Walmart dynamic pricing, its coming!!

[RivShore]

I have posted elsewhere about the difference just in milk prices, that make no sense to me. Walmart charged $3.48 a gallon. Our local grocery chain charges $4.28. But this is the part I don't get. Our local grocery chain OWNS their dairy. That dairy bottles all the milk for our local Walmarts too. So unless I am missing something, our local grocery chain could match Walmarts price and still make money, but they choose NOT to.

Maybe the grocery store can't match it without taking a loss.

Walmart is probably using milk as a loss leader - selling it at a loss so you come in for the cheap milk and leave with a cartfull of higher margin stuff.

 

[tvguy]

Maybe the grocery store can't match it without taking a loss.

Walmart is probably using milk as a loss leader - selling it at a loss so you come in for the cheap milk and leave with a cartfull of higher margin stuff.

The grocery store OWNS the dairy. If they can sell it to Walmart and Walmart can see at a lower price, the grocery store can too.

Except the price differences is on almost everything at Walmart. Those can't all be loss leaders.

 

[chicagodisneyguy]

The grocery store OWNS the dairy. If they can sell it to Walmart and Walmart can see at a lower price, the grocery store can too.

Except the price differences is on almost everything at Walmart. Those can't all be loss leaders.

Probably a ton of factors. Let say it cost $2.75 to produce a gallon of milk. Walmart might say they'll buy 500k gallons at $3. At that volume the dairy producer says okay... especially if they have excess supply. If they then have another 500k gallons they sell themselves they probably think they can get more per gallon in their own grocery stores.

Maybe it's different in other parts of the county...but in Chicago I wouldnt do my grocery shopping in Walmart....mostly because there are none. My hubby is from Southern Indiana and his town had a giant Walmart. His family there shops at Kroger and not Walmart. Not saying either is better or worse....but I think for groceries Walmart is never going to get top dollar.

 

[RivShore]

The grocery store OWNS the dairy. If they can sell it to Walmart and Walmart can see at a lower price, the grocery store can too.

Except the price differences is on almost everything at Walmart. Those can't all be loss leaders.

I would suspect smaller grocery stores are unwilling/unable to sell any product at a loss (grocery store profit margins are around 2% so there is no room for loss leaders). But Walmart can sell at a loss in the grocery department because they don't just sell groceries, they have much higher margins in all their many other departments that grocery stores just don't have.

There could also be some odd ways the dairy hits their stores with cost - maybe Walmart is actually getting a better price than they charge their own store because there's some benefit to getting additional revenue from, and pushing more cost to, the stores. (I have seen weirder stuff in the retail world!)

 

[RivShore]

If they then have another 500k gallons they sell themselves they probably think they can get more per gallon in their own grocery stores.

Exactly, maybe they are making up for the low margin sales to Walmart by increasing the price at their own stores. And if people still buy it at the higher price, why not? (from the dairy's perspective.)

 

[tvguy]

I would suspect smaller grocery stores are unwilling/unable to sell any product at a loss (grocery store profit margins are around 2% so there is no room for loss leaders). But Walmart can sell at a loss in the grocery department because they don't just sell groceries, they have much higher margins in all their many other departments that grocery stores just don't have.

There could also be some odd ways the dairy hits their stores with cost - maybe Walmart is actually getting a better price than they charge their own store because there's some benefit to getting additional revenue from, and pushing more cost to, the stores. (I have seen weirder stuff in the retail world!)

This chain owns 235 stores in 4 states, so small compared to Walmart, but not really small.
About odd ways, yes, that is possible. If you have read how Coca Cola operates. EVERY level of their operation is a different company and each company is expected to be profitable.
One company makes the syrup.
Another company transports the syrup to the bottler.
Another company bottled the soda.
And another company delivers it to stores.
That's why a 2 liter bottle costs. $2.68. Dr. Pepper being number two is priced at $1.98 Pepsi being number three has to sell at $1.98 and store brand soda is about $1.

 

[RivShore]

This chain owns 235 stores in 4 states, so small compared to Walmart, but not really small.
About odd ways, yes, that is possible. If you have read how Coca Cola operates. EVERY level of their operation is a different company and each company is expected to be profitable.
One company makes the syrup.
Another company transports the syrup to the bottler.
Another company bottled the soda.
And another company delivers it to stores.
That's why a 2 liter bottle costs. $2.68. Dr. Pepper being number two is priced at $1.98 Pepsi being number three has to sell at $1.98 and store brand soda is about $1.

That is a great example! Coke is one very tangled web, I only knew about half of those many companies needed to get a bottle on store shelves.