Grocery Shopping At Walmart

The large grocery store chains used to have virtual monopolies on food shoppers’ wallets. However, over the last five years their fortunes have changed, and their stock prices have lagged. The pressure has come from a two-pronged attack, discounters and healthier food stores. Walmart mostly and Target to some degree in the former group, and the likes of Whole Foods and Trader Joe’s in the latter group.

Some of the traditional grocery stores have seen the light and are attempting to shift their store offerings to be more like a Whole Foods. Safeway, for instance, has begun a remodeling campaign under the “Lifestyle” concept to regain some of the market share it has lost in recent years. Time will tell if the move works, but at least they are trying, so their odds are far better than those simply muddling along with razor thin margins and no plan to at least maintain the business they have.

This weekend I shopped at Walmart for groceries for the first time. That was a big step for me. I hate shopping at Walmart. I find their stores a miserable experience. While the prices are low, the departments aren’t well organized and much of the shelves look like they haven’t been restocked in weeks. More times than with any other store, I can wander around for 5 or 10 minutes looking for the aisle I need. This is a sharp contrast to Target stores, which I find to be fully stocked and very easy to navigate.

Anyway, back to Walmart and groceries. I usually visit the local grocery store, more out of convenience than anything else. However, I finally bit the bullet and realized I could save some decent money in Walmart’s grocery aisles. After a successful trip, I came home and compared Walmart’s prices to those I paid during my last trip to the local grocery chain. I wanted to know how much the savings really amounted to. Turns out, Walmart’s regular prices are 30% below my neighborhood grocery store. Even when you factor in the local grocer’s sale prices, Walmart still saved me 20%.

While I still prefer to go elsewhere, I will be making more trips to Walmart for staple items that I know I can save a good amount of money on. For me, that seems to be groceries and toiletries. With Walmart continuing to expand their food selection and Whole Foods and Trader Joe’s growing their store bases at 20% annual rates, the traditional grocery chains better adjust, as Safeway is attempting to do, or else they will become extinct fairly quickly.

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2 Thoughts on “Grocery Shopping At Walmart

  1. Jack Miller on November 28, 2005 at 7:59 AM said:

    I am with you 100%; I hate to shop but I like saving money. Our local stores play the game of forcing you to join their discount club. This system dramatically increases margins when the occasional purchase is made without the benefit of the card.

    The bottom line is that grocery stores has remained a fragmented industry because low cost distribution is key. Wal-Mart has built an incredibly efficient distribution network. It can offer huge discounts and not spend all the effort and advertising of the promotional system.

    Our home in Myrtle Beach is near the Wal-Mart where we buy most of our groceries. Our home in Clemmons, NC is an extra 5 miles from Wal-Mart, we tend to buy locally.

    The steady growth in sales at Wal-Mart make it an attactive investment for the next several years. Margins at many businesses are going to suffer under higher interest rates and higher operating costs. Wal-Mart, by simply maintaining margins, is going to look good.

  2. NO DooDahs on November 28, 2005 at 10:25 AM said:

    WMT is attacking the traditional grocery stores from another angle, as well – the regulatory angle, as seen in their CEO’s call for an increased minimum wage.

    http://www.washingtonpost.com/wp-dyn/content/article/2005/10/28/AR2005102802079.html

    Ingenious!

    Aside from the public relations benefits and the confusion around the rank-and-file Socialistas that have attacked WMT (don’t hate me because I’m successful!), there is … another side to this issue. This is a prime example of corporate rent-seeking. Of course, WMT already engaged in that on the local level through capitalizing on county commissioners’ powers of imminent domain, but this, oh this is inspired! These grocery stores, already a low-margin enterprise, are far more likely to have minimum-wage employees than WMT is.

    Time and again, when corporations call for regulation that seems at first blush to hurt them, like safety equipment in cars, or call for “green” regulation like adding catalytic converters to autos, they have a profit motive at heart. In WMT’s case, they have already absorbed more of the cost of a higher minimum wage than their competitors have, so this move hurts the competition more than it hurts them. It also raises the “cost of entry” into the discount merchandising space by increasing the cost of labor.

    The persons hurt by an increased minimum wage will be WMT competitors, not WMT.

    Other discussions of this phenomenon:
    http://www.fee.org/vnews.php?nid=3093
    http://www.marketthoughts.com/forum/viewtopic.php?t=957
    http://www.marketthoughts.com/forum/viewtopic.php?t=461

    WMT is attractive to me, but not as much as it was in September – it doesn’t quite fit the strict definitions of value I like to have, but it’s a fine company.

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