Friday, October 15, 2010


So, while the government tells us that inflation is nearly nonexistent and that Social Security and other programs will see no increase because of it, the real story is something far different.

Walmart's not alone in raising prices. It's happening everywhere.

"Walmart has rolled back its rollbacks. Earlier this year, the retailer tried to spark sluggish U.S. sales by lowering its prices — already bargains — even further. One analyst called it "an initiative that screams: Price! Price! Price!" These rollbacks, as they are known in Walmartspeak and in the company's advertising, were intended to overwhelm the shopper. In May, according to one shopping website, the price of a 40-oz. bottle of Heinz ketchup, which had been $2.42, was chopped to $1. Kraft mac and cheese, which had been going for $3.58, was reduced to $2.50. The rollback of a 50-oz. bottle of Tide laundry detergent, which was priced in the $7.48-$8.12 range, gave shoppers a $2.50 discount. Walmart expected a flood of customers to its stores, which would help lift the company's stock out of its rut and get Walmart rolling again.

Instead, cutting prices depressed sales, as shoppers took the bargains and ran. For the quarter ending July 31, Walmart's U.S. same-store sales fell 1.8%. The company's same-store sales have now fallen for five straight quarters. Of the rollback strategy, Bill Simon, the president and CEO of Walmart U.S., told investors at a September conference, "It did not do what we had hoped it would do. It did, however, drive price perception. It did not drive sales or traffic." As a result, Walmart rolled back the deeper discounts, and prices started inching upward this summer. According to a new report from J.P. Morgan, the price of a 31-item basket from a Walmart store in Virginia rose 2.7% in September alone. Walmart prices have jumped 5% since the start of the year and have been at their highest levels in the 21 months J.P. Morgan has tracked pricing data."

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