Wal-Mart is known for their Everyday Low Prices (EDLP); their guarantee that instead of big sales, their customers can come in and get what they need for less. According to Kathleen Seiders and Glenn B. Voss, authors of From Price to Purchase, “Advocates claim that everyday pricing increases customer loyalty, improves inventory management, and reduces labor and advertising expenses.” However, that reassuring EDLP might not be as helpful as it seems. It turns out Wal-Mart doesn’t necessarily guarantee the lowest price on all items, simply the ones at the end of the aisles and in center displays, the other models are often more expensive than other st... ... middle of paper ... ...ol Your Inventory.” Nov. 2000. Harvard Business Review. Bloom, Paul N. and Perry, Vanessa G. “Retailer Power and Supplier Welfare: The Case of Wal-Mart.” 2001.
While Wal-Mart continues to dominate the market and provide low cost goods to consumers, it does so at a high cost. Wal-Mart 's millions of employees pay is not reflective with its subsequent profits, leaving families with financial instability. With Wal-Mart 's engagement in price discrimination and its power of the market to receive substandard low cost goods it continues to make enormous profits. The ability to obtain products at a low price not only has helped Wal-Mart keeps costs down but maintain them as an inferior good. Since Wal-Mart is inelastic, it has no incentive to raise its prices, or the price it is willing to pay to producers.
Producer Hendrick Smith talks about one of Walmart’s biggest suppliers he says, “Walmart’s pullback was a body blow to Rubbermaid” (00:16:55-00:17:00). Walmart refused to continue selling Rubbermaid’s products unless they did it for the price Walmart demanded, this caused the once most profitable organization to go bankrupt. The negative impact on this was how many jobs have been lost because of Walmart. Walmart doesn’t care about the community either. An article mentions “Walmart’s huge advantages in buying power and efficiency force many local rivals to close.” (“Long”103) Walmart can only see that they are going to make more profit they don’t stop to consider the local businesses they put out.
Their motto of “Always low prices, always” have created soaring profits at the expense of their employees. Most Americans loves the convenience and low prices offered by Wal-Mart. Do Americans know what it actually costs for Wal-Mart to keep prices so low? With thousands of lawsuits filed each year it is a wonder why Wal-Mart refuses to change its practices. It is fairly safe to say that Sam Walton would not approve of how his company has been completely changed from its original intent by such a large margin.
Target competes with Discount stores and supercenter shopping formats of Wal-Mart with Target commanding a small premium on prices as it follows fashion trend. Market segment of Target is the high-income customers leading to higher margin realization. ($ 50,000 of target vs. EDLP strategy of Wal-Mart by leveraging purchasing scale has pushed down prices compared to other retailers. Average prices in Kmart and Target is at least 10-15% higher than Wal-Mart and focuses its competition on product variety and quality. Revenue growth of Costco during 2008-2012 (22.64%) is almost doubled that of Wal-Mart (11.86%) during the same period.
Foundations of Financial Management (11th ed). The McGraw- Hill Co. Google-Finace. (2008). Finacil statements: Targets and Walmarts Company, Retrieved April 10,2008, from http://finance.google.com/finance?fstpe=ci&q=LUV Target Corporation Investors. (2006) Retrieved electronically on April 15, 2008 from http://investors.target.com/phoenix.zhtml?c=65828&p=irol-stockQuoteChart Target Corporation.
The leading US retailer, Wal-Mart, is an expert at low product pricing as evident in 2004 with $250 billion dollars in sales to their 138 million weekly shoppers. However, they are also responsible for reducing prices so low that it drives specialty stores out of business. This is the effect Wal-mart has had on many toy stores and has almost closed the doors of the famous toy store Toys “R” Us Inc. Wal-Mart set extremely low prices on toys in a very successful pricing strategy to attract customers and become the leader in toy sales (Grant, 2004). This pricing strategy is called market penetration pricing. Penetration pricing is used to enter the market quickly and win a large market share (Anderson & Bailey, 1998).
Wal-Mart’s famous low price guarantee comes at a high expense of the environment, the small businesses, education, the rights and safety of the consumer, but most importantly their employees. Although Wal-Mart plays a dominate role in American economy, this “American” corporation shows little remorse in the actions they take that negatively impact people, because they are gaining a financial benefit. Over the years Wal-Mart has established thousands of new warehouses and stores in cities and towns nationwide. Although, Wal-Mart promises to bring an economic gain to the areas that they are built on. The building of their infrastructure and the traffic it brings along with it comes at the expense of schools, which lose money due to the subsidy granted to Wal-Mart and not them.