Wal-Mart Is Raising Prices Of Food, Household Products On Its US Website

Somebody should tell Wal-Mart they’re doing it wrong.

In what the Wall Street Journal described as an attempt to lure customers back to its brick-and-mortar locations, Wal-Mart has been quietly raising prices for some food and household products sold on its US website, including Kraft Macaroni & Cheese, Colgate toothbrushes and bags of Purina dog food.

Of course, we weren’t in the room when this plan was being vetted by whoever is in charge of corporate strategy at the retailing behemoth. But we find it hard to believe that nobody pointed out the simple fact that, if customers notice that prices have been raised on Wal-Mart’s website, customers can simply buy the same product, or a similar one, from Amazon or another competing retailer.

Before this latest shift in strategy, Wal-Mart previously planned to keep online and in-store prices equal for many of its most popular products, WSJ says, unless competition organically drove them lower.

But now the company is experimenting with a new pricing system that is raising prices on certain goods that would otherwise be unprofitable to ship.

To be sure, the pressure on Wal-Mart to drive foot traffic to its stores has never been greater, especially since the now-Amazon owned Whole Foods Market has been slashing prices left and right in a push to wrest market share away from its rivals. Meanwhile, the strategy of charging more online has been used by other big-box retailers like Costco Wholesale Corp. but the move is unusual for Wal-Mart, which has long embraced the strategy of outcompeting on price in accordance with its “everyday low price” message, and has worked to keep online prices at least as low as shoppers find in its 4,700 U.S. stores.

In some cases, product listings on walmart.com show an “online” and “in the store” price. Often the online price matches Amazon. But this system is changing now that the store is focusing on preserving its in-store dominance while also trying to expand its online presence.

“We always work to offer the best price online relative to other sites,” a Wal-Mart spokeswoman said. “It simply costs less to sell some items in stores. Customers can access those store prices online when they choose to pick up the item in store."

According to WSJ, a box of Kraft Thick n’ Creamy Macaroni & Cheese Dinner was $1.48 on walmart.com as of Friday, the same as Amazon’s price but more than Wal-Mart’s $1.28 store price (listed online). A similar comparison for a twin-pack of Betty Crocker Hamburger Helper showed the price as $3.30 online. but $2.50 if purchased at a Wal-Mart store in Illinois.

Wal-Mart is investing billions to boost e-commerce sales, which rose 60% in the US in the most recent quarter, but some shareholders worry the effort could drag on profits.

Marc Lore, head of Wal-Mart’s U.S. e-commerce unit, told investors in October that “this year should be the largest loss in e-commerce, and we’ll see slight improvement next year.” The company overall expects profit margins to be slightly down this year. It is scheduled to report third-quarter earnings on Thursday.

Wal-Mart e-commerce workers responsible for product sales have been instructed to boost profits along with sales, according to the people familiar with the situation, and are “no longer obligated to follow store pricing,” one of them said.

The company is also asking suppliers to sell more of their merchandise in bulk versions instead of single boxes, an effort to increase order sizes and make them more profitable, the people said.

For inexpensive items, “there’s no cheaper way to get these products to consumers than have them come in the store and pick it off the shelf themselves,”  Lore said at last month’s investor conference. He said he hopes shoppers will come to stores for the best price and place larger orders online to offset the cost of shipment.

In an effort to try and compete with Amazon’s “Amazon Prime” service, Wal-Mart offers free two-day shipping on millions of items on any order above $35.

Lore, who founded online retailer Jet.com Inc., which Wal-Mart bought last year for $3.3 billion, said that since he became head of Wal-Mart’s U.S. e-commerce division, the company has become more experimental with online marketing and pricing, including offering more discount codes and working with companies that publicize discounts through mobile applications.

Amazon is also trying new pricing models. It started lowering prices on products sold by outside vendors by as much as 9% in recent weeks, ratcheting up a price war with other retailers ahead of the holidays.

The company is also asking suppliers to sell more of their merchandise in bulk versions instead of single boxes, an effort to increase order sizes and make them more profitable, the people said.

For inexpensive items, “there’s no cheaper way to get these products to consumers than have them come in the store and pick it off the shelf themselves,” Mr. Lore said at last month’s investor conference. He said he hopes shoppers will come to stores for the best price and place larger orders online to offset the cost of shipment.

The change in Wal-Mart’s strategy comes at a particularly risky time - the holiday shopping season when retailers typically book their highest revenues and profits. If the strategy works, investors should have some idea of exactly how successful it has been by the time the company publishes its fourth-quarter earnings report.

However, raising prices in an era of unprecedented online competition could be particularly damaging. Considering the rapid growth Wal-Mart has seen in its online sales this year, raising prices could cause that trend to come to a complete stop.
 

Comments

Laowei Gweilo Anteater Sun, 11/12/2017 - 22:19 Permalink

Wal-Mart is increasingly seen as a Costco rival rather than a dollar store or Amazon rival, so it's not all that surprising they're copying Costco operational strategies imo.Plus, considering the losses that Amazon is taking, paid for by overpriced equity, to do their price cuts -- I'm not sure if that's a strategy Wal-Marts wants to, or even can, copy.  

In reply to by Anteater

LetThemEatRand eforce Sun, 11/12/2017 - 23:36 Permalink

The Chinese are communists, not socialists.  What put American companies out of business was fascism, e.g., the merger of state and business.  American politicians made it possible via trade and other laws for multi-national corporations to offshore labor for purposes of wage arbitrage.  The politicians on both sides of the aisle were paid well by American and multi-national corporations to create these favorable conditions for wage arbitrage.

