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Wal-Mart Pulls Misleading Ads -- Again
Advertising Board Says Wal-Mart's Savings To Shoppers "Not Even Close"
The driving mission of the Wal-Mart corporation is to make money by saving its customers money. "At Wal-Mart," the company says, "everything we do flows from our purpose of saving people money so they can live better."
This week, Wal-Mart's truthfulness about "saving people money" was called into doubt again. The retailer's cost-saving claims in its advertising were labeled "unsupported" by the advertising industry's cop -- the National Advertising Division. The NAD, in a case published this month, found that Wal-Mart's radio and TV ads which claimed "you could save on average over $700 a year" on groceries, was not based on any evidence in the record.
Wal-Mart's TV ads featured two small disclaimers: at the bottom of the screen it reads, "Excludes fresh meat and produce." The voiceover then states, "if you bought these kinds of groceries at Wal-Mart, you could save on average over $700 a year." A second disclosure, lasting four seconds, appears directly below the packaged goods and states that the claim is based on the "8/15/08 Global Insight, Inc. U.S. Cost Comparison Study based on 2007 sales of packaged foods by category; excludes meat, produce & other random weight items. Local savings vary."
Wal-Mart's ad was challenged at the NAD by the Texas-based grocery chain H.E.B., which charged that the $700 savings claim was based on a faulty study paid for by Wal-Mart. Since 2005, Wal-Mart has paid the firm Global Insight to produce market studies. Their 2005 study concluded that Wal-Mart had produced consumer savings of $2,329 per household per year. Global Insight determined that Wal-Mart was responsible for an overall 3.1% decline in consumer prices. That reduction in price level "translates directly into savings for consumers amounting to $263 billion by 2004" according to Global Insight.
Wal-Mart was so enamored of its consultant's findings that it installed a calculator on its website to show how many millions of dollars in savings the company had created for Americans as the months rolled by. That calculator is now gone from their website.
But the Global Insight study was roundly criticized by economists who said its conclusions were "deeply flawed" and "unreliable." The Economic Policy Institute noted that the Global Insight study was based on the retailer's impact on the Consumer Price Index -- but 60% of the items in the CPI are services, not commodities at Wal-Mart. "The real pressures on family income are coming from items that can't be bought at Wal-Mart (health care, housing, transportation)," said EPI.
H.E.B. complained that the 2007 Global Insight report blended together the whole grocery market, showing only that Wal-Mart's grocery prices were better than the average of all prices offered by all stores that sell food, including many small or specialty food stores that would have higher prices. H.E.B. said that Global Insight failed to look at brand, grade or quality of merchandise in its comparisons, and that the methodology used would allow Wal-Mart to claim lower prices even when consumers buying identical items would see no price difference on the shelves. H.E.B. even produced its own item-by-item cost survey of H.E.B. vs. Wal-Mart stores in Waco, Texas and concluded that "some shoppers will save more at H.E.B. due to its use of promotional pricing and coupons."
The NAD reviewed H.E.B.'s charges, and Wal-Mart's response, and found "a significant disconnect" between the Global Insight study and the claims made in Wal-Mart's commercials. NAD wrote that the Wal-Mart TV ad made it appear that "you" (the individual viewer) could save $700 a year by buying groceries at Wal-Mart. The NAD said "the Global Insight study cannot support this message, as it concerns a national average. Consumers who live in many towns and cities will not save even close to the promised $700." NAD was also concerned that grocery items in the Global Insight survey accounted for less than 36% of total supermarket sales, and items such as fresh meat and other produce were omitted from the survey -- disclaimers that no consumer would read or understand.
As a result of the H.E.B. complaint, the NAD found that the savings claim by Wal-Mart "was not supported by the evidence" and recommended to Wal-Mart that it discontinue its $700 savings claim. Wal-Mart responded by saying its claims were adequately substantiated and "well-supported," and "we stand by these findings and are proud of the savings we deliver to our customers." The company, however, admitted that it was no longer airing "that particular spot," and that it would take the Division's recommendations "into account in future advertising."
