Sunday, August 27, 2006

Wal-Mart Prices - Are they the lowest?

From PBS interview with John Lehman [Jon Lehman worked for Wal-Mart for 17 years, managing six stores in four different states before he left the company in 2001 to work for a union trying to organize Wal-Mart employees]

What is the opening price point? Why is it so key to Wal-Mart's strategy?

OK, it's lawn-and-garden time. Your grass is getting high. Your lawn mower is broken from last year, or you need a new lawn mower. You're going to go to Wal-Mart. So you go to Wal-Mart, and you're looking for a lawn mower, and to your delight, you walk in, and you see this $99 lawn mower. You may not want a cheap, basic lawn mower, but you see that price point on an end cap or a big display stack base, and you say, "Wow, what a great price." And it draws you in. It lures you into the department, and you form the perception immediately that "Hey, Wal-Mart's got the lowest prices in town. Look at this item right here. How could they sell it for $99?" ...

But as you walk into the department and look for that $269 power-drive lawn mower that you really are after, they're not losing money on that item. And it may not be the lowest price in town. Wal-Mart used to advertise "Always the low price." They don't do that anymore.

So are you saying that the opening price is the lowest price and actually will beat the competition, but maybe other items in the same category aren't necessarily the lowest price?

Oh, absolutely not. It's just like fishing: You want to entice that fish to that lure. ... Once you walk past that opening price point, they've got you, because you've already formed the perception that everything in that department is the lowest price in town.

And maybe it's not.

No, it's not. No, I can tell you it's not. I can tell you from experience it's not. ...


Someone in USA said...

It would be interesting to see a legitimate study on this - how Wal-Mart's wages compare to competitors in a given area or even national averages. That's a lot better than taking the word of someone like Mr. Lehman. If you know of one, evil (or whatever you like to be called), please point me in that direction. I have yet to see one, but it's possible I haven't looked hard enough.

How would you say claims that Wal-Mart's obsession with low prices kills suppliers matches up with the idea that they are not usually the lowest?

Adirondack Wal-Mart said...

Someone 'like' Mr. Lehman. He must be a liar because he saying something bad about Wal-Mart. We sure can't take the word of a liar like Lehman can we? Afterall, he works for a union now! And, yes there are studies out there, none by done by academics that I know of however. I'll leave it to you to find them, some are posted on this blog.

Are you arguing that Wal-Mart has not 'killed' suppliers? And what does Wal-Mart getting the best wholesale price have to do with what the retail price marked on the item.

I prefer not to discuss Wal-Mart with people that can't even keep a pro-Wal-Mart blog going. Did you run out of praise for Wal-Mart or did you just finish 'educating' everyone about Wal-Mart.

Anonymous said...

wow, someone in usa is back...promoting Walmart so that it will come to saranac lake or some other communitylike it. Have you ever shopped here? Is Walmart a "one size fits all" store and even though you don't live here, vote here, pay taxes here, send your kids to school here, or shovel snow here, you know exactly what's best for this unique community and have no problem shoveling Walmart s*#t here? You must be getting paid for this.

Anonymous said...

I like these quotes from the interview:

"They've taken the foundation that Sam built, and now it's on steroids. This company is out of control. I would say look beyond that."

"So no, I would say Wal-Mart is not good for America. I think the average person out there that you run into in a Wal-Mart store may say: "Yeah, I love this place, because look at the stuff I can get. Look at the cheap prices." But there's a cost for these low prices, and many people don't realize that."

This is a forward thinking reality:

"I think there's going to be a correction that takes place, though, eventually."

Someone in USA said...

When I said "a legitimate study," I meant an academic study. I have seen several others, but I take everything on this matter backed by a union with a grain of salt. Thanks anyway.

Lehman has an agenda now. I wouldn't trust him to tell me the truth any more than I would Lee Scott (who also has an agenda). I am familiar with the opening price point strategy, but in my experience, Wal-Mart's other prices are generally (not always) lower than its competitors. That's why I want to see an academic study on the issue.

There is no need to argue the issue, as empirical data should suffice.


I may very well know what's best for your "unique community." However, my purpose here has nothing to do with Wal-Mart's interest, or lack thereof, in Saranac Lake.

Adirondack Wal-Mart said...

Potsdam, NY 'Market basket study'. Not an academic study, just a list compiled by some real people.

Adirondack Wal-Mart said...

One other point to consider. Why is Wal-Mart's slogan no longer "Always the lowest price"?

Someone in USA said...

You know, I think I'll undertake a similar endeavor in my area, but I'll try to be more complete. It may take some time (a month or so), but I'll come back and let you know when I post it on my blog.

Anonymous said...

Did I read "someone in usa" correctly?... did he/she say in a response to "anonymous" that he/she knows what's best for Saranac Lake?

Anonymous said...

Wal-Mart's slogan "always the lowest price, always" was removed some years ago. If I remember right they were ordered to change it because IT WASN'T TRUE. (I don't remember who made Wal-Mart change their slogan.)
Anyway concerning pricing at Wal-Mart one should read The Myth Of Excellence by Fred Crawford & Ryan Mathews. Wal-Mart is mentioned in chapter 3 of this book. On page 47 the authors had this to say:
"Perhaps no comsumer business understands the new definition of price attribute better than Wal-Mart. But is the impression of lowest prices reality? While most consumers believe that Wal-Mart always has the lowest prices, a market-basket comparision that we conducted proved otherwise. Our research in which we compared prices charged by Wal-Mart and its 3 major competitors in 18 U.S. markets on a list of common items, showed that Wal-Mart was not always the lowest-priced player. On average, Wal-Marts prices were HIGHER THAN THOSE OF IT'S COMPETITORS ON ONE-THIRD OF THE ITEMS CHECKED." And on some items the savings amounted to ABOUT 2 CENTS PER ITEM!
What one learns from this is PERCEPTION IS EVERYTHING. Wal-Mart is PERCEIVED as having the lowest prices, but that is not always the case. And what do you think their prices would be if they came here WITH NO COMPETITION!? Their prices would be higher than their Plattsburgh store, because they have no competition here. In Plattsburgh they have loads of competition, so they have to keep their prices lower.
Wal-Mart makes themselves look good whenever they can. But they are no bargain folks.