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Wednesday, November 12, 2014

A Blue State Basket of Wal-Mart Goods

For the last several years I have taught a course in Consumer Behavior at a local university. It is fascinating for me as the content needs constant updating and it often leads me in to Behavioral Economics which is a special interest of mine and a rapidly growing discipline.

Each semester I do a lecture about Wal-Mart and then have a class discussion about the company’s impact on retail and even on American life. Also, I do a market “basket of goods” comparing buying a list of products at Wal-Mart and then at other chains and grocery stores.

This fall I decided to put a little twist in the basket of goods. It did not contain my normal middle American selections. This time I compared Wal-Mart prices for goods that were not mainstream but were available at the retail giant and all of the competitors in my sample. These goods are considered expensive by those of moderate income yet all are found at Wal-Mart.

My market basket of goods contained items such as Kind cereals, high end toothpaste, expensive soaps and soups, fruit juice, Lindt chocolate, and “healthy” Granola bars. In previous “basket of goods” Wal-Mart always won vs. the best of the competition by 12-15% (sometimes a competitor would have an individual product for less. No sales items were allowed in the analysis). For this upmarket compilation, it was more like 25% savings at Wal-Mart!

The sample was Wal-Mart, Target, two prominent drug chains, a national grocery chain and two local, high end grocery stores. Across the board, Wal-Mart trounced all competitors. Yardley soap was 99 cents per bar while competitors came in at $1.69+. Kind Cereal was $4.78 which was close to one chain but the local grocery stores had it at $7.36. Toothpaste at Wal-Mart was at least a dollar less expensive than anywhere else. They even sold high end Rembrandt at an excellent price (when I was young there was Colgate, Crest, Gleem, Ipana, and Pepsodent. At one drug chain, I counted 54 different varieties of dental creme). Soups were 30 cents lower relative to everyone else. Expensive chocolate is available at Wal-Mart and averages a dollar to a $1.20 less than all competitors. A 60 ounce container of Ocean Spray Cranberry Juice was only $2.98 but as high as $4.56 at a local grocery store.

Why do I bring this up? None of these products are bought in large quantities by struggling Americans. The upscale must be going to Wal-Mart more than they are willing to admit. The prices are clearly excellent. If these items were not selling, Wal-Mart would drop them and fast.

The financial press discuss how Wal-Mart is struggling a bit as they are losing some high end and younger customers to Amazon. At the other extreme, the very low end income customers are moving to Dollar General as Wal-Mart is perceived as too expensive. In fact, a new study has been released which has demonstrated that Dollar General is less expensive than Wal-mart. Next spring, when I do my next Wal-Mart analysis, I will include Dollar General in the mix with a more conventional “basket of goods” than I had this time.

Demographers often say that people who live in “blue” cities and states vote progressive politically and go to Thai restaurants, drive a Volvo or a Prius,  patronize green stores and farm to table restaurants, and they tend to look down their noses at the Wal-Mart nation. It seems, given my basket of goods this time around in a deep “blue” state, that many sneak in to Wal-Mart and get some high end products at excellent prices.

If you want to contact Don Cole directly, you may reach him at doncolemedia@gmail.com

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