If all of this sounds familiar, it should. In 1993, Target challenged to the NAD Wal-Mart's advertising slogan, "Always the low price. Always." The NAD ruled that the ads were misleading, because Wal-Mart did not always have the lowest prices. Wal-Mart appealed the NAD ruling to the National Advertising Review Board, a group of 70 professionals from the advertising field. Wal-Mart ultimately agreed to slightly change its slogan to "Always low prices. Always. Wal-Mart." The NARB ruled that Wal-Mart's older slogan, which it had used for nearly six years, indicated that Wal-Mart carries the lowest price for all items at all times -- a claim it simply couldn't substantiate.
Wal-Mart has spent a fortune misleading consumers. Last year Wal-Mart spent $2.3 billion on advertising. By comparison, ten years ago its advertising budget was $405 million. In this past decade, Wal-Mart's net income has increased three fold (from $4.43 billion in 1999 to $13.4 billion in 2009), but its advertising budget has skyrocketed almost six-fold.
These advertising watchdogs like NAD and NARB have bitten Wal-Mart repeatedly, but the company's deceptions simply morph into new slogans that imply savings that are neither honest, nor accurate. Wal-Mart boasts that 'always low prices' was Sam Walton's 'pricing philosophy' when he opened his first Wal-Mart in 1962. But the retailer has struggled over the years with truth in its advertising -- and it has been the burden of its competitors to repeatedly challenge its unsubstantiated claims. American shoppers have been manipulated into believing not only that Wal-Mart will save them money, but that the retailer can even quantify how much.
But the truth, as Wal-Mart might say, is that "local savings vary."
Al Norman is the founder of Sprawl-Busters. His books include "Slam Dunking Wal-Mart," and "The Case Against Wal-Mart." His website is http://www.sprawl-busters.com
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Misleading ads,Wal-Mart misleads in a lot of things
Walmart lures people in with "loss leaders" certain products with low proices or even sold at a loss
they make it up on other products such as general merchandise product which is often the same and sometimes more than a careful shopper might find at a competitor. they also bait and switch - they will advertise a cheap price on a TV or a compuyter, but the fine print allocates only a few per store that qucikly sell out - they then wil try to steer you to a lesser product for the same price or a highe rpiced product.
Most of Walmarts competitors ill match adds and double coupons - if youare a creful shopper you can save as much or more shopping elswhere
Walmart claims that they save the average family $2300 a year
the problem is, and this is accoding to various watchdog groups, that due to the outsourcing of mfg jobs that Walmarts quest for low prices has accelerated the average family lost 20% of earning power through wages stagnation, job loss or underemployment
so for example a mfg worker's $50k job is sent to china and they are forced to take a service job for 20% less or 40k
so lets say they save $2300. but they lost 10,000 thats a difference of $7700 of spending power lost
2300 hardly makes up for that
Regarding the income losses from the drop in manufacturing, that is highly misleading. Real household incomes have continued to go up for decades despite the drop in manufacturing jobs. The manufacturing jobs losses have all made up in other sectors of the economy from the early 1980s until 2007. During the recession in 2008-2009 there has been job loss across the board, however -- (which was also true in the major recessions in the 50s, 70s, and early 80s, when manufacturing represented a much larger percentage of the total workforce). You should also note that many areas of the country where there are Walmarts (which is most of the US) have very few to no manufacturing jobs at all, and there haven't been for several decades, or in some cases ever. Last, note that homeowners were immune to a good share of the inflation this decade, so for their real incomes have been under-estimated. They've also been able to refinance to lower interest rates, which has free up even more cash, giving them even higher real disposable incomes.
I own a home, and inflation has made a huge impact...our family income has increased by $1500/mo since 2002 and we are actually living more frugally now then we were before and still barely making ends meet.
Home values were over estimated from the housing bubble. you can not count home equity as income, esepcially overly inflated equity
And those areas where walmart is and the mfg is gone is exactly what I am saying - Walmart and other big box reatilers have accelerated the loss of mfg jobs with their quest for lower prices driving indutry offshore
Yes people find ways to cut costs, but it never makes up for the loss in wages and stagnation
incomes flat, costs for food, utilities, local taxes and fees, fuel, medical costs, education costs continue to rise
incomes are skewed because of the obscene wage growth at the top, whereas there are plenty of credible sources who show that real wages for middle to lower incomes have stagnated and declined
lets see - the midwest and central states are where walmart is most prevelent, and the midwest USED to be where mfg was most prevelent
coinicidnece? I don't think so!
There is nothing fun or attractive about shopping a WalMart.
