Monday, October 23, 2017

Always the Brand Name, Always.


Walmart has gone from discount retailer to mainstream brand-name retailer and no one seems to notice.  It is no longer a place with really advantageous prices on most things anymore.

Further to my previous posting, I have written about Walmart in the past and have always been a big fan of the store and also am a shareholder in the company.  They have a lot of good products there at reasonable prices including, and perhaps especially, many of their store-brand "Great Value" products.
But the funny thing is happened along the way.  Walmart no longer is merely a competitor in the marketplace, but in many respects has become the marketplace in many towns, cities, and villages. Walmart is now the de facto grocery store, department store, automotive center, sporting goods store, optometrist, hair salon, fast food restaurant, gas station, tax preparer, and Obamacare sign-up center, among other things.  Where people used to go to malls for "one stop shopping", today they go to Walmart.  And for many families, going to Walmart is a weekend event.
In any retail business, often you have to initially offer competitive prices or very low prices to attract business.  You do this to get warm bodies into the store, and perhaps drive competitors out of business.  However, once people get into the habit of shopping in your store, you can bank on that habit, and no longer have to offer lower prices.  And it seems that Walmart is falling into that pattern, as lately their prices seem to be ratcheting up, and also they seem to have fewer and fewer store-brand products than before, and more "name brand" products instead.  Great Value Woven wheat crackers are nearly impossible to find, but there is a wall of Triscuits in its place.
And this is not by accident but design.  Several years ago I recall reading an article about Walmart where the management mentioned they were trying to push brand names more and move upscale.  The "always the low price" and smiley-face logo (and the "falling prices" campaign) went away and the new "live better" asterisk took its place.  It seems they've succeeded in this as I am finding fewer and fewer discount items at Walmart and more more things that are priced at what are fairly mediocre bargains compared to other stores.
But as I noted, people get into the habit of shopping in the store, and initially they may not notice the prices have increased.  And in many small towns and villages, perhaps Walmart is the only place to shop anyway, so consumers don't have much of a choice.
Whether this bodes well for Walmart is anyone's guess.  I suspect that like any other type of dynamic system, there is a bit of hysteresis in people's shopping habits.  People will continue will continue to shop at Walmart and initially not notice that prices have edged up.  But eventually, over time, people may gravitate toward another retailer with lower prices, much as they initially gravitated toward Walmart in the first place.
Whether that retailer is Amazon or someone else is hard to say.  Quite frankly, I find that Amazon, like Walmart, has sort of "meh" prices these days, and unlike Walmart, doesn't have the same products for sale, but often inexpensive off-brand Chinese products instead, which are hard to cross-shop.   If I want an inexpensive weed wacker, and don't mind some off-brand, Amazon is the place to go.   If I want a specific brand of one, Amazon might be the last place to look.

For example, I was looking for rye grass seed at Walmart the other day.  They were sold out, as the garden section has been converted to Christmas displays and they assume that no one plants "winter grass" in the winter (when else do you plant it?).  But Walmart, Lowes, and Home Depot ordinarily carry this product, about $30 a bag for 25 lbs of it.  Amazon, on the other hand, starts at $44 a bag for 20 lbs, plus shipping.   For some crazy reason, Amazon has crazy prices on a lot of things.   And then there is the weird deals on $50 jars of mayonnaise, which I think is a cover for money laundering.

In terms of lowest possible price, the big-box lumberterias, Walmart, and Amazon are no longer the "go to" places they were in the past.   Not only are their prices not very low, odds are, they won't have the item you want in stock - and you may not even be able to order it online!
Perhaps this is the break that Sears/Kmart has been looking for.

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