• Retail Dive

Walmart is reportedly raising online prices


Dive Brief:

· Walmart is quietly raising its online prices for key consumer goods including boxed macaroni and cheese, toothbrushes and pet food, sources familiar with the policies told The Wall Street Journal.

· The policy in general isn’t unheard of — it’s commonplace at Costco and elsewhere, the Journal notes — but it’s somewhat rare for Walmart, whose basic pitch to shoppers is "always low prices."

· The retail giant earlier this year announced lower prices for online shoppers picking up orders in stores, and the Journal's report is a reflection of that new policy, according to a Walmart spokesperson. "We always work to offer the best price online relative to other sites," the spokesperson said in an email. "Our online prices are sometimes different than our stores prices – some items are priced lower and some are priced higher."

Dive Insight:

Walmart is one of the most efficient distributors of retail goods in the world — and founder Sam Walton’s promise to his customers has always centered around offering the lowest price. But the retail giant is also in the midst of a push into e-commerce, where efficiencies are harder to come by. "It simply costs less to sell some items in stores," a spokesperson told Retail Dive in an email. "Customers can access those store prices online when they choose to pick up the item in store through Pickup Today, if available for that item."

The costs are showing up in Walmart's bottom line. Gross margin rate in the second quarter for the U.S. segment declined 5 basis points, with price reductions and e-commerce costs more than off-setting new deals with vendors, Walmart CFO Brett Biggs told analysts in August. Analysts are increasingly leery of the margin trouble. Gordon Haskett analyst Chuck Grom said in a note emailed to Retail Dive that the company's latest quarterly report didn't quite deliver. "We think the comp/digital contribution needed to be a touch stronger (to be fair) to drive fresh money into the name," he said, though he also raised his share price estimates in light of Walmart's moat being "one of the strongest in retail."

Walmart's shoppers have historically been the most price sensitive of any in retail, according to Matt Sargent, senior vice president of retail for Frank N. Magid Associates. While in the past few months executives including new e-commerce chief Marc Lore (who founded the company's Jet unit), have positioned the company as being the answer to consumers' need for low prices and high convenience, these latest price adjustments are a sign that Walmart may be asking customers to choose between the two.

"Walmart is clearly trying to give shoppers an even more explicit trade-off: lower prices or more convenience," Keith Anderson,