They can say they save you $700/yr for shopping there, but how much of your tax payer money goes into subsidizing wal-mart's cheap labor? They do not allow a union, they pay the minimum wage or a few pennies better to most employees, the healthcare that they do not offer is unaffordable to people earning less than $1000/mo. If these employees have children---you the tax payer is the one to pay for the child's health care and probably food stamps. If an employee becomes pregnant then the tax payer is more than likely going to be paying for her healthcare as well. It is probably costing you MORE than $700/yr just to have them around. Great deal.
Wal-mart IS the epitomy of what is wrong in our country---boundless greed and no ethics. If it is legal, and helps the bottom line---they do it.
Even if it doesn't bother a person that wal-mart treats their employees and the taxpayer so badly they should consider what other cost cutting methods the company MIGHT be using.
I'd be willing to bet their Jalapenos come from Mexico. The cabbage is probably nine months old. but have no fear. Low prices always!!
Walmart pays just as well as most comparable retail stores and more than the vast majority of mom & pop shops that were put out of business by it. Most Walmart employees are not head of households either. Many are housewives working second jobs and often part time. Many are teenagers working after school or on weekends or during the summer. etc. etc. The head of household workers in urban areas are usually immigrants with minimal job skills and few other job prospects. About unionizing Walmart, all it would accomplish is higher prices for consumers, job cuts, and reduced expansion plans. Walmart would probably even close a number of under-performing stores. Also note that Walmart doesn't just save consumers a lot of money, they massively increase the total number of products available for shoppers - and do so at very low prices. People in rural areas, in particular, have access to a large number goods they never had before the Walmart arrived, or would have to drive a long ways to get (and pay much more).
Wal-mart, kmart, dollar stores, etc all pay a low wage. Anyone who takes an entry position there is probably in dire straits---I really can't think of a worse place to be than a Wal-mart all day, let alone being paid $5 hour for the suffering. Just think---after working eight hours the employee probably has $32 to buy some mcdonald's and put gas in their tank to make it back to work. I do not remember seeing any teenagers there at all. I also do not remember seeing any immigrants in my local walmart either. Mostly it seems like older ladies that frankly seem totally bored and miserable.
Wal-mart does have a large number of goods---you have your choice of 10 different coffeemakers now all made in China and all destined to live very short lives. I know, because I have gotten a coffeemaker for my birthday every year for the last three years. At wal-mart you get to choose between junky item A and junky item B, as opposed to the Mom and Pop store whose people would not have sold such junk to their neighbors.
Wal-mart has perfected the race to the bottom. Hopefully it too gets sucked into the black hole it has created.
those mom and pop stores were part of the community, and most of the money STAYED in the community - did not get shipped off to some faceless corporate headquarters or some fg site in china
Walmart is one of the most anti small business entities in the world
Isn't small business supposed to be the "backbone" of our economy as the politicians so love to say?
Poor America...I think Walmart is a picture of just what America has turned into. Big, aggressive, loud, and cheap and did I mention unhappy? Where is our happiness?
I was talking to a young person at work the other day and she was complaining that she was not happy and is tired of working. She is 28. I thought about this and told her I remembered when I was young (not 28 but 12 or 13) we couldn't wait to grow up because it looked like the grown ups were having all the fun. Well now that I am grown up, I want to know where is all the fun? Some of my friends work 2 or 3 jobs, have no leisure time, have never been on a vacation to anywhere. When I was younger, the grown ups seemed to have plenty of leisure time, for visiting or cocktail parties or bar-b-ques. Now to do those things takes plenty of money. So we work and work and work, and those of us who do not have a job, still do not have the disposable income to for leisure and happiness. We are sad and unhealthy and poor.
Was happiness when most folks spent their days working in dark dirty factories, steel mills, sweatshops, and coal mines? Or when the issues of the day (50s, 60s, and 70s) were urban decay and housing shortages? In the last few decades our cities have been rebuilt (except Detroit) and there is a glut of houses, mostly large houses. Regarding fun, today there are many more resorts, hotels, entertainment like cable, movie theaters, DVDs, music, theater, etc, and more people own boats and second homes (particularly vacation homes) and fly for recreational purposes than ever before. In the 60s and 70s, flying, for example, was very expensive, mostly because consumers were subsidizing union wages. Today flying is cheap and affordable for pretty much anybody (unless you're homeless).
