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Reverse strategy: Walmart makes some products pricier online than in stores

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14 November 2017

Wal-Mart Stores Inc has started charging customers more if they buy some products online than if they buy the same product in stores, part of the company's efforts to boost profits and drive store traffic as it competes with Amazon.com Inc.

The world's biggest retailer has quietly raised prices for some food and household items sold on its US website, including boxes of Kraft Macaroni & Cheese, Colgate toothbrushes and bags of Purina dog food, according to comparisons made by the media between online and in-store prices.

The strategy may appear counter-productive, yet Walmart is not alone in adopting it. Like many retailers across the US, it hopes highlighting lower in-store prices will help the traditional brick-and-mortar company compete with online giants like Amazon.

Some other big-box retailers charge more for online purchases, including Costco Wholesale Corp, but the move is unusual for Walmart, which has long honed an ''everyday low price'' message and has worked to keep online prices at least as low as shoppers find in its 4,700 US stores.

A FOX13 consumer investigator did some of the math, and found that Walmart's in-store price is often the lowest, even when compared to Amazon's prices for the same product.

One bottle of Tylenol sold on Walmart.com and Amazon.com for $4.92 per package. Purchasing the pills in a Walmart store would shave nearly a dollar of the online price tag, with the in-store price of $3.97.

But sometimes the best choice is a little less clear. For example, on a box of Hamburger Helper, Walmart.com's price is $2.20. Amazon prices the same boxed meal at $1.60, offering a better deal than Walmart's website. But the in-store price of the same box of Hamburger Helper is $1.50, offering a savings of 10 cents.

''We always work to offer the best price online relative to other sites,'' a Walmart spokesperson said in a statement to FOX13.

Walmart previously aimed to keep online and in-store prices equal for many of its most popular products, unless competition drove them lower. But the company is experimenting with the new system, which has at times resulted in higher web prices for goods that would otherwise be unprofitable to ship, people familiar with the situation told The Wall Street Journal.

In some cases, product listings on Walmart.com show an ''online'' and ''in the store'' price. Often the online price matches Amazon.

''We always work to offer the best price online relative to other sites,'' a Walmart spokeswoman said. ''It simply costs less to sell some items in stores. Customers can access those store prices online when they choose to pick up the item in store.''

On Friday, a box of Kraft Thick n' Creamy Macaroni & Cheese Dinner was $1.48 on walmart.com, the same as Amazon's price but more than Wal-Mart's $1.28 store price (listed online). A similar comparison for a twin-pack of Betty Crocker Hamburger Helper showed the price as $3.30 online, but $2.50 if purchased at a Walmart store in Illinois, a WSJ investigation showed.

The higher online prices are part of Walmart's efforts to nudge more customers into stores as well as raise its ecommerce margins by offsetting the cost to ship orders to homes.

A $1.28 box of Kraft Macaroni & Cheese could cost a big retailer around $10 to ship from Chicago to Atlanta, depending on how remote the buyer's address is, according to a cost analysis by consultants Spend Management Experts. A smaller retailer would likely pay about double. A twin pack of Hamburger Helper could cost around $10 to ship between Minneapolis and Atlanta, estimates the firm.

Walmart is investing billions to boost e-commerce sales, which rose 60 per cent in the US in the most recent quarter, but some shareholders worry the effort could drag on profits.

Marc Lore, head of Walmart's US ecommerce unit, told investors in October that ''this year should be the largest loss in ecommerce, and we'll see slight improvement next year.''

Overall, Walmart expects profit margins to be slightly down this year, according to WSJ. Wal-Mart's net income has declined the past two fiscal years, down 7.2 per cent to $13.6 billion in the last fiscal year ended 31 January 2017. The company is scheduled to report third-quarter earnings on Thursday.

Since Walmart's current chief executive, Doug McMillon, took the job in 2014, the retailer shifted its growth strategy from building more cavernous supercenters to improving existing stores and investing in ecommerce. In 2015 it closed more than 150 US stores, and it plans to build just two dozen stores next fiscal year.

Without new stores, Walmart executives say they will boost sales by bringing more shoppers to existing locations and driving online sales. Walmart has raised starting wages for store employees, refurbished stores and bought smaller online retailer startups.

So far, the bet is working. Walmart has increased sales in existing stores for 12 consecutive quarters, boosted by more shoppers coming to stores at a time when many traditional retailers face sluggish sales.

The company is also asking suppliers to sell more of their merchandise in bulk versions -instead of single boxes - to increase order sizes and make them more profitable, the people said.

For inexpensive items, ''there's no cheaper way to get these products to consumers than have them come in the store and pick it off the shelf themselves'', Lore said at last month's investor conference. He said he hopes shoppers will come to stores for the best price and place larger orders online to offset the cost of shipment.

After scrapping an effort earlier this year to create a membership delivery program to rival Amazon Prime, Wal-Mart offers free two-day shipping on millions of items on any order above $35.

Amazon is also trying new pricing models. It started lowering prices on products sold by outside vendors by as much as 9 per cent in recent weeks, ratcheting up a price war with other retailers ahead of the holidays (See: Amazon begins offering big discounts even on third-party goods). http://www.domain-b.com/companies/companies_a/Amazon/20171107_big_discounts.html





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