Walmart Guarantees Lowest Prices for Christmas
Walmart has lost some of its cred when it comes to low prices. The chain is looking to change that and its new "Christmas Price Guarantee" is a step in that direction.
Here’s the deal: Walmart doesn’t want consumers thinking they have to wait it out this holiday season looking for the best deal on gifts. The chain’s guarantee tells consumers that they can go to any of the chain’s stores and not worry if they’ll get the best price for the season. If, at any point between Nov. 1 and Dec. 25, they find a better price somewhere else, Walmart will match it.
"Given the state of the economy, we’ve seen much more promotional intensity and gimmicks," Duncan Mac Naughton, chief merchandising officer, Walmart U.S., told MarketWatch. "This just gives customers some confidence."
Walmart is also taking a variety of other steps to make it a more attractive shopping option for the holidays. According to a company press release, Walmart will offer its credit card holders no interest for six months on items purchased during the holiday season if they pay in full during that time. It is also offering free shipping on roughly 95 percent of the items it sells on Walmart.com with an order of $45 or more. As previously announced. Walmart has also brought its layaway program back and is offering a discount of 10 cents a gallon at participating Murphy USA or Walmart stations.
Discussion Questions
Discussion Questions: Has Walmart gotten its pricing mojo back with its “Christmas Price Guarantee?” How do you expect Walmart’s competitors to react to the announcement?
The short answer would be “Yes” Walmart has gotten its price mojo back with its total offer this season. While it may be a hassle to go back to the store to claim a reduction in price, it will provide customers comfort to know that no matter what happens they will have gotten the best price possible. This eliminates the need to wait to see who puts what on sale. The single caveat is, does Walmart have the sought after item in stock?
It also sets a potential “floor price” for Walmart’s competitors. They know that Walmart has set a low price and matching it may be all they need to do rather than try to beat it.
The difference from an operating standpoint is that Walmart’s “mojo” used to be based purely on consumer perception that they were getting the lowest price — which wasn’t always the case, depending on the basket. In fact, research showed they could be paying more. The result was that Walmart got the sales but also got them with margin. It was a pretty slick strategy.
This, on the other hand, is an act of pure desperation. Price matching is the ultimate sign of weakness. The only thing to win here is the race to oblivion.
Consistency is what builds trust. Breaking consumer trust takes no time at all; rebuilding transcends a measurable time line.
Walmart is on the right track to rebuilding that trust through the reviving of their lay-away program, their price guarantee and the return to wider assortments and everyday low pricing.
As long as they can execute effectively, then I would say the mojo has landed. Knowing how well they process returns and price matches, I would say they are wading into an area that may do more harm than good. The last thing you want to do is actually make the customer feel bad for calling you on a price match and, so far (here in Ontario, anyways), I haven’t seen that customer love when it comes to the customer service desk. Competitors should react proactively instead of re-actively by actually offering lower prices throughout the season. By using customer service and better inventory allocation, competitors can make the uphill climb a little less strenuous. Those elements are Wal’s vulnerability.
So how will Walmart factor in the 5% REDcard rebate at Target? How will Walmart factor in all the credit card rebates at other stores? How will Walmart factor in prices available only with an in-store coupon or loyalty card? What about like-items specifically made only for certain retailers that have slightly different model or UPC codes but are basically the same item? I’m guessing they won’t and smart shoppers will get a better deal on many items at competitors, regardless of Walmart’s promise. What about all those Black Friday items when there are only a limited number per store? I get a feeling the fine print to this guarantee is longer than the ads. If a Target ad matches Walmart and gives me a another 5% off, you know where I’m going along with other smart shoppers.
Walmart is pulling out all the stops because they are being trounced by dollar stores on one side and the mid-tier retailer who has decided it’s a good time to become a discounter on the other. It’s notable that they aren’t giving up cash to match the better price found elsewhere, just a gift card redeemable only at Walmart.
Customers who redeem gift cards often spend more, and they’ll probably feel good about having gotten a deal. I would say that it’s a winning strategy, albeit a little disingenuous, but then again we are talking about Walmart.
The “Christmas Price Guarantee” sounds like an extension of the “Match It!” campaign that has run on TV for the last several months. As such, it inadvertently reinforces the message that there are competitors out there actually beating Walmart on price. It would be more compelling if Walmart relaunched its “Rollback” campaign with a new wave of price cuts. Layaway is likely to have a bigger impact on recapturing market share in the next two months.
Forget about the pricing and look at the strategy. For years, retailers have been teaching holiday shoppers to WAIT, WAIT, WAIT, WAIT because, if they did, they were going to get better prices.
