The Better Business Bureau has a beef with Wal-Mart's ad claims that it saves shoppers $700 a year.
It's been asked to stop running the ads and this little story (subscription required) found in the Wall Street Journal today is an opportunity to shine some light on how retailers assess and set prices, and how you can make sense of it all.
Retailers employ all manner of technology to set prices. They hire consultants, secretly shop the competition and use price optimization software to analyze and determine the correct cost of goods.
So when a company as huge and efficient as Wal-Mart makes a claim that shoppers can save up to $700 a year by shopping its stores, and then says that claim is supported by a study from another large International company, you'd think it would be pretty solid.
But the the National Advertising Division of the Council of Better Business Bureaus disagrees, and has told Wal-Mart to stop running the ads. Wal-Mart has complied, but says it stands behind the claim and its source, Global Insights Inc.
Global Insights conducted two extensive studies at the request of Wal-Mart. One in 2006, and another in 2007. This was in response to claims at the time, that Wal-Mart was actually responsible for keeping inflation in check in the United States.
Global Insight's research supported this claim, saying they found "the existence of Wal-Mart between 1985 and 2004 resulted in a 3.1% cumulative reduction in consumer prices by 2004. This translated into consumer savings amounting to $263 billion in 2004 -- $895 per person and $2,330 per household."
The next year's follow up was even more dramatic, claiming consumer savings of $957 per person and $2,500 per household. Quite a bit more than Wal-Mart's claims of $700 per person.
But when someone says you can save more money, it would certainly be helpful if they said specifically how. Global Insight didn't offer any insight on this, "you don't have enough room on your blog" said their spokesman. But I've done shopping studies and while they are complicated and so tedious you'd rather pull your hair out than do another one, it's not really rocket science.
Get a list of items that can be duplicated at the stores selected and shop. Compare only items that are identical and available, then calculate the total difference.
Maybe the claims are in question because Global Insight used scan data from checkouts, so the comparison's aren't specific. Or maybe it's because as the rival grocery chain (H-E-B) that filed the complaint with the Better Business Bureau claims, buy one get one free promotions aren't factored into the results.
Or maybe it's just that 2007 seems a lifetime ago and those results would be different today.
But $700 actually seems a little bit low to me.
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