Walmart Saves You Money Even if You Never Shop There

Shortly after Thanksgiving we received a sale flyer from Walmart in our newspaper. On the front page was an image of a Walmart receipt with the items blurred out. But on the bottom it said (in very large, clear lettering):

We help families save an average of $2,800 a year, no matter where they shop, based on Walmart's impact on the economy.

This made me think of a few things:

• I'm assuming they mean that when Walmart moves into an area that other businesses have to lower their prices to compete, so even if you don't go to Walmart, you save money. Does this sound to you like whet they mean?
• I wonder if it's true.
• Is this a good thing to say in an ad or not? I understand that they mean to say "we're looking out for you to get you the best price" but don't they also imply "why shop at Walmart when you're saving by shopping other places?"

What's your take on them using this phrase?

Comments

[TJ]

Makes sense to me. My wife's little store doesn't even try to compete with things that could be bought at Walmart. The few things she does carry that they have (for the convenience of the customers) are sold at little profit and no one would come in just to buy those things because of the higher price. And she often just picks this inventory up at Sam's Club given how little the price differs from wholesale anyway.

This looks more like an attempt at quelling the discontent with Walmart and their treatment of workers and their affect on local businesses than an advertisement. And frankly, the best argument they'll always have against the attack on their low wages, benefits, etc., is that their model directly leads to more affordable goods for the lower & lower middle class and, therefore, leads to an increased standard of living for the entire community. When I'm in a large city, its hard not to notice the number of working poor, the high price of staples, and how the city still refuses to allow a Walmart within its limits. I'm sure changing public opinion of their evil empire image to get them into these cities is worth an advertising campaign.

I frankly dont like what they (not picking on Walmart here, all large chains) do to local businesses and the homogenization of America I've seen occur in just the past 25 years, and the death of small downtowns. But given I can afford to pay the extra amount local vendors would otherwise charge, it could easily be argued my opposition to the Walmarts of the world is an elitist attitude that in total hurts the struggling working class.

[sandra]

I've often wondered about this claim they make. They have to be comparing the person who walks in without a list or weekly meal plan and buys everything at regular price without coupons at a regular grocery store and then at Walmart. By combining coupons (my local grocery store always doubles coupons up to $0.50) with sale items, my yearly grocery budget for a family of 4 (includes food and cleaning supplies) is only $3200.

[Joe B]

Grocery stores where I live do not double coupons. Wal-Mart consistently has lower prices for the groceries my family actually buys.

This seems like nothing more than a jab at people who are too elitist to shop at Wal-Mart.

And yes, I am aware of the state of Wal-art/Employee relations.

[Everyday Tips]

I haven no idea what empirical evidence they have to make this claim. However, I am sure it is true in certain cities. Where I live, there is so much competition already, and I certainly did not notice my prices suddenly dropping once Walmart came to town. However, if you are in a more rural area and Walmart marches in, I am sure it would affect the prices.

By the way, on many things I find Walmart to be more expensive than other stores.

[mdb]

Walmart faces resistance anytime it tries to build a store (menino in Boston will not allow one), it could be to address this.

[jim]

I believe savings also come even if you never shop at WalMart. Because WM's prices are low, other establishments have to lower their prices, with the effect being you are saving money.

[APF]

This is a claim that any business that prices competitively can make. Any entrant means an increase in supply to the market, and if there is any degree of price competition, this will put downward pressure on prices.

I'm not sure either what the empirics are behind the $2800 are. If it's a straight average without taking volume into account, it'd be easier to get to that figure than a volume-weighted average because stores with large volume are probably in already highly competitive areas.

Like TJ said, I think this is a move to spur "warm and fuzzies" to combat the negative stigma they've come to be associated with. And I think it's effective.

I may not love the way the compensate their employees but I do love getting volume discounts transferred to me in the sale price. I'm kinda torn. I guess once the premium to take my business to places with employee compensation I feel good about becomes small enough relative to my income, I'll make the switch.

