Walmart’s strategy

Pitching low prices, chain aims to open Somerville grocery

October 11, 2011|By Megan Woolhouse, Globe Staff

A Walmart markets prices for groceries in Dallas impressed Trena Daffe… (Photos by Rex C. Curry/Associated…)

DALLAS - To understand a Walmart grocery store, consider Ro-Tel, a combination of diced tomatoes and green chilies in a can.

The Texas kitchen staple recently sold for $1.20 a can at an Albertson’s grocery store here. A Walmart supercenter a few miles away sold it for 88 cents. But it was Walmart Neighborhood Market - a Walmart selling only groceries - that offered Ro-Tel for a steal: just 78 cents on sale.

“You can’t beat that,’’ shopper Lajuanda Bennett said recently as she pushed a shopping cart heavy with Ro-Tel cans through the store.

Walmart Neighborhood Market now wants to make its debut in the Northeast with a store in Somerville, promising these kind of rock-bottom prices to a region with some the nation’s highest grocery costs. Grocery prices in the Northeast run more than 3 percent above the national average, and rose nearly 6 percent over the past year, according to the US Labor Department.

The push in the Northeast - including the recently rebuffed effort to open a Neighborhood Market in Boston’s Roxbury neighborhood - is part of the Arkansas retailer’s plan to open more than 150 grocery stores across the country by late 2013. With a sagging economy weighing on sales, Walmart is relying on its tried and true strategy of undercutting competitors’ prices. And while the impact of Walmart’s grocery store concept is relatively new and unstudied, critics said the chain - already the world’s largest - hurts local business and competition.

Walmart representatives have said they want to expand in urban areas, such as Roxbury, where there are few stores offering affordable, healthy food, as well as places like Somerville, where the company says customers are “badly served’’ by what it calls overpriced competitors.

“It’s an important market for us, one we have the potential to serve some real needs in,’’ Walmart spokesman Steven V. Restivo said of the company’s desire to expand in the Boston area.

Somerville Local First, a group that advocates for independent businesses, recently said it would oppose the store. It cited the company’s wage and labor practices, pricing strategies, and fears that the grocery store, a corporate juggernaut, would pave the way for further Walmart expansion in Greater Boston that would drive smaller competitors out of business.

“We know the general public needs affordably priced goods, but Walmart, in our view, has a long history of predatory pricing, typically done to push out competition,’’ said Joe Grafton, executive director of the group. “Their ultimate goal is saturation of the retail market.’’