Wal-Mart Admits Its Prices Aren’t That Low
A Denver television station has done another one of those reports about how Wal-Mart charges different prices for the same goods at nearby stores. But it contains this priceless piece of Wal-Mart doublespeak:
Our goal is to bring our customers every day low prices in the communities we serve. Each store strives to be competitive with the retailers in their own neighborhood. All of our merchandise starts with the same basic price. However, our store managers have the prerogative to lower prices to meet or beat the competition in their neighborhoods.
[emphasis added]
In other words, they’re saying, “We get beat on prices often enough that we have to give store managers standing instructions to eliminate our profit margin so we that we can keep the myth of our everyday low prices alive.” Furthermore, the company is also admitting that when there is no competition they will charge whatever the market will bear. After all, if prices can go down because of the competition, they can go up because of lack of competition; can’t they?
I hate to get all academic on you, but as I am one it’s very hard for me to resist – so just bear with me for a moment. Just today I was reading E.P. Thompson’s “The Moral Economy of the English Crowd in the Seventeenth Century.” Trust me, it’s a lot more interesting than it sounds. Thompson argues that food riots in Seventeenth Century Great Britain were caused by the different manner in which peasants and producers looked at prices. Peasants looked at the price of bread and said essentially, “That’s too high. If we don’t eat we’ll starve and we can’t afford to pay that price.” The producers, by contrast, set prices on the basis of supply and demand. This cultural disparity led to riots.
Look again at Wal-Mart’s statement again, “All of our merchandise starts with the same basic price.” It’s a statement that would drive Adam Smith crazy. Basically, they’re pandering to the moral economy of the crowd. They want customers to think that Wal-Mart’s prices can go down, but they’ll never go up.
Here’s Target’s statement from the same report:
Target considers several factors in determining everyday product pricing in its stores. The primary factor is the competitive marketplace. Target strives to provide competitive pricing that is similar to other retailers in the same locale. Product pricing for select items at an individual Target store can be impacted by prices on identical items at other nearby retailers. Therefore, it is commonplace that prices on selected items may vary from Target store to Target store within one metro area. This is especially true in markets with a high density of Target stores as well as competitors like Wal-Mart and Kmart. Target’s pricing strategy is based purely on being competitive in the trade market area. It is not based on demographics, income of an area or location. The same pricing scenario is true for most national retailers. Target does not adjust prices between its own stores out of fairness to the guests who routinely shop their local Target store and so that we may remain competitive within our local communities.
[emphasis added]
Say what you want about Target, but at least they don’t treat their customers like idiots. They are producers who are willing to recognize the realities of the market. Wal-Mart wants people to think its Santa Claus; always giving and never taking. I think this is exactly why attacking Wal-Mart on prices is a winning strategy for Wal-Mart critics: if there are customers out there who really expect Wal-Mart’s prices will always be the lowest, it’s not hard to use the company’s own statements and basic economics to dispel them of that misconception.
If you read about what happened at Wal-Marts across the country on Black Friday, you know it’s not too far-fetched to claim that the riots have already started.
This isn’t so much a comment on this story specifically, but I just wanted to let you know that I really appreciate this site. Walmart embodies so many things that are wrong with the way things work, and I’m glad you’re hear to keep people informed. I’d been talking for the longest time about starting up an “ihatewalmart.com” or somesuch, but with the time I have available and the gaps in my knowledge, I never really did much with it.(And I really dig Target, too, FWIW.)
A thousand kudos to you!
Mr. Rees,
First off, you would be careful when touting yourself as an academic. If you really are one, you would be better served to be a little more humble about it because your logic is faulty and less intelligent readers may be misled.
Now, you have been saying in this post and others that Wal-Mart claims it always has the “lowest” prices. Maybe you can help me here, but I have yet to see any Wal-Mart statement, advertisement, etc. that says the word “lowest”. “Always low prices” is not the same as “lowest”. Since you infer “lowest” from that statement, your argument is weak.
I am not an academic, but I know that supply and demand is not constant across all regions of this country…or even within the same metropolitan area. So why should Wal-Mart be required to charge the same price at all it’s locations. The demand curve for shoppers in Mentor will be different than the curve for those in Euclid. Wal-Mart gets this, and therefore charges the profit-maximizing price that satisfies that demand.
“Target’s pricing strategy is based purely on being competitive in the trade market area. It is not based on demographics, income of an area or location.”
Wal Mart and Target are saying the same thing. Target’s pricing strategy is based on being competitive in the trade market area, and what do you think sets the competitive price in the trade market area? demographics like income. Wal Mart and Target both want to out price the competition but they are price takers, in a basic economic sense and will only charge what the market can bear.
Basic economics will not bring down Wal Mart, but social justice will. People will have to take a stand on their own so Wal Mart and companies like them will be forced to accept labour unions and give their employees the average benefits they deserve.
I live near a very small town, the closest other towns are 50 miles away. The only department store in our town is Wallmart.
We retired here from the Houston area thinking that in a town of 7,000 people, mostly above the age of 50 (and this is not a retirement area) that everything might be a little less expensive. Not so. The people here are not wealthy retired but mostly are drawing Social Security checks. We needed an item that was priced at 35.00 here and we picked it up at a wallmart store in Houston for 25.00. Wallmart stores sure take advantage when thats a shoppers only choice.