In reply to by eforce

Bigly Arnold Sun, 11/12/2017 - 23:45 Permalink

Read the labels. Too much in Aldi is sourced from China. I will not eat that shit.Also, note at Costco that their ramen noodles...China. A couple of other items too.Melamine in dog food? Air you can cut with a knife?  Why do we need to bring in volume (not specialty) food from China?  

In reply to by Arnold

Leotardo Bigly Mon, 11/13/2017 - 07:56 Permalink

Too much in Aldi is sourced from China?Like what? I happen to do read labels, and in 20 yers of shopping Aldi I have not once come across a chinese food product. Present some examples, please, just do not include those nasty ramen packs, they are not FOOD.I hope Lidl will come to my location soon. Between it, Aldi, Trader Joe and the local farmers market my family is set.

In reply to by Bigly

jmack Sun, 11/12/2017 - 22:13 Permalink

boycotted walmart since before the  black sams warehouse ceo wouldnt do business with a company just because they had an all white sales team. 

Utopia Planitia Sun, 11/12/2017 - 22:14 Permalink

Perhaps Marketing believes that online shoppers have greater disposable income than in-store shoppers. Or are willing to pay a premium to avoid the apocalypse of shopping in-store...

garypaul Sun, 11/12/2017 - 22:17 Permalink

OK, this is what I think it's happening. Once you factor in the cost of online, it is truly cheaper to just sell things simply in the store. The author of this article is the one who doesn't get it. Customers can't just "go to Amazon". Mainly because Amazon loses money on many of it's sales and simply won't be in business much longer for this reason. Many people laugh at that, but then why are so many online retailers trying to buy up brick-and-mortar? (hint, any one of us could be wrong about the reason so don't talk as if you KNOW anything).

MisterMousePotato Friedrich not Salma Mon, 11/13/2017 - 04:55 Permalink

I have never found ANY foodstuff online selling for less than what is available in a store.Raisens. Popcorn. Pasta. Coffee. You name it.Doesn't matter if you buy a pallet. It's still cheaper in stores.Okay. Maybe you have to wait for a sale. Maybe not. Maybe you have to go to this store or that. Or maybe not.When butter or bacon or whatever is on sale, you buy a shit ton and bank it.I bought a new refrigerator last year. Sold our old one at the time via a Facebook for sale forum. Posted pictures of the thing, including ones with the doors open.Someone asked, "Who the fuck has that much food?"Not a day goes by without me looking around and feeling blessed. Even so, I was humbled.

In reply to by Friedrich not Salma

ThrowAwayYourTV Sun, 11/12/2017 - 22:20 Permalink

I dropped the wiff off at walmart the the other night and headed over to home depo while she looked around walmart. About an hour later I pulled up to the front to see her standing there empty handed.First thing she said when she got in the car was, "what a shit hole!" People in there a fucking strange." I'll just get what I need online.Funny thing is, I felt the same about home depot. We both came home empty handed.waste of gas and our time.  

HRH Feant2 ThrowAwayYourTV Sun, 11/12/2017 - 23:11 Permalink

SAme here. Went to the local store and my fav Sauvignon blanc was out of stock. Not just once but on mulitple days.

The turnover for my fav organic half-and-half seemed low. I thought the quart I bought had gotten warm.

I have a small Walmart in my area. I only started going there recently. It is weird. Holy shit it creeps me the hell out!

I hear you about Home Depot and Lowe's. I need a set of exterior lights. Have to get them approved by the HOA. Pain in the butt. I wasn't going to put crystal chandeliers out. Go figure.

In reply to by ThrowAwayYourTV

SilverDOG ThrowAwayYourTV Sun, 11/12/2017 - 23:14 Permalink

Like flying back into US airports after being abroad, even in S.America.When you get to your car after, disgusting carpets, rights violations, street vendor crap food smells( I will not consume), peeling paint, urine stench wafting, under repair sections, 1970's decayed appearance and obese in droves... "what a shithole !" USA ! USA ! USA !  "Uh Uh Uhh, he said ass""Heh he hehe yeah... asss"

In reply to by ThrowAwayYourTV

Anteater Sun, 11/12/2017 - 22:22 Permalink

Kraft, Colgate and Purina are The Tribe. when Putin had had it with filthy chicken from USA he stopped  the Imports and the tribal Growers sent their chicken bits toChina but China didn't want them so the tribe had them process  the dark meat in China irradiated and ship it back in cans thenlabel it in a free-trade Zone as made in USA But while the chickenbits for pets are clearly marked as irradiated the Campbell'schunky chicken soup has no such label. It's magic!Uuum uuum good!

serotonindumptruck Sun, 11/12/2017 - 23:08 Permalink

I do a fair amount of online grocery shopping.Whether one chooses to boycott Amazon, WalMart or other big retailers, it's still not that difficult to find a company who has the same product at a less expensive price.Shipping and handling charges are the 'catch' with many online businesses. Many of the sizable companies who might compete with WMT or AMZN for market share are clearly accepting razor-thin profit margins when selling a common household/food item, especially when it comes to S&H charges.USPS, UPS, FEDEX, and other large carriers are sitting in the cat-bird seat right now, as many consumers are choosing to shop for non-perishable grocery items from the comfort of their homes.edit: Once you start getting potential stock market tips from retired HazMat Specialists, then you know the top is close. Do your own DD.

Elmerthudpucker Sun, 11/12/2017 - 22:35 Permalink

Chinamart has all kinds of inside connections so whatever the strategy is you can bet it's already backed with protectioin money and some sweet kickbacks for the inlaws and shirt tail relatives of everyone in DC.                                         You've got the best government money can buy and the most entitled elites anywhere on the planet making sure the people on top stay on top  no matter what.      Why would any corporation compete when it can just pay to play ?