[Rod Ferguson]

I agree with most here - this looks to me like a PR campaign to offset the negative press Wal-Mart receives.

@Joe B - I only shop at Wal-Mart for a specific type of dog treat that my dog loves and is only available there, and nothing else. You might consider me elitest, but I find that Wal-Mart products are, on average, substandard and the food prices are not that competetive when compared to a Woodman's (and the food selection is limited as well). For me, shopping at Wal-Mart means I have to replace things more frequently and spend more money for staples - two things I do not like to do.

[Pop]

"Walmart faces resistance anytime it tries to build a store (menino in Boston will not allow one), it could be to address this."

That's what I was thinking too, "Just let us in your neighborhood, it's good for everybody"; fast forward a year and they've driven out most of the competition and everyone then gets the thrill of shopping at Walmart.

[Patrick]

I don't agree with the Walmart statement at all.

First, it's no secret that Walmart pays employees so little that they create programs showing employees how to receive food stamps, collect Medicaid, and receive government subsidies. Whatever they're saying customers save just shows up in our taxes because walmart makes the cost an externality.

Second, $2,800 is a savings of $230 a month. That's a lease on a decent vehicle. I just think that seems a bit much for the savings per person. I could believe half that. They need to release a more in-depth study.

[Michael Goode]

It isn't just prices--it is costs. Wal-mart is not really a great retailer. What they are great at is distribution and inventory management. To compete with Wal-Mart other retailers and grocery stores had to improve their distribution and inventory management to lower their costs. The net effect is Wal-Mart benefited the economy because they made not only themselves but other retailers much more efficient. That is shown by the fact that profit margins and wages in the sector have not shrunk enough to explain the lower prices.

[Paul]

Isn't free enterprise grand?

[billyjobob]

I like Wal-Mart. They have some good products at great prices. I don't grocery shop there because I like Meijers better for most of that stuff, but some things are cheaper at Wal-mat. The original Sam Walton idea of Wal mart is still good. Good products, low prices, large selection, clean and organized store.

A lot of people hate Wal-mart and believe they do their employees bad. Well... have you talked to the average wal-mart employee... they actually are getting paid what they are worth. If they think they have more value than what Wal-Mart will pay them then they should move on to that employer that will give them what they feel they are worth. But lets get real. These people have a job with the skills they have. I don't feel bad for them.

[Travis Williams]

There is no way to tell if this is a true statement or simply a PR statement.

It could very likely be a true statement though based on Walmart's dominance on the retail industry. This doesn't have to be based on listed prices but could also take into account price matching.

[Old Limey]

I have never shopped at a Walmart because the nearest one is too far from where we live. I have read articles and watched programs that discussed Walmart's success. They were really the first very large US corporation to aggressively have products made in China and coerce the Chinese manufacturers to cut, cut, and keep cutting prices while maintaining quality that met Walmart's standards. Once Walmart showed just how cheaply products could be obtained from China their methods spread to other US companies. Walmart is notorious for playing hardball with their employees over wages and benefits, which they counter in the media by airing commercials where the theme is always that of a Walmart employee (often a person of color) touting what a great company they are to their employees.

Now, after many years, the "Walmart" model has been adopted widely to the great benefit of American consumers. The following paragraph is an extract from one of John Maudlin's "Outside of the Box" reports that shows the consequences of outsourcing.

At the peak in the late '70s the US had almost 20 million manufacturing jobs with a population of a little over 220 million. In June of 1998 we still had 17.7 million manufacturing jobs. But by October, 2010 we were down to 11.6 million manufacturing jobs in a country of 320 million people. Six million manufacturing jobs have been lost in the last 12 years, and 2 million in the last two years alone. We now have fewer manufacturing jobs than we had in 1941. As manufacturing jobs have fallen, government jobs have risen. Which of course means that taxes (or debt) have risen.