No instead,there are sweatshops for illegals,or in third world countries were they no standards at all,not to mention create more environment problems that we have to deal with here.As for steel mills I worked in one for 25 years,it was better than working in Wal-Mart and it was those jobs that created the middle class.Now we have sweatshops more than ever with a lot worse working conditions and pay.so I guess that's your kind of happiness.
Not a surprise. They have not been a good corporate citizen in the past, no reason to believe they've turned over a new leaf now.
I guess this means that we are all zombies who will just act on whatever we see on TV. I personally have a found a great method to avoid being "tricked by these ads. I go to store A and look at the price of an item, then I go to store B (lets say... Walmart) and I look at the price of the same Item. Then I buy the Item from the store that sells it the cheapest. If I want quality, I do the same thing only I compare the quality of the Items sold at store A and B. Genius huh! And I didn't even need the help of a government agency who's funding comes from my hard earned tax dollars.
I must say that I find many items much cheaper at Walmart compared to many other places. And in a world where I am taxed for just about everything I do, those savings come in very handy. No, I do not buy lobster at Walmart, but that’s just me. If someone else makes the choice to buy it from them, why is that a problem? If people are not saving money, or they have a problem with the quality of the items purchased... they can simply go to another store.
Walmart employs over 2 million people. My grandmother works there, and if it wasn't for that job she would have nowhere else to go.
Truth in advertising is a LAW...Walmart either complies or they don't and pay the price...I don't care for the way Walmart does business so I chose not to shop there...my call. You certainly get to make your own choices, but you don't get to say this article isn't valid.
I try to shop carefully (oh! and I pay taxes, too!) and I use advertisments in the newspaper to help me with that...It is NOT a good use of my time (or gas) to spent it going back and forth between stores to check on prices. A good business does not lie to it's customers.
As far as you grandmother (bless her heart!) perhaps she has no where else to go because Walmart has driven out the other business' in her area.
I never said the article wasn't valid. However I do not agree with the Author's opinion that Wal-Mart’s success has come about by deceiving its customers. How many ads are out there today that say things like "We are #1 in the Business" or "We offer better service than any other..." Ultimately its up the Individual consumer to decide whether or not these claims are true or not. In time, consumers will choose where to shop based on there own personal experiences in the different stores regardless what any ad tells them. The fact that Wal-Mart has grown for so long now indicates that consumers are satisfied with what they are getting.
I bought my 37 inch TV at Wal-Mart a while back because it was $200 dollars cheaper than the same tv at another big electronics store. I was not tricked into doing anything, Wal-Mart earned my business by selling me what I wanted at a price I could afford. Not taking the time to compare prices is your personal preference. I applaud you when you say that you do not shop at Wal-Mart because you do not like the way they do business. While I do not agree, I like that you are exercising your write as a consumer to choose who you do business with.
Funny thing is I prefer shopping at target for most of my stuff…
How in he|| do you have so much time to comparison shop?
I look for coupons and I shop at local places or chains that do good in the area - Target, etc.
I'll never set foot in a Wal*Mart. But that's just me.
Walmart doies not always have lowest prices a careful shopper who shops around and watches store adds can very often find a better deal on a better quality product elsewhere.
its not always about cheapest prices its about value - what good is a chinese product that lasts half as long as a domestic one, yet is only a buck or two cheaper?
Perhaps if walmart had not driven out the local businesses and offshored production , your grandmother would have been able to have a better job somehwere else
And they don't even give your kids free cookies at the bakery anymore. Glad to know those Walton kids are getting 3 times more money than they were before. The least they could do is set up a trust account for giving out free cookies to kids at their bakeries.
Actually, the slogan that got them into trouble in 1993 was "Always the lowEST price, always." There was no way they could prove their price was lower than anybody elses.
They also got into trouble around that time for putting "Buy American" signs above merchandise that was imported. When the founder Sam Walton dies in the early 90s and the company was turned over to the managers, things did not go well for Walmart. The stock plunged to the low 20s and the decision was made to stop buying goods made in America and switch to cheaper imports.
But the high cost of low prices is felt in other ways, too.
Tell me, have you ever seen a Walmart employee with a smile on their face?
I swear ever one I've seen looks like they are either auditioning for a zombie movie or about to go postal.
And that funny smell in the produce department? It's the "fresh" produce rotting.
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