There is also a symbiotic relationship between social concerns about Walmart and its low prices.  It is difficult to ignore the economic and social impact of Walmart stores in a community. (To get one perspective, view the video Walmart: The High Cost of Low Price here). While some weigh in against shopping at Walmart under any circumstances, a majority of Iowans find their way into a Walmart Supercenter at least once during the year. For purposes of Blog for Iowa’s food pricing discussion, and because the topic of Walmart food pricing is so broad, I will narrow my focus to two aspects of how Walmart delivers low prices: vendor relationships in this article, and overhead (specifically labor practices) in the next.

A friend of mine, a small business owner and entrepreneur, recently wrote about the prospect of being a Walmart vendor,

In an agreement with Walmart, a vendor can increase manufacturing productivity and gain buying power with its vendors. Doing business with a well capitalized company like Walmart produces a satisfactory, if lower, gross margin and can help with financial planning and accounts receivable. All of these things serve to reduce costs for a large or mid-sized operation, enabling low prices. For a mid-sized manufacturer, a board of directors’ discussion may well be how big a bite of the Walmart apple to take in an annual business plan. For a small scale operation, the maze of rules may seem too big a hassle.

My point is this. Because of the scale and a well defined purchasing process, Walmart drives vendors to be more efficient and thereby lower costs. An example from our shopping survey is the veggie burger crumbles. In four of five instances, these were manufactured by Kellogg’s subsidiary Morningstar Farms. Walmart’s price was $3.32 compared to Hy Vee and Sam’s Main Street Market at $4.59 and John’s Grocery at $5.19. It is the purchasing process and contractual relationships with large manufacturers like Kellogg's that drive Walmart’s low prices.

There is nothing unethical about this, as a signed contract presumes agreement by the parties entering into it. Walmart is very good at purchasing and this skill contributes significantly to their lowest prices in our shopping survey. If a person supports American business at all, it is difficult to argue with Walmart's successful purchasing program.