[jeffinwesternwa]

It's a global economy and Walmart takes a positive advantage of that. For the most part their prices are cheaper across the board. However, with several Kroeger stores around me, plus Safeway, etc., I notice Wal-Mart OFTEN (sometimes weekly) changes prices on many grocery items as others have sales. SO "yes" you save $$ but, that $2,800~ is based on "regular", not sale prices elsewhere. Wal-Mart doesn't have "sales" but, prices go up and down often as they shop competition. Their employees often can not find as good jobs anywhere else and average pay STARTING wage for unskilled workers at the WM near me is almost $11/hour plus they offer health insurance even to part-timers for under $100 a month! Other excellent benefits too, even for PART-TIME workers. Many folks think Wal-Mart kills jobs but, in several places they've built, I've found increased competition, thus better service, less UNemployment and more choices for consumers and WORKERS when WM arrives. That is good! Summary: Hundreds of good NEW jobs for many who otherwise would only make minimum wage or be unemployed, with benefits, increased competition, around the clock hours to work and shop and lots of state and local taxes from WM and employees goes into the pot..ALL a positive! If consumers wanted higher prices, different products, WM would NOT be so crowded! Simple economics...

[Brent]

Patrick is correct, any savings we see on our receipts are taken out in our taxes from the practice Walmart uses of paying employee's less so they can use government assistance rather than have to pay it them self.

[Bad_Brad]

In a large enough metro that can support WalMart plus at least a handful of its competitors, I am inclined to agree that WalMart makes things better. But in towns of, say, 5000 to 30,000 people, when WalMart moves in and everyone else has to close up shop, in those cases, I would argue WalMart makes things worse. Okay, maybe they do offer some things at a discount versus what would otherwise be available to people in these towns, but they reduce the choice and therefore the overall consumer experience in those towns. I say that having lived in one.

[Old Limey]

I agree with the previous post regarding Walmart and would like to add that the same thing happened in our area when Home Depot moved in. We had a wonderful hardware store near us that had a huge inventory. The owner told me once that it didn't bother him to keep items that maybe only got purchased a few times every year. Once Home Depot opened up about a mile away, like many others, I would go to my local store for small purchases needed, such as a 50c PVC pipe fitting for something I was working on, but for large purchases it was worth my while to drive to Home Depot. Pretty soon the local store went out of business and before long other small stores also closed because their volume dropped to the point where they couldn't stay in business. The same thing happened to small nurseries, I started buying the bulk of what I needed at Home Depot and only a hard to find speciality plant at the small nursery. Pretty soon the small nursery went under. The small grocery stores disappeared long ago, now all we have are Costco and two large supermarket chains. This is the way things are in areas that can support and allow the Big Box stores.

[Lurker Carl]

Evil Wal-Mart employs well over one million people, the turnover rate is typical for retail. How can that many employees be wrongfully treated and the company still thrive?

Boo hoo, one hundred year old companies like Sears and A&P can't compete with Wal-Mart. Life is so unfair!

[MrAtoZ]

This dialogue about Wal Mart's impact reminds me of the concept of "creative destruction" developed by Joseph Schumpter, which is often cited as a benefit of our system of free enterprise. The emphasis is usually on the creative side of the equation, but there is also necessarily a destructive side as well, and in the case of Wal Mart's competition, those destroyed can be small businesses that can't match the cost efficiencies of the big box model of retailing.
We live in a culture where each coin in that $2800 has two sides.

[Pop]

I can understand people with very tight budgets doing whatever they have to to save a buck, but when people with substantial means eschew the local hardware store for Home Depot to save $10, or the local grocer for a Walmart, eventually we all lose.

Old Limey-
you post some scary (and well known) statistics about the loss of manufacturing jobs in our country. Do you consider yourself part of the problem when you willingly spend 50 cents at a hardware store but reserve your big spending for Home Depot?

[PDL]

It's obviously a PR attempt to show that Walmart is good for the neighborhood, but I wonder what the statistics are for jobs, too, because the difference between prices and jobs is what really matters, taking into considering the number of jobs as well as the hourly pay. Higher wages or more jobs, with lower prices, equals better for the neighborhood. Lower wages along with lower prices, equals not any better.

