Wal-Mart causes supermarkets to lower prices
March 19, 2008
by FoodBusinessNews.net Staff
AMHERST, MASS. — Wal-Mart supercenters are forcing conventional supermarkets within a five-mile radius to lower prices, according to researchers at the University of Massachusetts Amherst.
"Families that shop exclusively at supermarkets within five miles of a supercenter can expect to save between $37 and $104 per person each year since Wal-Mart will cause these stores to lower their prices," said Nathalie Lavoie, a resource economist at the university. "Consumers living within five of a supercenter can save $88 to $223 per person if they shop exclusively at the supercenter.
The research found even when conventional supermarkets lowered their prices to be competitive, the prices at Wal-Mart supercenters were still significantly lower. The price difference between supercenters and supermarkets is about 14% to 23% for the national brand and 7% to 18% for private labels. Consumers who don’t have a supercenter in their city and are willing to travel to a supercenter can save around $186 to $298 per person each year.
"The question of whether Wal-Mart is good for the economy is difficult to answer because it involves so many factors, but our study does show that consumers who want to purchase groceries as inexpensively as possible do benefit from the presence of supercenters," Ms. Lavoie said.
The researchers also found Wal-Mart supercenters cause conventional supermarkets in a five mile radius to lower prices by around 6% to 7% for national brands and 3% to 8% from store brands. The grocery and dairy departments had the most significantly lowered prices and there was no impact on the price of frozen foods.
"The full impact of Wal-Mart supercenters on the economy needs to take into account their effect on the customers, employees, competitors and consumers," Ms. Lavoie said. "But we conclude that Wal-Mart supercenters have a positive effect on the welfare of price-sensitive consumers."