Is Walmart’s Loss Leading Egg-Scapade A Winner?

WalmartWMT
is known for its everyday low prices on products across the store, but a recent offer of a carton of 18 eggs for $2 at a store in Kentucky raises questions about how this particular location was able to offer a price so far below that which chains are paying for a dozen eggs wholesale.

Newsweek reports that a store in Harrodsburg, KY, was selling the eggs (the size was not specified in the reporting) well below the $2.16 to $2.18 wholesale price currently being paid by retailers in the Midwest for a dozen medium-sized eggs delivered to the store, based on data from the U.S. Department of Agriculture. It’s also lower than the $2.11 to $2.14 that most pay when the same size eggs go to a warehouse for distribution to stores.

Reports of the low price had some on social media questioning whether the eggs were near their expiration dates or asking why other retailers were charging so much more, according to Newsweek’s reporting.

A Walmart company spokesperson said that the retailer was able to take advantage of a deal to lower its price and “quickly pass on those savings” to its customers.

In an online discussion last week on RetailWire, BrainTrust panelist Susan O’Neal, general manager, promo intel and insight at Numerator, applauded the strategy.

“Maybe Walmart landed a great deal on eggs, maybe they decided to use it as a loss leader to win back shoppers who are trading down or out to dollar stores,” wrote Ms. O’Neal. “Either way, brilliant, opportunistic tactic by the Harrodsburg, KY store!”

A search of the local area around Harrodsburg found that Walmart goes up against Aldi, KrogerKR
, C&T Food Market, Save A Lot and La Hacienda.

At the time of this article’s reporting, a carton of 18 Great Value Large White Eggs was listed at $4.20 on the Walmart site for a local store.

The price of eggs has skyrocketed due to an outbreak of the avian flu that has caused poultry farmers to cull millions of birds from the nation’s flocks. The average price nationally for a dozen grade A eggs was $4.82 in January, up from $1.93 the year before, according to the U.S. Bureau of Labor Statistics. The higher prices paid by consumers in recent months have been met with charges of gouging.

Walmart has gained most of the headline attention when it comes to public commitments made by retailers to push back on price hikes in grocery. Doug McMillon, Walmart CEO, in December told CNBC that center store categories posed the biggest challenge in getting prices under control. The retailer has recently warned major consumer packaged goods companies against further increases, Reuters reports.

David Spear, senior partner, industry consulting, retail, CPG and hospitality at TeradataTDC
, saw the promotion as being another way to send a message to suppliers.

“This is a promotional play, a one-and-done to drive sales and showcase Walmart’s influence when it comes to pricing,” wrote Mr. Spear. “The normal price for eggs is at least double this price anywhere in the stores I’ve shopped, and in most locations around the country. I do think Walmart can play an instrumental role in pushing back against CPGs’ price hikes, which could help other grocers as well.”

“This appears to be nothing more than loss-leading pricing by Walmart,” wrote Mark Ryski, CEO of HeadCount Corporation. “Given Walmart’s size, they can influence pricing and lead the market. Selecting a high profile category like eggs gives the loss-leading strategy even more attention. I don’t think there’s anything new here.”

Some saw the move as primarily customer-facing PR.

“We can all speculate why they priced the eggs at an egg-ceptional price in this one store,” wrote professor Gene Detroyer. “Indeed what they got was considerable national media attention with a low-price message.”

“What does a one-off deal mean to shoppers nationwide when only a limited group can take advantage?” wrote Ken Lonyai, consultant. “Essentially nothing. What does a one-off deal mean to a retailer nationwide when only a limited group can take advantage? Really valuable press that money can’t buy.”