Now Wal-Mart is telling the shopper to buy NOW, NOW, NOW. Get what you need. Don’t worry about the pricing. Take the pressure off; take the stress off. Wal-Mart has removed the WAIT for a better price mentality.
How does that affect Wal-Mart pricing? Probably not a lot. Once people have made their purchases, how many are going to continue to scour competitive pricing to assure that they got the best? Even if they see a slightly better price, how many will go back to Wal-Mart to claim their rebate?
What should competitors do? The exact same thing. If everyone’s pricing policy were to match the competitor’s lower price, there would be no lower prices to match.
With these three offers, Walmart is taking big steps towards reinforcing its image as being the low price leader. Expect other retailers to match free shipping and layaway.
The “guarantee” is a good promotion because it locks in consumer confidence about low prices.
This could be a great win or a greater loss. It will all depend on execution. As the other posts have pointed out, there is a lot to gain if this is done correctly. Now for the “but”: if the process of getting a rebate is difficult or time consuming, it will create more harm than good. Lots more can go wrong that will make the customer experience negative.
Negative customer experience costs more than low price.
While Wal-Mart’s price guarantee sounds good on the surface, it is really just an admission that they do not have the lowest prices. Anyone that checks prices already knows this, but it may cause others to realize it and backfire on them. Creating a lasting low price image is very difficult to achieve but may be even harder to get back if you lose it. It looks like it is becoming much harder for Wal-Mart to maintain their market share than it was to acquire it.
Price, price and price. This is and should always be Wal-Mart’s Mojo. It is great to see an aggressive position finally being taken by WM! This will definitely help sales and push WM’s organization to better manage their stores, their costs and their profits!
Walmart is making a foolish move with a price guarantee. It doesn’t take much thought to see each local retailer advertising one item at a price below Walmart. One-hundred local retailers advertising a low, low price on an item that just happens to be out of stock in their store could force Walmart to suspend its dividend. Whoever thought this up should be run out of Bentonville on a rail. Walmart earned its position in the mind of the consumer by delivering value. If this position has eroded (as it has in my mind), it won’t be restored by some harebrained “marketing” strategy. Message to Walmart – ASK YOURSELF ONE QUESTION – What would Sam have done?
In the new era of hyper-localization and uber price optimization, no retailer can guarantee the lowest prices on a consistent basis. Walmart’s price match moves are ingenious because they shift responsibility to individual shoppers and, in the process, the exceptions that matter to particular shoppers are corrected. No more having to figure out long tail pricing possibilities and preferences.
On the other hand, Walmart’s holiday price guarantee has the potential to throw a wrench in the gears during a high-volume shopping period for many of the reasons that David Livingston cited. I hope they are ready!
With the amount of “deals” around and the possibility that retailers have guessed holiday demand incorrectly, Walmart could be making a fairly large investment with this promise.
The Christmas Price Guarantee looks like a winner for Walmart. The brand already tops the holiday shopping list for many bargain-savvy shoppers. This guarantee will almost certainly provide consumers with more incentive to shop now rather than wait for a hoped-for lower price sometime in December. That latter point is, for me, the highlight of this program. It tees off the consumer’s desire to be a smart, cost-conscious shopper, while also addressing their desire to get shopping conveniently done before the post-Black Friday craziness.
Including the other initiatives Walmart has rolled out — especially the revival of layaway — Walmart is definitely burnishing its low-price perception. For a consumer saddled with a sagging economy and no hope that our elected leaders — or wannabe elected leaders — have any way out of this morass, the Price Guarantee is simple plan that ensures the Average Jane and Joe get to hold onto as much of their money as possible while still enjoying the holidays.
As for competitors, they could try things like unique/exclusive products or free gift wrapping, but if they really want to be competitive with Walmart, then they’ll need to look at creating ways to ensure consumers feel they’re getting their money’s worth by shopping that brand, e.g., BOGOs, promotional gift cards with the purchase of a set dollar amount, etc. It won’t be easy, but it’s a guarantee that the 2011 holiday shopper plans on enlisting the same savvy Santa, recession-honed shopping behaviors they exhibited over the last several years.
It seems Walmart will test the limits when it comes to their pricing mojo. If they sense they can sell higher, they give it a shot. When they hear the ground rumble, they cut back. Their sense of timing is excellent. That is one of the reasons they are the industry leader.
It certainly appears an effort is being made. However, Walmart does not exist in a bubble; we need to learn of the competitors’ reaction and the believability of the claim as it weathers responses.
I also believe that Walmart can own the “low price” claim without receiving a substantial benefit from it. I expect consumer behavior to change during these difficult economic times and while “low price” appears to be the obvious top claim I would expect competitors to find the consumer insights to effectively battle Walmart.