Walmart to Take Another Bite Out of Grocery Prices (and Suppliers' Margins)

WalmartIf you shop at Walmart (WMT) for groceries, your food bill is about to shrink.

The nation's largest retail chain is looking to provide some new financial relief to its shoppers -- many who are living in a permanent recession -- by offering lower prices on grocery items every day, Reuters reports.

The pricing adjustment at the retailer will mean the mega-bargains at its 3,868 U.S. stores won't just be limited to its well-known "rollback" sales promotions.

In turn, the chain is reportedly pressuring food suppliers to keep the wholesale prices low on everything from soda to cereal and pasta.

Walmart did not provide confirmation about its new pricing policy by press time.

Reclaiming Its Bargain-Basement Image

WalmartThe move comes as Walmart works to reclaim its image as the nation's low-price leader, one that's been tarnished as an expansion binge by dollar stores has eaten into the discounter's market share.

"Walmart is wise to leverage its cost advantage -- just as consumers are being pinched on energy prices -- and position itself as a problem solver for families," Craig Johnson, president of retail consultancy Customer Growth Partners, told DailyFinance. They're sending the message, "'We have little control over gas prices, but we can help you save on your grocery bills.'"

With this move, Walmart is also hewing to its core philosophy of "driving down sourcing costs and passing most of the benefits along [to consumers] in everyday pricing," said James Tenser, a principal with retail consultancy VSN Strategies.

The retailer, which boasts an estimated 25% share of the U.S. supermarket business, wants to hold on to its food shoppers by sweetening the deals in the grocery aisle.

High grocery prices "continued to be an issue for many of our customers," said William Simon, president and CEO of Walmart U.S., during the company's fourth quarter conference call last month. "A challenging economy and rising gas prices will continue to drive customers to seek value," Simon said. "We'll continue to help consumers adapt to such trends."

Putting the Squeeze on Suppliers?

But Wal-Mart's appeal to grocery suppliers to lower prices coincides with rising costs. For the fourth quarter, total grocery inflation was approximately 4%, Simon said, and "inflation continues to impact meat and selected grocery categories."

It's no secret that the chain's sheer size means the retailer has major leverage over suppliers. Those that want to keep working with the chain will likely have to eat some of those higher costs.

"In order to protect their margins, stay competitive and keep costs low for the consumer, grocers like Walmart might be negotiating for wholesalers to absorb potential increased food prices," Greg Mulholland, an analyst at financial information firm Sageworks, told DailyFinance.

That could be a tall order in the wake of the commodity cost volatility of the past 24 months, Tenser said.

Still, "Walmart may see this circumstance as an opportunity to hammer harder on its rivals by reinforcing its every-day-low-price positioning," he said. "Suppliers can choose: Tighten their belts, or make a case [to Walmart] that some cost increases are unavoidable."



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Robert

Winco is KILLING Walmart groceries! Way cheaper at Winco!

September 16 2012 at 2:47 PM Report abuse rate up rate down Reply
Wayne Bradshaw

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May 05 2012 at 11:59 PM Report abuse rate up rate down Reply
Joy

Yes - Thanks to Walmart many people can afford to feed their families and live on limited income. However they are not always the cheapest and could certainly improve in many areas. Meat is way out of line! and a small "Coffee Mate" @ $4.18 is out of sight! - There are many others. They are the only store I shop that seem to have square - hockety wheels on their shopping carts! Sure gives one the jitters - but, they do have a good pharmacy.
Dale

March 24 2012 at 3:54 PM Report abuse rate up rate down Reply
Corduroy-fire-kills-

Walmart no longer has the lowest prices on groceries. They haven't for a long time. So, a price cut doesn't really mean much - they will likely still be higher.

March 24 2012 at 12:11 AM Report abuse rate up rate down Reply
george

walmart is lieing. they just went up 10 cent on a pack of sausage that i buy. they have been going up on prices steady for the last 6 months that i know of. i go to walmart only because their the biggest place nearby. their pre-packaged meats suck so i go to a real grocery store if i want good meats. walmart is a rip off and people dont know it. i go to walmarr almost enery day so i see prices change and its not in our favor.

March 23 2012 at 8:11 PM Report abuse rate up rate down Reply
Cynthia

I think I get their strategy. They have raised their prices on items that I buy regularly by about .40 each. Almost everything is raised. So now they are going to drop the prices they just raised? Will it be dropped by .20, .40? If they were honest those items would cost .50 less than they did last month.

March 22 2012 at 5:36 PM Report abuse rate up rate down Reply
rlavallee

I'm sure not seeing prices drop at the Walmart I shop at. Most of the items I buy are up at least twenty percent in the past year, some have as much as TRIPLED in cost in that time. Meat? Forget about it, who can afford meat? I shudder to think of what prices must be like in major grocery-only chains.

March 22 2012 at 1:18 PM Report abuse rate up rate down Reply
tmanc50847

I really try and support local retailer...However, Oreos are now $4.69 at my supermarket- I went to Walmart and they are under $3.00...same with cereal prices at Walmart......When you by 2 packs a week it adds up.....there are things you just can't beat.....

March 21 2012 at 5:48 PM Report abuse rate up rate down Reply
askmrsam

We now shop at Publix & although their prices are higher on some things, they are lower on other things. We stock up on their buy one get one items & our savings are greater then they were at Walmart. What we don't buy at Publix we buy at Target where they do ad match & have never told us to go to store that advertised lower pharmacy prices & now I find ALL our meds are cheaper at Target then Walmart. Publix also offers several meds free. I haven't paid for my diabetes med in over a year & get most antibiotics free also at Publix. Publix also are Lee & Collier Counties biggest school supporters. They not only have back to school drives to help students it school supplies, they give schools cookies & snacks for PTA meetings & open houses among many other things.

March 20 2012 at 10:05 PM Report abuse rate up rate down Reply
askmrsam

Walmart lost us & many others when they refused to match competitor prices & were told if we want at that price to go there & buy it. This happened at two Walmart stores in Lee County, Fl. to us & we no longer shop at Walmart grocery three times a week or the Walmart super store & we don't care what they sell their products for. Their "Word" IS NOT gold.

March 20 2012 at 9:48 PM Report abuse rate up rate down Reply