Are Wal-Mart’s prices the lowest?
Wal-Mart’s international advertising campaign claims the chain offers “every day low prices.” Next week, the Costa Rica Economy Ministry (MEIC) is going to make them prove it.
In May, MEIC staff investigated the legitimacy of Wal-Mart’s marketing slogan, which was unveiled in Costa Rica in late April as part of the company’s expanded operations in Central America and Mexico. After visiting several Walmart stores in Costa Rica, the MEIC report found pricing and information discrepancies to be “confusing” and potentially misleading for consumers.
“Advertising is a tool to promote consumerism and it must be delivered clearly and sufficiently. It is established by law that all advertising must be truthful,” Kattia Chávez, interim director of MEIC told The Tico Times this week. “Certain aspects of the ‘every day low prices’ campaign do not provide consumers with adequate information and could thus be misleading.”
According to the MEIC, Wal-Mart didn’t inform customers which products are discounted. While the company advertises that several thousand products are sold at lower prices, it doesn’t provide customers a list of which ones.
“Wal-Mart said that they lowered prices on 4,000 to 5,000 products, but consumers have no certainty that the products they are buying are the ones that have every day low prices,” Chávez said. “The consumer doesn’t have access to the list of those prices, so we’ve asked Wal-Mart to make the list available.”
MEIC also found that Wal-Mart doesn’t provide consumers with the amount of discounts for items included in the marketing campaign. While many prices are labeled as reduced, no information is given that indicates the difference between original and marked-down prices.
MEIC has issued Wal-Mart a July 29 deadline to respond to its findings. Also, if MEIC determines that the company has deceived or misled consumers, Wal-Mart could be subject to fines and would be asked to discontinue the campaign. The MEIC has the authority to take those aggressive actions under Article 34 of the Promotion of Competition and Effective Consumer Defense Law.
In a statement, Yolanda Fernández, Wal-Mart’s regional manager of corporate affairs, said that, “At this time, we are reviewing the observations of MEIC and intend to take the necessary actions to respond to the commentary they offered. … We are a business that exists due to the support of our customers and since the beginning we have been more than willing to provide them with clear and precise information so that they benefit from our program of everyday low prices.”
The U.S. company has 185 stores in Costa Rica under the brands Más x Menos, Palí, Maxi Bodega and Walmart, the latter replacing Hipermás at locations in April. The company plans to open 24 new stores here this year. Last Friday, Wal-Mart inaugurated a “Maxi Palí” in Paraíso de Cartago, east of San José.
Wal-Mart launched its “every day low prices” campaign in Costa Rica and other Central American countries in February, more than a year after Wal-Mart de Mexico acquired 51 percent of Wal-Mart Central America in December 2009.
After the acquisition, Wal-Mart de Mexico said it would invest $378 million in Central America in 2011. The investment, which was the largest in the history of Wal-Mart in Central America, is expected to result in 80 new regional stores and generate 2,500 direct jobs and 5,000 indirect jobs. By the end of 2011, the company expects to have more than 600 retail locations in Central America.
However, Wal-Mart de Mexico said that second-quarter profit fell 3.4 percent due to increased spending on store openings in Central America, Bloomberg reported this week. Wal-Mart de Mexico Chief Executive Officer Scot Rank called the second-quarter performance “a tough one.” But Rank also said he expected the investment in Central America store openings to “pay off later this year,” Bloomberg reported.
Meanwhile, Wal-Mart U.S. hopes the “every day low prices” campaign will help turn around eight consecutive quarters of negative same-store sales, MarketWatch reported last week. But, said MarketWatch, a survey by Morgan Stanley analyst Mark Wiltamuth found that a growing number of U.S. consumers don’t believe Wal-Mart offers lower prices.
The survey of 1,513 U.S. consumers found that 60 percent of shoppers don’t believe Wal-Mart’s prices are the lowest, and only one in four believe the company’s everyday prices are “significantly lower” than grocery stores.
In 2010, Bentonville, Arkansas-based Wal-Mart Stores Inc. raked in more than $400 billion in worldwide sales.
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