Here's something else I bet a lot of people don't know about "evil" Wal-Mart and their low prices. Nearly every grocery store in the country charges manufacturers to shelve their products - money spent just to get the product on the shelf. Nationally, this alone costs manufacturers about a million dollars to launch a new item. Grocery stores pocket this money as added income, utilizing funds to pay for additional administrative costs of bringing in a new item (warehouse impact, shelf revisions, data management changes, etc.
Wal-Mart and Target don't charge a dime for new items. Instead, they use their equivalent share of funds to drive down the end price of their products, effectively passing along the savings to consumers. consider the following:
Pepsi produces a 12pack of soda for $1.50
They want to make a profit of 25%, so they sell to retailers at $2.00
Grocery retailers want to make a 33% profit, so they sell 12packs for $3.00
AND they get to keep all of the new item money that Pepsi paid to get the item stocked.
Wal-Mart wants to make 33% profit as well
However, they apply new item fees towards the invoice prices paid to manufacturers.
Instead of paying $2.00 per item, maybe they only have to pay $1.90
They can still make a 33% profit by selling the item at $2.80, 20 cents less than grocery
Only downside is that they didn't get to keep all that new item money becasue they're driving the cost down for the consumer.
Does the strategy make them more money in the long run? Yes! Does it drive down costs for the consumer? You bet. What an evil corporation.
