Wal-Mart plans to crush competition more than usual
Filed under: Company News, Wal-Mart Stores
Part of the Wal-Mart (WMT) legacy is that it moves into regions with its huge stores and uses low pricing to push local retailers out of the market. This may give consumers more buying power, but it has caused many local communities to resent the effects of Wal-Mart on mom-and-pop stores.
Wal-Mart now plans to go from hurting sales at smaller stores to hurting sales at its more direct rivals. In an exclusive interview, the company's CEO Mike Duke told The Wall Street Journal that he plans to slow gross margin growth. This means that the world's largest retailer is giving its stores the green light to cut prices on merchandise below their current "everyday low prices."
Allowing gross margins to flatten at Wal-Mart may be particularly hard on its rivals in the food retail business and on consumer electronics companies like Best Buy (BBY).
Investors have to wonder why Wal-Mart has been so slow to make such a critical decision. Why has it waited so long to lower prices in order to take more market share during a recession -- especially when it can use its wholesale buying power and balance sheet to significant advantage?
The answer is probably as old as the retail industry itself. Store owners have always been faced with the choice of either keeping prices and margins high, or lowering prices to get market share. Wal-Mart is about to make another push for market share which may improve its sales, but could drop margins low enough to hurt earnings.
Douglas A. McIntyre is an editor at 24/7 Wall St.
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Reader Comments (Page 1 of 13)
10-05-2009 @ 11:29AM
Bob Sweeney said...
That is the fault of us consumers. there is more to life than the cheapest price. I like using the local merchants for a couple of reasons.
1. Most of the stuff is made or grown in the USA
2. I get to know these people on a personal level and they turn around and do business with me.
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10-05-2009 @ 2:59PM
susan said...
Absolutely correct!!! I cannot stand Walmart. People think they are getting something for a better price but actually they are getting crap for their money..I have shopped there in the past but won't go anymore. Their produce is horrible, their meat is disgusting. Their service is unbearable..Anything frozen is defrosted by the time you get out of the store. The clothing last one season..You get the point..I'd rather spend an extra couple of bucks and get something I could use rather than throw the money out at Walmart!!! On the lighter side, if you want a great laugh go to peopleofwalmart.com...
10-06-2009 @ 1:34AM
hookmrl said...
walmart--duh you mean china mart
10-06-2009 @ 4:28AM
hookmrl said...
guess what shop around walmart is cheap on some things and how many businesses did they kill off how many people did they put out of work
10-05-2009 @ 12:53PM
MIck said...
When I absolutely, positively, must have a fix of cheaply made inferior Chinese crap; I go to WalMart...
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10-05-2009 @ 5:25PM
Victor said...
Crest is Crest and Tide is Tide. If I can get these and other name brand items for less at Wal-Mart, then I will. If everyone that says they would rather shop at a Mom and Pop actually did, Mom & Pop would still be in business.
10-05-2009 @ 6:08PM
Mike said...
Yeah you are right. All of the companies WalMart buys from has a junk manufacturing line and a good stuff line. Panasonic, Sony, Levis, and hundreds of other companies have put in junk lines in their assembly buildings that leave off parts and those are the items WalMart buys. That keeps the cost down. Coke, Borden and even companies like Proctor and Gamble sends their lower quality products to WalMart while they have completely seperate production lines for companies like Target.
A mind is a terrible thing to waste MIck so stay in school.
10-05-2009 @ 8:23PM
F Scharer said...
actually it's been documented that Walmart forces business to lower quality to do business with them. they set the price at which they buy and tell the suppliers that they need to lower the quality if needed to meet that price. only one company that I know of refused to do so, Grasshopper Lawn Equipment.
10-05-2009 @ 12:58PM
AS said...
its about time. but if they lower the prices on one thing they'll just go up on something else you need. or shrink the size of what you're buying. they already do that now.
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10-05-2009 @ 1:16PM
suepfullmann said...
You are so right.....
10-05-2009 @ 11:34PM
bob joes said...
I would not go to Walmart if they were Giving stuff away. They are THE PROBLEM not the solution.
BUY AMERICAN !!
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10-06-2009 @ 12:41AM
Zach said...
But you cannot buy American. They all went overseas What to do?-what to do?
10-06-2009 @ 3:18AM
Stephanie said...
Funny no body complains when Wal-Mart brings jobs to their "little" town unlike the "Mom and Pop" shops that only employ family or close friends of the family's kids. That closes out a whole town in it self but yet "Mom and Pop" want me to spend my money their and not give anything back to the community. Ya know, Wal-Mart might sell cheap crap but at least they put something back into the community in exchange for that cheap crap. And I agree with the person that said "crest is crest and tide is tide" and ya know what else? My kids out grow their clothes after one season anyway. I try not to give my kids each others hand me downs. Think of how you felt as a kid always getting the left overs. At least with Wal-Mart "crap" my 4 kids can all get a new outfit for one season. Say what you will but if people really didn't want it to happen it wouldn't. It's as simple and demand and supply.
10-06-2009 @ 11:17AM
cflotsofluck said...
I'm sorry to say, but even though I disagee with the way Walmart does things, I'm out of work right now and can't AFFORD to shop anywhere else!! I consider myself POOR!! When I go to another store besides Walmart, I do COMPARISON PRICING, and no matter what the item is, at Walmart, it's always more inexpensive!! In times like these, when money is as scarce as hen's teeth, I'll shop in Walmart before I shop anywhere else!! It's a matter of "MY" financial survival !! PRINCIPLE for me, has to take a back seat!!!!
10-05-2009 @ 1:48PM
Bull said...
Most of you down wal*mart, but you all go there, if I remember the ''mom & pop'' I remember them sticking it to me,or not having what I wanted, it's nice to have ''one'' place to do all your shopping and be done with it.
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10-05-2009 @ 1:59PM
WALLY said...
WAL*MART IS WHERE A LOT OF PEOPLE SHOP. THE CONSUMERS THAT GRIPE ABOUT THEM CLOSING MOM AND POP STORES SHOULD NOT BE SHOPPING THERE. WE KNOW A LOT OF PEOPLE COMPLAIN BUT STILL SHOP AT WAL*MART BECAUSE THEY OFFER THE BEST PRICES OF ANY STORE ON MOST OF THEIR MERCHANDISE. I WOULD IF I LIVED IN A VERY SMALL COMMUNITY OPPOSE THE GIANT COMING INTO OUR TOWN ON A REFERENDUM BECAUSE IT WOULD DESTROY THE CULTURAL,TRANQUIL, SERENE QUAINTNESS THAT A SMALL TOWN HAD FOOT PRINTED FROM THEIR EARLY FOUNDATION. SUCH TOWNS WE SEE ALL OVER AMERICA. IT IS BAD ENOUGH MACDONALD'S AND OTHERS CAME IN LET ALONE BIG POPPA WAL*MART
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10-05-2009 @ 11:17PM
Messa said...
WHY ARE YOU SHOUTING AT US?
10-05-2009 @ 3:57PM
Charlie said...
Like the South Park episode stated a couple of years ago; the customers are the "hidden force" behind Wal-Mart. When and if, people quit shopping at Wal-Mart, then things will change. People can only blame themselves.
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10-06-2009 @ 12:32AM
Nan said...
I love to shop at "Mom and Pop stores" but my income is so depleted that I will have to start shopping at walmart. I can't go without food, etc. I know that their stuff is crap but it is now all that I can afford.
Many other families are in the same position as I am. And yes, Sam is probable turning over in his grave.
10-05-2009 @ 2:12PM
bill said...
sam wouldnt run walmart like this if he was still alive..all the made in USA signs are all gone...
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