In a move made to generate increased traffic at their stores, WalMart earlier this year decided to drastically cut prices on many of their food items. Their hope in cutting prices is that these items would be loss leaders and bring more people into the stores to purchase more profitable items. Unfortunately for them, this plan backfired, and people came into the store to purchase those extremely cheap items, and did not stick around to purchase other items. As a result, WalMart has been required to increase prices once again.
Some are questioning WalMart's decision in lowering their prices in the first place. The decision to lower their prices to spur revenue would have been a wise decision, had the overall economic well-being of our country been healthier. Since people are still hesitant to spend money on unnecessary items, their strategy backfired. Instead, WalMart should have taken a different approach, such as cutting the prices on some of the large ticket items, while maintaining a reasonable profit margin on complementary items to those large ticket items.