walmart

Walmart adjusts online pricing strategy

Some food items receive significant markup for online purchase

Wal-Mart Stores Inc. has begun listing some items, including many food products, at higher prices on its website than it charges for buying them in its stores in an experiment to make its online operations more profitable, according to a report in the Wall Street Journal.

The Bentonville, Ark.-based retailer previously had aimed to achieve price parity between its online and in-store pricing, the newspaper reported.

A visit to the Walmart.com website showed that many food items listed two prices, one for online purchases and the other — often significantly discounted — for buying the same product in-store. For example, a 20-ounce can of Dole pineapple chunks was priced at $1.63 on Walmart.com and 86 cents for in-store purchase. A 15-ounce can of the retailer’s private label Great Value pumpkin pie filling was discounted even further, at 80 cents in-store vs. $1.91 online. 

According to the Journal, the move is part of an experiment in which Wal-Mart is seeking make its online operations more profitable and drive customers into its physical stores. It is no longer requiring that workers responsible for ecommerce sales match online prices match with those in-store, the article said.

The cost of picking and shipping products to consumers generally makes online sales less profitable than offering them in stores, where consumers select their own items from the shelves.

Wal-Mart is also asking suppliers to supply more products in bulk packages that can be shipped to consumers more economically, the Journal reported.

The company, long known for its low-price leadership, is still seeking to maintain online prices that are on par with competitors, however, according to the Journal.

A Wal-Mart spokesperson was not immediately available for comment to SN. 

During its annual conference with analysts last month, Wal-Mart said it expected its online division to remain unprofitable next year, although the company said it expects the division to lose less money than in the current fiscal year. 

Walmart previously had experimented with a delivery membership service that was seen as a way to compete with Amazon, but the retailer earlier this year scrapped that model and now offers free two-day shipping for a large range of items on orders totaling $35 or more. 

Karen Short, a New York-based analyst with Barclays Capital, on Monday raised her price target for Wal-Mart’s stock ahead of the the company’s scheduled third-quarter earnings report this Thursday. She cited Wal-Mart’s scale and its “vibrant ecommerce business” in a retail environment that has been substantially altered by Amazon’s acquisition of Whole Foods.

In a separate report previewing the company’s earnings, Short said she believes Wal-Mart is continuing to invest aggressively in pricing overall, despite reports to the contrary.

“We believe the Wal-Mart ‘M.O.’ today is to communicate very little regarding strategic actions so as not to tip off competitors who have taken defensive actions in the past, but to execute behind the scenes,” Short said in the report.

Among the tailwinds boosting the outlook for the third quarter, she said, are the growth in the company’s ecommerce operations and in its Marketplace offering, a platform for sellers to reach consumers directly. In addition, she cited potential benefits from passing along at least a portion of food-cost inflation.

Wal-Mart’s test of differentiated pricing comes as Ahold Delhaize, parent of the Stop & Shop, Giant, Food Lion and Hannaford chains, said last week it was looking at eliminating the disparity between online promotions at Peapod and in-store pricing activity.

According to a new report from research firm Packaged Facts, Amazon will account for 18% of online food and beverage sales this year, while Wal-Mart, the No. 2 player on online food and beverage sales, will account for 9%.

The report predicts that online grocery sales will triple by the year 2022.

“At this stage, it is too early to determine what percentage of overall food and beverage sales will eventually be made online, but it is not unreasonable to assume a 20% to 30% market share by the time the market reaches equilibrium over the next decade," says David Sprinkle, research director for Packaged Facts.

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