense. Hence much of the economic turmoil we're in.
Perhaps if Wal-Mart had not saved us all that money, we'd have seen the writing on the wall much sooner.
4-12-2008 @ 5:34PM
Mike said...
Ok so Wal-Mart's very presence in the marketplace results in some amount of savings for everyone.
Because they exist, (and are as large as they are) we save.
Can we quantify that in terms of a vacation or a new car? Probably not. Since none of us remembers a time during our adult lives when Wal-Mart did NOT exist, we don't actually realize the $2500 "pay raise" that they provide us.
But I think it is more than realistic to look at our everyday purchases. It doesn't take a rocket scientist to see that I save money when I buy $4 prescription drugs, or that buying 4 tires at Sam's Club saved me a bundle. I promise you that when I buy diapers for my toddler my money goes a whole lot further buying the Members Mark brand at Sam's Club!
So while I can't say I realize the $2500 savings that they are promoting, there is no doubt in my mind that by shopping at Wal-Mart and Sam's Club my family is saving money... and that money that we saved is used for us to take our family vacation to the beach this summer. Then we will start saving for a Disney vacation for next year. And of course we squirrel away a few bucks every month for college for the little guy.
A penny saved is a penny earned so thanks to Wal-Mart/Sams Club we're saving money and living better!
4-12-2008 @ 6:16PM
B. Harrison said...
If, on one hand Walmart "saves" the WalMart shoppers $2,500.00 per year; but that certainly is not the net results of the impact of WalMart. Per recent reports, WalMart accounts fo something like 8% - 12% of China's exports . . . that is a HUGE AMOUNT, and contributes substantially to the American trade deficit to China.
On the other hand, the devaluation of the U.S. dollar by almost 50% during the last seven years is substantilly attributile to the escalating enormous trade deficit, which WlMart contributes to significantly.
So, on one hand they "save" you $2,500.00, and on the other hand they reduce the value of your money by 50% . . . any fool can figure out that WalMart is not "saving you anything in the long run", are they?
4-12-2008 @ 6:30PM
B. Harrison said...
Things take time to "cycle through" Now with the economic crisis unfolding upon our nation, and with the impact on the value of the U.S. dollar, Americans may begin to understand the long term impkications of buying cheap foreign goods.
Yes, in the short term there are savings to be realized superficially. However, in the long run, those "savings" are offset many times by the long term impact on our economy, and the value of our currency for future purchases; and the impact of undermining our economy and manufacturing base.
"A penny saved in the wrong way" may wind up costing fifty cents", which we can ill afford.
4-12-2008 @ 8:03PM
Ty Williams said...
Why don't you guys get off Walmart's case. Is anyone going to dispute the fact that Walmart saves us money? Why don't you get a life?
4-13-2008 @ 8:43AM
steve said...
walmart is ripoff safeway is still cheaper for food dont buy wally world china junk
4-13-2008 @ 10:32AM
johnyboy said...
I do agree that Wal-Mart/Sam's Club can save a family money, though they do it by pitching foreign made goods priced higher than those goods would cost in their prospective markets. Wal-Mart specifically does this, and yet like many, claims to be an "American" company. I myself would rather pay more upfront for an item, if I know that it's going to last-an assurance that Wal-mart goods cannot give. If people really looked, their local supermarkets and grocery stores either are or would be competitively priced on food, if one asked--just for the purpose of securing business. Remember, this country was built on the backs of hard working men and women and SMALL BUSINESSES, not Mega-Stores. tthe way this country is going with the economy and it's government, I'm sure we will see "SEIG HEIL" days soon.
4-13-2008 @ 2:00PM
Allen said...
I don't usually shop Wal-Mart because I beleive they are an Evil Anti-American Empire. It's sad that they have
forced many other American Companies to offer Cheap Chinese Crap just to compete. So, while they may lower prices
they have also lowered quality as much or more. And they are reducing the available choices. I would rather pay
more for a quality product. But they are running most of those out of business. I wish they would have stuck with
the Mullett wearing Trans-Am driving Trailer Dwelling clientele they started with and left the rest of us alone.
4-13-2008 @ 7:18PM
roudy11z said...
If you are a low income family like some of mine are then you know WMT saves you money overall. I have listened to their shopping experiences and while maybe not saving $2500 per year, they do say it approaches $2000 per year especially now with generic $4 drugs available. With this they tell me they will exceed the $2500 savings this year by quite a bit.For you people who hate WMT GET OVER IT! We don't care as long as they are trying to always save us money--ALWAYS. RoudMan
4-13-2008 @ 7:24PM
rowdy said...
I forgot to add that WMT closed up 14 cents a share Friday. What am I missing? Is it a miracle?
RoudMan
4-13-2008 @ 9:55PM
Donna said...
yes wal-mart saved me $5 on a pair of jeans I bought last week. I washed and dried them after I wore them once and had to through them out because they fell apart. As for food they are not as cheap as Kroger and I have found that their food is of poor quality so guess what I go to sears or jcpenny and a real food store. As for things that you use once and then through away I agree that sam's club/wal-mart are cheaper if you buy in larger quanity.
4-14-2008 @ 6:41AM
Mike said...
Should have returned them Donna. Must have had a defective pair. I buy George brand dress pants to wear at work and they have been extremely durable. Plus I dry-clean them at least once a week and they stand up to that punishment.
I can't imagine why you would pay good money for something and then THROW it away if you find it to be defective rather then returning it.
4-15-2008 @ 12:54PM
roudy11z said...
FOR YOUR INFORMATION--
WAL-MART CLOSED UP 14 CENTS YESTERDAY ON A DAY(APRIL 14) WHEN THE REST OF THE MARKET WAS DOWN INCLUDING TARGET. WHAT IS GOING ON? I SAID THIS WOULD HAPPEN BACK MANY MONTHS AGO BECAUSE THEY ALWAYS HAVE LOW PRICES "ALWAYS". NO PUN INTENDED. ROUDMAN
4-15-2008 @ 1:10PM
roudy11z said...
I'm sorry I was wrong about Wal-Mart close yesterday(April 14). It was up 35 cents instead of the 14 cents. The 14 cents was the close for Friday. This is because they always have low prices, "ALWAYS". Again no pun intended. RoudMan
4-24-2008 @ 12:28AM
Chris L said...
I usually pay More at Wallmart if I need something at the time... I pass two cheaper stores to If go to Wallmart.. Aldi, and Marcs both are what I call value prices.
Wallmart is cheaper compared to Kroger... Which just has jacked up prices..
I don't get why people think wallmart is cheap.. Just because the price looks cheap, doesn't mean it is. Like this Green tea I get, its on the end for $1.50 and at Giant Eagle thats their normal price, but often goes for $1, but wallmart never brings it down to that.
Just is a better deal compared to higher priced stores. Not really a discount, but then again I am in a extremely competitive city, and they price nationally.