Has Wal-Mart become a victim of its own success by promoting itself as the place consumers go to save big on everyday needs and other items? Has it, in effect, made raising prices and protecting margins to difficult?
Recently, the company announced it was rolling back prices on thousands of items in an effort to rejuvenate a business that has reported disappointing results in recent quarters.
Linda Blakley, a spokesperson for Wal-Mart, told the New York Post, "We've stepped it up where our customers need us to -- with the basics of consumables and food."
Some analysts have suggested the move was not likely to scare Wal-Mart's competitors as the decreases were mostly tweaks. In fact, research by JPMorgan Securities suggests Wal-Mart's rollbacks might be little more than the company lowering prices on items that had recently increased.
According to the JPMorgan, Wal-Mart has increased prices in its stores by an average of 2.3 percent since February. Of course, the same research pointed out that Wal-Mart's prices were still roughly 12 percent lower than the typical supermarket. Target, on the other hand, was within one percent of Wal-Mart's prices.
In a RetailWire poll last month, 86 percent of respondents said Wal-Mart was "much more" or "somewhat more at risk" to competition than it had been in the past. The study was tied to a story on research by Kantar Retail's Management Ventures, which found Target had lower prices than Wal-Mart on 40 market basket items in two or three surveys taken over an 18-month period.
Discussion Questions: Does Wal-Mart's price positioning make it more difficult for the chain to raise prices on items than many (most) of its retail competitors? How can Wal-Mart protect overall margins when more of its business is in lower-margin grocery categories?