For quite some time we’ve been hearing that just about the only two major companies that are seeing any revenue and profit growth are McDonald’s and Wal-Mart. One can see how that would happen generally, because people are feeling pinched and they are choosing the cheapest alternatives. And with McDonald’s in particular, well, they’re virtually ubiquitous, so 99% of the population can choose them instead of another restaurant.
But how is Wal-Mart managing it? Many people live near a Wal-Mart, but many others don’t have one around for miles. By the same token, many of the people who do live near a Wal-Mart don’t have many other choices to begin with, and like most of us, they’re not suddenly deciding to spend more money.
Does anyone know the details? What sort of merchandise is it that Wal-Mart is selling so much more of? Groceries, clothes, or electronics?
Well, for one thing, the distance to Wal-Mart is unquestionably to their advantage; there’s no more ubiquitous store that offers all the things they offer. The average distance to a Wal-Mart for any American (or Canadian, I daresay) is shorter than it is to any other chain of department stores.
Secondly, I don’t buy that most, or even very many, of Wal-Mart’s shoppers lack other options. Wal-Mart shoppers are decidedly middle class. My wife and I make good money and shop at Wal-Mart for some things. Tough times might motivate us to shop there for more things that we might otherwise have bought at other stores. People who CAN’T shop anywhere else might not buy any more stuff than they did before, but people who CAN, who are looking to save money and get better deals, can give greater share-of-wallet to Wal-Mart. In tough times people will exert more thought and energy into finding bargains that, in fat times, they wouldn’t be as concerned about. So Walmat doesn’t lose much from the poor folks1, but gain from the middle class.
Its not just the middle class that’s going to Wal-Mart. I’ve seen a lot more of really expensive cars (think Ferrari [and definitely not a kit car] and the like) in the parking lot of my local Wallyworld.
Shopping at Walmart may not save you money compared to other stores in your vicinity. Walmart changed its ad campaign a while back and no longer claims the lowest prices. In fact, there are now claims Walmart does price gouging, especially in less affluent areas.
I do know the local Walmart had grocery prices that are substantially higher than the food chain stores down the road. It’s been this way for years, however, their now dead ad campaign was sufficiently enticing to lure customers and keep them coming back. If you don’t price compare, you don’t know you are getting ripped off.
As for the local Walmart’s clothes and electronics, all I can tell you is other stores regularly beat Walmart prices, if you price compare.
As the crow flies, yes, particularly if you considered each square mile of Canada or the States apart from how many people live on it. For me, in the L.A. basin it would mean going twenty or thirty miles in L.A. traffic and it wouldn’t be worth it for day-to-day things. Similarly, New Yorkers (specifically Manhattanites) may have access to Wal-Mart locations on Long Island and perhaps the outer edges of the boroughs, but who’s going to take the ferry, or spend hours on the train to go to Wal-Mart? It isn’t a question of urban disdain, but of the practical matter that W-M just hasn’t been in the big cities for geographical reasons. And a lot of people live there who don’t consider themselves potential customers because they would have to go through too many hoops to get there.
That’s why car sales are so poor lately. Who can’t squeeze another year or two out of their current vehicle?
If you are selling a lot of necessities your business isn’t going to suffer as much. People still need to eat, use toilet paper, buy their kids some school supplies, change their oil, etc.
Yes, you can beat Wal-Mart on price sometimes by being a shrewd shopper but even though you may pay 5 cents more, you know you are not going to pay $1.00 more for the same item. Wal-Mart’s legacy is not to price gouge. If that business principle is changing then they are taking a huge risk.
I have about 5, yes 5, Walmarts within in 10 miles or less from me. Their electronics are cheaper than Best Buy, which from some reason is starting to sell higher priced products only as I couldn’t find a phone there for less tha $50. Staples is able to match them often on network equipment. Plus, Walmart’s items look as it they’ve been tossed around a bit. As for food, the Walmarts are in a pricing war with local WinCos which has expanded a lot out here. The employee-owned angle is working for Winco while Walmart is all one-stop. Their clothes are cheaper and having a wider choice in size. The local Targets stop at 36" for men’s pants.
I once saw an NBA coach shopping at our local WalMart, he left and got in his Range Rover. It was Nate McMillan who grew up here and was coaching Seattle at the time, now he coaches Portland.
This is true of any chain retailer, of any level: Macy’s, Target, Sears, The Gap, or anyone else. As a factor, it’s a wash.
No, but the increase in sales it not about people spending more money; it’s about their spending less. Instead of buying $100 jeans at the Gap, they’re buying $25 jeans at Wal-Mart. Wal-Mart gets a bump in sales from the people who go there instead of other, more expensive (if only in perception) places.
I price compare basic food items all the time - bread, milk, eggs, hamburger meat and other generic staples the average shopper buys regularly. Walmart loses hands down every time compared to the local WinCo. Sure, we can nit-pick over specialty items and certain labels but that’s not the point. Walmart charges $3.80 a gallon for full homo milk. WinCo just dropped their price from $2.48 to $1.98 a gallon. I can buy a carton of 18 jumbo eggs for less than Walmart will sell a dozen regular sized eggs. Even a can of the proverbial Campbell’s Chicken Noodle soup is more than a dollar at Walmart; WinCo is only 60 cents.
