Walmart saves families $700 million a year? Show me the math

Wallmart rolls back, claims $700 million savingsLast year Walmart got into some trouble for claiming it saved shoppers $700 a year just by shopping its stores. Competitors took issue with the claim, as did the National Advertising Division of the Council of Better Business Bureaus, and the ads were pulled. But Walmart is at it again, saying it can save shoppers $28 a week with its latest round of reduced prices. That's more than twice the amount it claimed that got it into hot water last year. Is it true?

"American families could see more than $700 million in savings this summer across all grocery categories through the retailer's continued, aggressive Rollbacks program," Walmart says in a press release. "Price reductions include 'deep Rollbacks' on a basket of 22 favorite foods and everyday essentials families routinely purchase, offered for an average savings of 30% off the retailer's everyday low price."

The math goes like this: If you regularly buy all 22 items, you'll save $28 from the formerly higher prices. Just how Walmart came up with the $700 million annual savings is unclear. Walmart says on its website that it "serves customers and members more than 200 million times per week at more than 8,446 retail units under 55 different banners in 15 countries." But that's globally; breaking out the numbers for U.S. shoppers is much more difficult -- dare I say, near impossible.

So let's go back to the new rollback prices: if you buy those same items every week, the savings total up to $1,456 annually. But that's faulty reasoning since many of those are staple products like ketchup and mayonnaise, things most families don't buy every week for 52 weeks. The reductions are hefty to be sure -- a 40 oz. bottle of Heinz ketchup reduced to $1 from $2.42 -- but it's the rare household that uses that much ketchup with any regularity.

Walmart pairs the rollback announcement with new survey results from Greenfield Online that say American families are into saving money. "Walmart recently surveyed moms across America and found that there is overriding concern about their financial outlook. Three out of every four surveyed continue to look for ways to stretch their dollars. For 78% of moms, saving money on basic items and everyday purchases is critical."

Really? Saving money is important to moms in this country, during an economic recession?

These new deep rollbacks offer significant savings to consumers (the part of the equation that means manufacturers are taking a hit on these items is another story and an important one), but Walmart's insistence on issuing dramatic claims of annual cost savings is puzzling. It gets into trouble every time. Last year when it pulled the ads at the behest of the Better Business Bureau, I wrote that $700 a year in savings seemed a bit low, and it still does.

I just can't prove it with a calculator.
Read Full Story