Wal-Mart Stores Inc. customers will notice something different when they're shopping for products like macaroni and cheese, apple juice, toothpaste and fruit cocktail on the retailer's website.
The Bentonville-based company recently started listing online and in-store prices for some food and household products. The online prices are higher than in-store costs for those items. The initiative is Wal-Mart's latest attempt to improve the profitability of its online business and drive traffic to its U.S. stores, according to retail analysts.
Neil Stern, a senior partner with Chicago-based McMillan Doolittle, described a dual-pricing plan as an "interesting" strategy for Wal-Mart after its online business gained momentum the past year. Wal-Mart reported a 60 percent increase in U.S. e-commerce sales during the second quarter and will report third-quarter earnings Thursday.
Stern believes that charging higher prices for some products online -- where there's greater transparency for customers -- could leave Wal-Mart "exposed" in a competitive retail environment. But he said the visibility falls in line with other recent moves the company has made to steer traffic to its stores, where the vast majority of Wal-Mart's sales occur.
"I think what's pretty clear [is that] most of Wal-Mart's actions over the past year or so have been to leverage online to bring people to the physical brick and mortar stores," Stern said. "That's discounts for picking up in store, that's expansion of click and collect and now it seems like that's also adjusting pricing strategy. If you really want it and want the best price, come to our stores."
A quick search of Walmart.com showed the price difference on food or household item varied Tuesday.
A box of Kraft macaroni and cheese was being offered for $1.48 online, but was $1.28 in stores. A can of Del Monte green beans was $1.48 online and 68 cents in stores, while Wal-Mart's Great Value brand fruit cocktail was $1.74 online and $1.08 in stores.
Customers who choose to have the products delivered to their homes will pay the higher price. But Wal-Mart said customers can access the store prices online if they choose to pick them up at the store.
While the online price at Walmart.com is higher on those products than the in-store price, the retailer said in an e-mailed statement it always works to "offer the best price online relative to other" online sites.
"It simply costs less to sell some items in the store," a Wal-Mart spokesman said in the statement.
It follows what Marc Lore, Wal-Mart's U.S. e-commerce chief, told investors last month during a meeting in Bentonville.
"There's no cheaper way to get these products to consumers than have them come into the store and pick it off the shelf themselves," Lore said, referencing items such as individual boxes of baking soda.
But Lore and Wal-Mart want to give shoppers the option and the retailer has invested billions in its online business over the past couple of years to better compete with Amazon.com.
Wal-Mart has expanded its online assortment to more than 60 million products, is offering free two-day shipping on orders of at least $35 and offers a discount on certain items ordered online if customers are willing to pick them up at one of the retailer's stores. The initiatives have dented profits. Lore said last month the current fiscal year would represent the company's largest e-commerce losses with a "slight improvement" expected next year.
Wal-Mart isn't the only retailer charging higher prices for online purchases. Carol Spieckerman, a retail consultant and president of Spieckerman Retail, characterized Wal-Mart's decision as a "wildly contrarian move" compared to most retailers.
"Few would have the confidence to attempt such an overtly transparent pricing scheme," Spieckerman said. "Inconsistencies between online and in-store pricing have been a dirty little secret in retail. Now Wal-Mart is bending it to its advantage and leveraging its store fleet in the process."
Driving sales at Wal-Mart's 4,700 U.S. stores remain key to the company's financial success despite the investments in the online business. Spieckerman said the latest plan is another sign Wal-Mart is doing everything possible to encourage shoppers to visit its stores as the Christmas season cranks up.
Edward Jones retail analyst Brian Yarbrough agreed, but added Wal-Mart's plan to offer higher prices for some online goods compared to the stores can be "a little bit dangerous" as well.
"I understand what they're trying to do," Yarbrough said. "We can talk all day long about being an online retailer and trying to drive that online business, but driving traffic to their bricks and mortar locations -- which is their bread and butter -- is what they need to do more of. But you do question: Does that start blurring the lines between price transparency and does that make some customers get frustrated?
Business on 11/15/2017