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Sunday, September 14, 2008

Back to the Big Box Battle: Is New Ad Campaign Deceptive

One of these days, I am going to do a full blown comparison of prices of Wal Mart to other stores. According to much of the research on Big Box retail, is that big-box retail creates the impression of lower prices is by having a few goods that are quite cheap. Stacy Mitchell, who came to Davis last year, is the author of "Big-Box Swindle."

Mitchell argues that Big-Boxes have a number of select products that are essentially "loss leaders" that are used to create an impression of overall lower costs. For instance they may highlight a few items like DVDs and have them appear to be at very low prices, while most of their goods are around the same price you would get at a local business.

This came to mind a few weeks ago when I saw Wal-Mart's latest commercial in their new marketing campaign, "Save Money, Live Better."

The ad points out that the cost to a family of buying a take-out pizza is on average around $14. However, Wal Mart's take-and-bake pizzas are $8. If your family eats pizza once a week every year, that’s an annual cost savings of more than $300.

Sounds great, but the problem is that it is misleading. The ad compares apples (take out pizza) to oranges (take-and-bake pizza). As anyone who orders pizza on even a periodic basis knows, one pays far more for pizza that is already cooked than for pizza that you have to cook yourself.

In fact, a quick look at two comparable locations showed that Safeway in Davis had a 14 inch take out pizza for the same amount as Wal-Mart claimed their pizza cost. Costco had one for $9. Papa Murphy is the chain pizza place best known for take out pizza. Prices vary, but one can get a large take-and-bake pizza for less than $10 at Papa Murphy's and in some cases for as low as $7.00.

The point of this is that Wal-Mart's ad is at best deceptive. It makes a price comparison that is for two different things. By comparing the price of take-out pizza to take-and-bake pizza, Wal Mart distorts the price differential.

So where does that leave us? First, it leaves us with the thought that if you are trying to save money on your household budget do not order a pizza take-out because you can probably feed your family for far less money even if you go into the prepared food section which is generally far more expensive than making it yourself.

Second, the idea that Wal Mart has the lowest prices still remains questionable. I have no doubt that people can cite some examples. I would at some point really like to go down the list on a number of core items to see what the price comparison really is.

But third, why go to misleading ads to sell your products? Wal Mart clearly has taken a hit in recent years for a number of their predatory business practices which has led communities to attempt to freeze them out, stores to close, and legislators to take action.

There are real questions about the damage done to local business by a Wal Mart. Money gets sucked out of the community and the local town pays a huge price for a modest tax revenue.

All of this leads back to Davis because Target is frankly just another version of Wal Mart. They have broken ground on Target finally. You probably saw the pictures of the pro-Target city councilmembers jumping for joy at Davis' version of big-box retail.

The city of Davis is of course claiming (perhaps hoping is the better word) that Target will lead to an increase of $600,000 in tax revenue. Money that the city desperately needs--but is probably a drop in the bucket compared to the increasing costs of the city's top employees and their pensions and benefits. Indeed, research suggests that big-box stores can become crime magnets which may lead to the need for additional police officers. That may eat into that $600,000. As would the loss of business from elsewhere in the city.

The city is getting its Target, the question is how much will cost us--not in terms of money but in terms of losses to our character and by diverting away people and money from our downtown which according to all the councilmembers who ran for election this past spring has never been better.

---Doug Paul Davis reporting