Low Price Isn't Everything

On the LBN post http://www.democraticunderground.com/discuss/duboard.php?az=view_all&address=102x1509193, I promised to come here and ruminate.

Let's go.

Every store needs a drawing card, which is a reason to shop there before any other store. Being the first store shopped is very important, because for most consumers on most items, there won't be a second store shopped. When was the last time you went to a store to get dog food, found out they didn't have exactly the dog food you wanted, and went to a different store? Unless your dog has very specific needs that can only be met by one product, probably not very often. (A quick caveat: if your dog's needs are that specific, you're going either to your vet, somewhere like Petsmart, or a farm supply store. I just wanted to pick a product lots of people buy that you can't get from me, and dog food was the first thing that came to mind.)

Now! What are good drawing cards? Price, obviously. "We have great prices, come and see" will bring in the crowds. And if you have great prices, they'll come back. But ya know something? Great prices alone won't bring them in forever, because someone can ALWAYS beat your price. I don't care how huge your buying power is, someone can beat your price.

An example: I sell lumber. The company I sell it for used to advertise "Low Prices are Just The Beginning." We used to claim that we had the lowest lumber prices around, and at the time we did. That's not the case anymore. A lot of "Builder's Bargain Centers" have popped up all over America. You'll see 'em in lots of different guises--bargain center, discount center, Cheapest Lumber Around, whatever. But you look at the lumber they sell and you'll back away. They sell number-three and number-four lumber. They sell "blow" plywood*. They sell shingles, but you'll find three or four different lot numbers on one pallet.** (You'll also find three or four different brands there--once I went in there and they had four different colors of shingles, and every one of those colors was a different brand.) If we were advertising "we have great prices" with no other drawing cards, no one would ever shop there. Now we advertise, in addition to our great prices, that we have top quality products and a wide selection of the things you want, and you can ask us for advice on your project. That's my drawing card--NOT just price.

What's screwing Wal-Mart, and what could put them out of business eventually, is that they insist on using price as their sole drawing card. Remember, anyone can beat your price somehow. A small chain, say fifty or sixty stores in one state, could offer nothing but house brands at lower prices than Wal-Mart--there are companies who specialize in buying a tank car of laundry detergent, packaging it and putting forty different labels on it. Would it work? Ever been in an Aldi? Almost everything they sell is house brands, their buildings are only large enough to sell one SKU of each kind of thing (you won't find eight different kinds of green beans, say) and your average Aldi employs five people, but Aldi's kicking ass because people know they can save a lot of money by shopping there.

But what about national chains? Specifically, Target? Not lookin' too good for Wal-Mart there either; on identical items, the prices are pretty much the same--within a couple of cents either way. (Tell me now, if you are trying to buy a big bottle of Tide, if you're in Target and see it for $7.97, would you leave the store and go to Wal-Mart because you knew they had the same bottle for $7.94? Forget the fact that Wal-Mart is redder than a Target team member's shirt and we're all Democrats here; if you shopped in both stores, would you leave one to go to the other to save three cents?) Now look at non-identical items. Wal-Mart trends to low-end items while Target trends high. Some people will buy the low-end stuff Wal-Mart sells. As long as Republicans are running the country, that's practically a given. At some point, we'll elect a Democratic majority again and the country will turn around...and Wal-Mart will still be selling nothing but cheap Chinese crap (CCC) and using low price as their major drawing card while Target has both CCC and the top name brands at good prices...and people who don't absolutely have to buy CCC will stop going to Wal-Mart.

* Plywood is made by gluing thin sheets of wood together at various angles. After it's glued up, it's cured in an autoclave that contains a hydraulic press. You put a number of stacks of plywood in the press, get everyone out of the autoclave and close the door. A computerized cycle exposes the plywood first to steam, then to a vacuum, then to dry heat; all this cures the glue and stabilizes the sheets. When they release the hydraulic pressure, the top and bottom sheets in each stack delaminate. These sheets are called blows because they "blew" apart, and they're salable. They work well for doghouses and stuff like that.

At this point, you're thinking "isn't there a way to keep this from happening?" No, but there is a way to minimize your losses. Plywood has always blown and always will, but you can use an inexpensive sheet as the sacrificial one. Start and finish your stack with a sheet of 3/8" or 1/2" CCX plywood, and you won't blow any of the one-inch AAX that's between them. They've tried just reusing the same two sheets and that works, but they continue to make blows because people like blows and there's enough profit in blows to justify making them.

** Lot numbers refer to the granules, which are ceramic. The shingle company makes a batch containing five or six tons of granules of different colors (if you have a gray roof, there are green, blue and red granules in addition to gray ones; they add character and eye appeal to the shingle), puts it in a hopper and makes shingles from it until it runs out, then makes another batch of granules and begins anew. The various colors of granules in a lot can vary in color and color ratio from one batch to another, so it's best not to mix lot numbers on one roof.

Wal-Mart fails on all accounts.

I don't mean that they are beaten by others, I mean they absolutely FAIL.

I wouldn't shop Wal-Mart if my politics were any different than they are. That's just an enormous bonus.

that their prices are the lowest around on everything in their building.

And on some of the things they sell, it's true, they really are. But they have some things that are the same price everywhere, and many things that are more expensive at Wal-Mart.

At the point when the Republicans have gone away, people will be able to afford to shop elsewhere...and W-M will either need a new schtick or they'll die.