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Rollback: Wal-Mart to focus more on everyday low pricing initiative

Walmart Canada CEO Lee Tappenden poses in the Ancaster Ontario Walmart, which was renovated last year becoming one of the company's new prototype stores.

Glenn Lowson

Wal-Mart Canada Corp. is going back to the future in its discount-pricing practices.

The retailer is focusing more than ever on so-called everyday low pricing (EDLP), which was a foundation of its low-cost business model. In past years, it occasionally drifted to shaving weekly prices on a short-term basis and then raising them again, as most other retailers do to lure shoppers with special markdowns.

"We're taking prices down on a more permanent basis for a minimum of at least six months, which is as permanent as you're going to get in an a price environment with inflation and deflation," chief executive officer Lee Tappenden said in an interview.

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Wal-Mart's EDLP initiative is helping heat up the grocery wars, putting more pressure on rivals to drop prices. Since September, Wal-Mart has chopped prices twice, the latest in January, affecting 1,000 items each time such as Heinz ketchup, its private-label Great Value peanut butter and Crest toothpaste, mostly in the food and consumer-products aisles, he said. (It had tested some price cuts in April and June.) It's widening the price gap between its stores and those of competitors, he said, without providing numbers.

The price rollbacks seem to be rippling through the industry. In December, the prices of food purchased in stores fell for the fourth consecutive month, by 2.8 per cent, Statistics Canada figures show.

Wal-Mart is able to lower prices though improved efficiencies, including "being tougher on third-party expenses, travel and things like that," Brett Biggs, chief financial officer of U.S. parent Wal-Mart Stores Inc., told an investor conference last fall.

That includes coming down harder on some suppliers based on sharper "fact-based" analytics, Mr. Tappenden said. But he stressed Wal-Mart does not use an across-the-board strategy as Loblaw Cos. Ltd. did last year, when the grocer told its major suppliers they had to cut their prices by 1.45 per cent.

Parent Wal-Mart recently used Canada as a pilot market for a beefed-up cost-analytics program to lower expenses, said David Cheesewright, who heads the parent's international division and once led the Canadian business. "We've essentially put a lot more science behind the way we negotiate," he said.

The retailer is also aiming to reduce food waste by offering markdowns on food that is close to its best-before-date to clear it out, Mr. Tappenden said. It's focused on donating as much "good, safe food" as possible to food banks and recycling the food it doesn't sell or donate so it doesn't end up in a landfill.

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It sends food that is not safe to eat or damaged for organic recycling where facilities exist – currently 244 Wal-Mart stores have organic recycling and it expects all of the chain's 330 supercentres to have recycling by the end of the year, he said. The company is on track to meet its goal of zero waste to landfill by 2025, he said.

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About the Author
Retailing Reporter

Marina Strauss covers retailing for The Globe and Mail's Report on Business. She follows a wide range of topics in the sector, from the fallout of foreign retailers invading Canada to how a merchant such as the Swedish Ikea gets its mojo. She has probed the rise and fall (and revival efforts) of Loblaw Cos., Hudson's Bay and others. More


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