I’ve had conversations with store clerks at both Walmart and WinCo and both confirm the price gouging. Even the WinCo staff tell me their stores at the other end of town have higher prices for the exact same items. I’ve even confirmed it with my own visits. At one WinCo in a not so nice neighborhood the price per pound for a cheap quality steak is more expensive than a top quality at the WinCo I shop.
Yes, Walmart is taking a risk. However, I do think they’ve hoodwinked much for their clientele they can afford the risk. Walmart never has grocery ads nor advertises basic items on TV. The local food chain stores do regularly and Walmart never wins. I don’t believe most of Walmart’s clientele price matches that much, if at all.
If WinCo is doing this, it’s using the milk as a loss leader to lure people into the store. That normally doesn’t mean that over an entire varied shopping basket their prices will be cheaper. It may be true, but the odds are low. Especially when you compare Wal-Mart prices to all other supermarkets all over the country. Wal-Mart’s enormous buying power means massive economies of scale.
People always use one local store as their example and expect those conditions to have some meaning when applied to thousands of stores in all 50 states. They don’t. Wal-Mart quickly took an enormous share of the supermarket business because it’s overall prices really are lower than supermarkets that offer more choices, more prepared foods, more departments, and better staffing and service. Customers can and do make the choice which kind of store to shop in.
That holds true for non-food items as well. You give up service and quality at Wal-Mart in favor of low pricing. Hardly surprising that in a recession more people are willing to make that trade-off.
And since there are about 2500 Supercenters (the ones with grocery stores) and another 1000 plain Wal-Marts in the U.S. alone, they are nearer to more people than any comparable store. That’s doesn’t include Sam’s Club stores or the huge international division or their million private label products that they stock or all the other ways they have to make money. Wal-Mart is the second largest company in the world (after Exxon-Mobil) and they do better in bad times.
Do you have a list of commonly purchased food items? I’m willing to price compare for a few weeks as a mental exercise.
How about:
A gallon of homo milk
A dozen eggs (reg? jumbo?)
Hamburger
Loaf of bread
Oscar Meyer sandwich meat
Head of iceberg lettuce
Bananas
Six-pack soda
Campbell’s Chicken Noodle Soup
Heinz Ketchup
Cat food
Dog food
Pizza
Frozen broccoli
Fresh broccoli
Canned corn
What else?
We could carry this theme to another forum.
I live on a quiet street with little traffic. Yet I could walk to the Giant Wal-mart that is located at the corner of one of Tennessee’s busiest intersections. They do a thriving business in a multicultural neighborhood. It is a mall unto itself.
I think that it is the range of items offered, the generally lower prices and the one stop convenience that most loyal customers rely on.
They cause the destruction of small towns, treat certain categories of employees like indentured servants, exploit immigrant labor, uglify America and import goods from sources that have less than meritorious labor practices – so I have heard.
I don’t shop there. I used to “get my eyes done” at another Wal-mart, but I’ve switched to Lens Crafters. I’ve never set foot in my neighborhodd Sore Spot.
But I heard on TV that they are doing a brisk business – one of the few.
There are dozens of supermarket price comparison sites that will allow you to do this from home.
The problem that frustrates all of them is that it’s impossible to find enough brands, varieties, and sizes in common at all stores to make this work. Private label items are large percentages of discount stores and exact comparisons are often hard to find, sometimes deliberately. Sales knock everything out of whack unless you compare for long periods of time. Produce may come only in packages, meat in various cuts, etc.
The local paper did this for a long time at three major local chains. There was never a week when all the items could be properly compared.
It sounds easy, but in practice so many questions and approximations and exceptions creep in that only a stat expert could come up with a true end result.
I can confirm that there’s no way in hell anyone’s making money at $2.50 or $1.50 a gallon of milk. It simply can’t be done, because of minimum costs in efficently making, pasteurizing, and delivering milk.
And believe me, Wal-Mart ain’t gouging anyone. Simply put, they neither have the time nor inclination. They are utter merciless price competitors, but they won’t won’t normally take losses on items. They know they have stiff competition still and would rather lose some profit now than a store later.
Walmart imports most of their crap from China. That’s the short answer. And customers in Ford F150s that wouldn’t be caught dead in a Japanese car pay for the imported crap.
I doubt it. Is Wal-Mart getting the Chinese-made Doritos or eggs or milk? The answer, at least in my Wal-Mart, is no. Most of their products are name brands. They aren’t getting the newest Britney CD from China, nor are they getting Black and Decker cordless drills or Xbox games or Jack Daniels or whatever else from China unless the brands you get everywhere else are also from China.
Their clothing brands might be made in China, but as far as I know, Wal-Mart owns those, so the value added is here, not in the same overseas sweatshop where they make Nikes and Banana Republic duds. (And that doesnt include things like socks and undies which are often widely sold brands.)
Wal-Mart has cheap prices becuase they have staggering purchase power, as mentioned above.