[SteveD]

The newspaper ad is obviously PR, but the statistics are real. I took an economics course that did a case study on Walmart, and it raised the same point -- a study showed that grocers in an area where Walmart went into business typically lowered their prices, so that everybody in the area saved. People who lived in areas without a Walmart did not get these savings. Also, the study showed that Walmart competed more directly with department stores than small Mom and Pop shops, and had much less negative affect on small retailers than public perception.

From Wikipedia: "Global Insight, which conducted the research that supported the ads, found that Walmart's price level reduction resulted in savings for consumers of $287 billion in 2006, which equated to $957 per person or $2,500 per household (up 7.3% from the 2004 savings estimate of $2,329)."

P.S. I don't shop at Walmart either, but that's because I don't shop anywhere much :-D

[Old Limey]

Pop:
You are right! I am part of the problem and I bet you are also.
The problem is however too widespread and far too large for me to sacrifice myself on its behalf.
A friend of mine (now deceased) felt very strongly about "Buying American" and always drove a Cadillac but you must know how hard it is these days to buy manufactured products that are not manufactured in one of the low labor rate countries. I go to Kohls when I need to buy a pair of pants and I buy well known American brands but when I look at the countries of origin they are from all over the world but never from the USA. If you watched 60 minutes last Sunday you would have seen where the country with economic numbers that we dearly wish that we had is now Brazil. It's also interesting that they have gone almost 100% to an ethanol based energy source based upon home grown sugar cane while we are still paying as much as $92/barrel for imported oil to keep our large automobiles running. Our corn based ethanol is more expensive and always will be so we at least put an import tax on Brazilian ethanol to protect our farmers.
We could do the same thing with China but it would backfire on us in ways that would be devastating to the value of the dollar and drive up prices.

Unfortunately I have to take care of #1, and that means that it's rare that anything I buy is made in the USA. Even the majority of fish products rarely come from our oceans and even though we live in California which is a great wine producing state, our house chardonnay, and one that we thoroughly enjoy every evening, is bottled here but imported in bulk from Eastern Australia, and it's only $1.99/bottle. When we eat out it's still cheaper to take a bottle with us and pay the $7 - $10 corkage charge. The only fish products we buy that are somewhat local are "Red Snapper" from Canada, and "King Crab legs" from either Alaska or Russia. Our Pacific ocean waters are fished out and our wild salmon season has been put on hold for the last two years in an attempt to restore their population. The problem there is that we are taking too much water out of our rivers for farming and domestic usage and have disrupted the salmon spawning grounds - does that sound like something you've heard before?

[Sunil from The Extra Money Blog]

great PR move - the ad makes on think, contemplate and maybe even research and read up further. advertising dollars well spent

[Jani]

it is all about give and take (or first take and give), if we have 'unfair' foreign exchange rate with high $ value, all countries take advantage to manufacture/serve which all Americans consume, even American Icon GM manufactures some parts outside US and assemble here...

I'm not sure about numbers ($2800/Year), but Wal-Mart sells for less (for sure), recently we had coupon of Kohl's ($10 off on $20 purchase), we bought some Pyrex glass back-ware (total $24) and with coupon cost us $14, there was Wal-Mart near to Kohl's and we just went inside to look around and found same Pyrex were sold at $14 (without coupon), so at least for branded stuff, first check Wal-Mart price (no comparison for sure)

[Linda]

"Do you consider yourself part of the problem when you willingly spend 50 cents at a hardware store but reserve your big spending for Home Depot?"

My choice often boils down to the cost of driving there. It is cheaper to spend ten extra cents at the local hardware store for an inexpensive purchase, than to spend fifty cents of gas to get to Home Depot. But if I can save $10 or more by going Home Depot, I've paid for my time and gas. WM also figures into this equation, with all the Supercenters. One stop shopping has something to say for it.

