February 2011

Wal-Mart to lower produce prices, Really

The largest retailer of fresh produce, Wal-Mart, recently announced that it will lower the price of its produce in order to increase sales volume.  Anyone familiar with the Wal-Mart business model might question how this will be done without putting additional pressure on the growers who in some cases are already being squeezed too hard anyway.  Even more important than where and how lower prices can be accomplished by not hurting growers is:  Why do prices have to be lowered at all!

 Sometimes people and companies get into situations where they believe that lowering the price of items they are selling will increase the volume of those sales. Sure that makes sense to many, the lower the price the better opportunity that someone will choose your product over the competition. However, what if by lowering the price all you end up doing is forcing your suppliers out of business or to the brink of closing their doors when you don’t even need to lower your prices in the first place? What you really need to do is educate the customer on why buying the particular product at current price levels is already a value.

 So why will Wal-Mart lower their prices?  First, it is their business model to be the lowest priced in all categories sold.  Second, because the suppliers will allow the reduction. Third, because the publicity that lowered prices will bring simply brings in more customers regardless of the actual price. I understand all of these reasons, but because I support local growers I would much rather see Wal-Mart use their purchasing power to educate the consumer on the value of buying produce at fair prices.

For example, at my local supermarket and at many across the US one can buy a 10lb bag of fresh potatoes for $ 2.99 or less. The same $ 2.99 can buy a 12 oz bag of potato chips.  That makes fresh potatoes .29 cent per lb and the processed chips $ 3.98 per pound!  (By the way the grower is lucky to get .05 per pound).The value difference is beyond comparison although some may say I am not comparing apples to apples so-to-speak.  The real point is where can you pay .29 per lb for any type of nutritional food? It is already a value when comparing to other food sources.

 If that is the case then why do you have to lower the price more? It seems to be that what’s really needed is to educate the consumer more on the values of fresh produce as compared to other food products and as a by product, the growers will not have to lower prices that are already making it difficult for many of them to survive. Really, Wal-Mart? You’re lowering your produce prices why?  If Wal-Mart wants better publicity, why not show their customers they can help your family stay healthy, eat less expensively, and help local growers by buying Wal-Mart produce?   Or isn’t that as sexy as just lowering a price?