Earlier today, I started a
kerfuffle on a comment thread when I wrote that Wal-Mart's reputation for low prices is undeserved. As there seem to be Kossacks out there who need to be straightened out, I thought I'd do my second whole diary entry on this subject.
If you don't believe me when I write about opening price points, will you believe Public Management magazine? The author is retired Iowa State Economics Professor and long-time Wal-Mart expert Kenneth Stone:
How does the number-one retailer maintain an image of low prices? First, by actually making sure its prices are lower than its competitors, at least on key items. These items are called "price-sensitive" items in the industry, and
it is commonly believed that the average consumer knows the "going price" of fewer than 100 items. These tend to be commodities that are purchased frequently.
Price-sensitive merchandise is displayed in prominent places such as the kiosk at the entrance to the store, as well as on end caps, in dump bins, and in gondolas down the main aisles. Consequently, when Wal-Mart customers see the items of which they know the price, the ones always priced lower in Wal-Mart, they start assuming that everything else is also priced lower than at competing stores. This assumption is simply not true.
My barber has offered me a simple example. He sells a nonbreakable pocket comb for 25 cents that he procures from his vendor for eight cents. Wal-Mart sells a lower-quality comb for 98 cents, and one would assume that Wal-Mart pays less for it than the barber does. People keep buying Wal-Mart combs, however, because the average person does not know the going price of a pocket comb, and it is automatically assumed that the Wal-Mart price is the lowest.
[Emphasis added]
In fact, Wal-Mart has been getting away with this trick for years. This is from a nice little book by Bill Quinn published in 2000 entitled How Wal-Mart Is Destroying America (and the World):
Wal-Mart got by with the slogan "Always the Lowest Price. Always" for years, until the National Advertising Review Board, which is funded by the Better Business Bureau, investigated the claim that Wal-Mart always has the low(est) price. The Board found that this just was not and is not true, and promptly ordered our pals in Bentonville to stop saying it.
Wal-Mart then had to change its motto to something that barely skipped around the law-like "Always Low Prices. Always"-so near the original slogan that the public in general still perceived that Wal-Mart had the lowest prices.
If you believe that Wal-Mart has the lowest prices, you are playing into the company's hands. A few items are cheaper, but they jack up the prices on everything else.
If you think you save money going there regularly, Wal-Mart is playing you for a fool. There is no good reason to shop at Wal-Mart except that you have absolutely no other choice.
JR
PS While we're at it, there's no such thing as the Easter Bunny, you don't get all "A"s if your roommate commits suicide and there were no weapons of mass destruction.