[Jim]

I'd question how they came up with the $2800 figure. Average family only spends about $50k a year and only about 20% of that wold be spent at retail stores. Most of the spending is on housing, cars, insurance, etc.

If you assume an average family spends about $10k total on groceries and other products that you could buy at Walmart then they're claiming they're saving us about 28% indirectly. I really doubt that is the case.

[Bad_Brad]

Jim - I was thinking the same thing. I would love to know how they arrived at the $2800 figure.

[Squirrelers]

FMF -

Your interpretation of what they mean sounds plausible to me. They are often faced with much resistance by local small business communities, from what I understand.

Why such a statement makes sense is that ultimately, most consumers are going to care about the bottom line as related to their own households, not that of the local mom and pop stores. Which, for a variety of reasons, is unfortunate. But it is what it is!

[Ryan Waggoner]

I read somewhere that economists had calculated that Wal-Mart had singlehandedly lowered the annual inflation rate by 1%. I'm skeptical, but maybe that's where this comes from?

[Ron]

What's always ironic about Walmart bashing is that if those mom-n-pops had the chance, they'd put Walmart out of business ... along with the 400 store employees who work at each of their 4,000 stores, the thousands of truck drivers and distribution center employees who supply them, and the entire lot of corporate support staff.

[Keith]

I am not keen on their "save money live better" campaign. If I didn't know better, I would think they were a bank. There is no SAVING when shopping at Wal-Mart or most any other retail establishment. You go to SPEND money. True, there maybe a discount from full retail price but no savings. To prove my point, next time you shop at Wal-Mart look at your savings account. Did Wal-Mart make a deposit? No? Well, I rest my case.

[Ginny]

I haven't shopped at Wal-Mart for about 4 years, and went there to pick up some batteries recently. I noticed that their selection on a lot of products is way down from what it used to be, and they squeezed down a lot of their departments, and offer less inventory, and less brands. You can't even "comparison shop" between brands.

I had bought a George Foreman grill for example from K Mart, which carried 6 different models, I specifically wanted one with removable grill plates, which I purchased, and while I was at Wal-Mart, I stopped to check Wal-Mart's price, just to see if I got a "good" deal or not. Wal-Mart only carried 2 basic models- a large and a small, and that was it.

I'm thinking that they've done what they planned, and squeezed the manufacturers so hard to produce products at their price points, and what you get from them now is the bottom of the line product with no extras.

I don't think they're lower on prices than other stores, and they don't really need to be, because it's in everyone's brain through their ad campaigns, everyone just assumes it.

I would rather pay a little extra somewhere else anyway, and go to another store, than to fight the crowds trying to find a parking space, wait in long checkout lines, and get help if you need it.

[Georgia]

I shop at a minimum of 6 Wal-Mart's. They are clean, spacious, reasonable, and the worker's are great. They love working there and tell me so when I ask. If they do something for me, I try to pass my thanks on to management. I have friends working there and they are well satisfied with their compensation. One friend has been there at least 20 years and will retire from there.

My brother has said that one of the reason I have so many good Wal-Mart's is because I live in the Midwest and we still have a good work ethic here. Who knows?

As to Mom and Pop stores, I was given one possible explanation by someone. When Wal-Mart first became huge, many of the Mom and Pop stores were exactly that - run by Mom & Pop. When they decided to retire, especially in small towns, sons and daughters did not want to take over the business. They wanted to move to the big city for a regular paying job. That may be one of the main reasons for the demise of small stores. I know big business can have problems, but do we have to blame everything on Wal-Mart, Target, K-Mart, etc.?

[Mark]

@Ginny: You are exactly right about the range of products at WalMart. They have found it cheaper to limit the choices in favor of volume. This has to be an opportunity for other retailers. (Why is Target still in business, for example?)

But another factor that has killed many of these businesses is online shopping. Too often, the local store is just a showroom for Amazon - they just haven't figured out how to make Amazon pay them yet.