The discount juggernaut's earlier attempts to woo shoppers in "the new normal" U.S. economy with drastic price reductions backfired. Instead of spurring sales growth, Wal-Mart customers tended to simply snap up the bargains, then restrain themselves from filling their cart with other merchandise.
Time took a look at Wal-Mart's new game plan, which involves adjusting prices on items including food to a two-year high. The retailer's already increased costs in these areas by a whopping 5% since the beginning of this year.
Even with the price hikes, Wal-Mart is still the king of cheap. According to a study by JPMorgan Chase, when compared to grocers such as Kroger
That said, raising prices could always backfire. Wal-Mart vies for consumer dollars with other discount giants such as Costco
Earlier this year, danger for discounters seemed apparent, as Wal-Mart admitted that its traditional customers were suffering greater financial hardship than most Americans, and living paycheck to paycheck more than ever.
With its same-store sales down for five straight quarters, so Wal-Mart's real challenge is to grow additional customer traffic. Although you can see why Wal-Mart might boost short-term sales by raising prices, that might force its core customers to buy even less. It might even drive many of them to rivals such dollar stores. In other words, this new plan for slightly upwardly mobile prices could backfire, too.
Is Wal-Mart making a huge mistake by boosting prices? Let us know what you think in the comments box below.
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Alyce Lomax does not own shares of any of the companies mentioned. The Fool has a disclosure policy. True to its name, The Motley Fool is made up of a motley assortment of writers and analysts, each with a unique perspective; sometimes we agree, sometimes we disagree, but we all believe in the power of learning from each other through our Foolish community.