Walmart Regains Low Price Title

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August 23, 2011

Kantar Retail's latest version of its semi-annual pricing study found that Walmart has regained its edge, beating Target, as the low price leader in an overall market basket, which includes national brands and a subset of private label products.

Target surprised the industry by edging out Walmart for this title in the past two surveys, as well as a third independently conducted pricing study by AOL’s Walletpop.com and retail consultancy McMillan/Doolittle. In all three studies, Target bested Walmart on low prices across a variety of food and general merchandise items.

Kantar’s newest survey found Walmart’s overall basket price was 1.2 percent lower than Target's. The results come as Walmart is moving away from promotional pricing, adding national brands that had been scaled back in its failed Project Impact program meant to present less cluttered stores. During that time, Walmart removed roughly 15 percent of its SKUs -- largely national brands -- and took displays out of what was commonly known as Action Alley.

Shoppers revolted, and went looking for favorite items elsewhere. Last year, Walmart reversed this store remodeling initiative, bringing back SKUs and loading up Action Alley with flats of merchandise to win back customers.

The number of price promotions in Walmart's basket has declined since June 2010, according to the Kantar study. These findings reinforce Walmart's increased emphasis on Everyday Low Price (EDLP) positioning on any given basket. At the same time, Target's overall reduction in Temporary Price Cuts (TPCs) since January 2011 made it less competitive in this study. “It’s a reminder of how important TPCs are to Target's ability to compete with Walmart,” the report stated. “However, if a shopper used a REDcard to purchase the items in this study, then Target's overall basket would have registered about 4 percent less expensive than Walmart's.”

But shoppers are spending cash more and using credit less since the recession took hold, a trend that continues through this tentative recovery. Target's 5 percent Rewards program adds a unique dimension to the price comparison between the two retailers, with Target using its REDcard to drive incentives and differentiation, instead of relying on its store brands and unique product selection.

"It seems as if Target is encouraging its select guests, those who are already more engaged with its brand, to increase their loyalty through more aggressive prices,"  said Leon Nicholas, senior vice president of retail insights for Kantar Retail. “Such specific targeting is a stark contrast to Walmart's wide audience appeals, underscoring how the two retailers are leveraging opposing strategies to assert their price positions," he concludes.

"Looking ahead, Walmart's EDLP strategy appears set to intensify," Nicholas added. "Increased emphasis on gross margin control will heighten pressure on Walmart's operating expenses and internal efficiencies and will increase the retailer's focus on its suppliers' cost. Management's direction indicates that Walmart is aggressively working to advance its lower price position."

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