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Beware of Wal-Mart's Discount Store Trap

Wal-Mart (WMT) is saving Christmas—or at least salvaging the gloom of holiday consumer forecasts, somewhat. But even though Wal-Mart promises low prices (and often delivers), that doesn't mean shoppers are getting best deals on everything that the discounter sells.

The mega chain seems to be benefitting from a push to market their stores as places of quality and affordability in this darkening recession. "'Save Money, Live Better'’ is a slogan that’s going back to the original kind of Sam Walton slogans," says Benita Das, a partner in Collective LA, a branding and design firm.

That tactic appears to be working: According to a new survey by America's Research Group released December 17, 66.2% of Americans shopped at a Wal-Mart last week, up from 41.3% last year. "Wal-Mart had as many shoppers this weekend as JC Penney (JCP), Sears (SHLD), Target (TGT) and Toys R Us combined," says C. Brett Beemer, CEO of ARG.

Not Everything in a Discount Store is a Deal
This explosion of shoppers, along with many other retailers offering 60-70% holiday deals, led Beemer to raise his annual Christmas retail forecast from a dismal minus 3.5%, to a less sad 2.8%. But just because a store like Wal-Mart is associated with great bargains, does not mean you should scoop up every item and expect it to be the best deal.

When it comes to buying specialty products like electronics, Wal-Mart offers no better deals than other retailers like Best Buy (BBY), according to Consumer Reports. Still, customers associate the superstore with a smart buy, accurate or not. "Even if they may be spending the same as they are spending at Best Buy," says Das, "the consumer expectation is that Wal-Mart has a lower price based on past brand association."

Where the Deals Are
According to Consumer Reports' Electronic Store Ratings, customers found Wal-Mart's electronics prices to be average, which matched other walk-in stores like Best Buy, CompUSA (SYX) and Office Depot (ODP) and ranked behind retailers like Video Only, Costco (COST) and B.J.'s Wholesale (BJ).

So how do you avoid the discount store trap? Do some homework.

The real price deals in electronics usually can be found on the Internet, which housed Consumer Reports' top three options for electronics pricing: Costco.com, BuyDig.com and Abe's of Maine online. "In general when people buy electronics, they're happy when they buy online," says Donato Vaccaro, associate director of survey research at Consumer Reports. But, he notes that people are hesitant to buy electronics online and are more inclined to go to walk-in stores. "They think they're going to have to pay a lot for shipping or things are too delicate to be shipped," says Vaccaro.

Those who eschew the Internet for some in-person action are flocking to Wal-Mart, according to ARG's numbers. One of the main reasons for this shift is that Wal-Mart offers a variety of products at once. But Wal-Mart has had mixed reviews in varying arenas, according to a sampling of Consumer Reports rankings.

Outside of pricing, Wal-Mart also received the lowest overall ranking (and a score of 77 out of 100) of the 27 walk-in stores that qualified for the survey (Apple was ranked first with a score of 91.) The survey of 23,000 people reviewing 38,000 products combined measurement for price, selection, product quality, customer service, shopping ease, checkout and return policy, into an overall rating.

But while being ranked 27 out of 27 might make Wal-Mart seem like a bad stop for picking up that new TV, Vaccaro points out that 77 is still a good score. "In general, a 77 is not a shabby rating," says Vaccaro. "There's a statistical difference between Apple (AAPL) and Wal-Mart, but people are generally satisfied." However, Wal-Mart is not one of the 11 stores that earned a recommendation from Consumer Reports for electronic purchases.

Many Ignore Other Deals
In the end, these satisfactory ratings aren't hurting Wal-Mart. Still, according to ARG, Wal-Mart blasted electronics and appliance competitor Best Buy, who saw a drop from 12.9% to 10.4%. Such statistics goes to show, that not everyone judges deals by the store front, even though maybe they should.

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