Wal-Mart Boxed In By Price Positioning
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
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
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?
- Report: Wal-Mart food prices going up – New York Post
Wal-Mart price cuts not threatening to competitors – The Dallas