Dollar General, Walmart Lead Kantar Price Point Study

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Dollar General, Walmart Lead Kantar Price Point Study

12/15/2015

Dollar General’s overall basket was found to be the least expensive in Kantar Retail’s fifth annual opening price point (OPP) survey, which seeks to determine how select retailers meet the grocery and consumables needs of shoppers looking for the lowest absolute shelf prices to fulfill their basket requirements.

Dollar General edged Walmart Supercenter’s basket by $1.28, which equated to a basket priced 4.8 percent higher than Dollar General’s, which Kantar said represents a widening of the gap from last year, when the difference between the two retailers’ total baskets was $0.66. Dollar General’s overall leadership over Walmart was driven primarily by the nonedible sub-basket and to a lesser extent, the edible sub-basket. Notably, a higher proportion of Dollar General’s overall basket was private label – 68 percent versus 58 percent of Walmart’s. Meantime, Aldi’s basket led overall private label penetration at 80 percent.

New to the study this year, Save-A-Lot had the cheapest edible sub-basket. Dollar General took the lead on the nonedible sub-basket. Walmart had the cheapest HBA sub-basket. Conversely, Aldi had the most expensive overall basket, coming in at nearly 40 percent more expensive than Dollar General’s overall basket. Aldi’s position was driven primarily by its relatively high OPP prices in the nonedible and HBA sub-baskets. Specifically, Aldi’s HBA sub-basket was more than three times more expensive than Walmart’s.

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All data was collected by Kantar Retail in southeastern Massachusetts in October 2015. In a slight methodology change to previous years, the market research firm swapped out Target in favor of Save-A-Lot in light of the latter’s value-oriented offer and large geographic footprint. Each retailer was assessed on the lowest price point available to the shopper in that category, regardless of brand or pack size (excluding trial sizes). The goal was to mimic the budget-strapped shopper’s need to minimally meet her purchase requirements across categories.

Promotional pricing had little impact on the OPP leaders across sub-baskets. Dollar General and Walmart, which had the least and second least expensive overall baskets, respectively, each had only one item on promotion. Meanwhile, Stop & Shop, which had the most items on promotion (three), came in third overall. Save-A-Lot and Aldi each had two items on promotion, but came in fourth and sixth, respectively.

Edible Grocery Sub-Basket Findings

  • Save-A-Lot recorded the least expensive edible sub-basket at $11.78, ousting last year’s leader, Aldi. Save-A-Lot’s position was driven by pricing of six out of 10 items at less than $1, while only one item was priced over $2.
  • Dollar General and Walmart came in fourth and fifth, with only $0.40 separating them. While Dollar General held its relative position year-over-year, Walmart recorded the second least expensive sub-basket last year.
  • Family Dollar recorded the highest edible sub-basket at $17.74, 50.6 percent higher than Save-A-Lot. On an index-to-leader basis, 2015 represents Family Dollar’s most expensive sub-basket in the five years of the study.
  • Private label penetration in this sub-basket was highest for Dollar General and Aldi, where private label made up 80 percent of each retailer’s basket.

Nonedible Grocery Sub-Basket Findings

  • Dollar General had the least expensive sub-basket ($8.55), with all but one item priced at $1
  • All the retailers studied appear to be focusing their value pricing efforts on these nonedible categories. Of all recorded price points in this sub-basket, 60 percent were at or under $1.
  • Pricing in the nonedible sub-basket was tight among the remaining retailers. Only $3.10 separated first place (Dollar General) from last place (Save-A-Lot).
  • Aldi’s entire basket was made up of private label.

Walmart carried its leadership position from last year into 2015. Walmart’s OPP prices were cheapest for every category represented in the sub-basket. Moreover, Walmart’s sub-basket price dropped $0.09 from last year when it was $4.51.

Dollar General and Family Dollar tied for the second least expensive HBA basket at $5. This is the fourth consecutive year that both retailers have had identical OPPs for these specific categories, indicative of their ongoing battle for OPP leadership in the HBA department. Moreover, Family Dollar’s sub-basket pricing has remained stable at $5 in each of the last five years. (Dollar General was not part of the original study in 2011.)

Aldi led in private label penetration again in this sub-basket: 60 percent of its HBA sub-basket was private label.

Kantar Retail's Point of View

Dollar General and Walmart continue their close battle for OPP leadership, each using different sub-baskets to express price leadership. Of note, every retailer’s overall basket ring grew year-over-year, in one case by $2.23 (Aldi). This is a significant increase, especially since total baskets for low-income shoppers typically range between $10 and $15.

The increase is surprising as well given that inflation has been relatively modest over the last year, ultimately begging the question: What other factors are driving up OPP shelf prices?

Regardless of the answer, Dollar General’s ability to keep its basket level pricing relatively stable (its basket total increased only $0.05 year-over-year) is a strength, reinforcing its strong price perception in the shopper’s mind. If that commitment to low prices is truly driving its leadership, then it would be a significant endorsement of the retailer’s affordability proposition.

Walmart’s performance reflects the overall challenges it faces when competing on price. While the retailer’s strength in HBA reflects its continued commitment to its 88-cent generics program, its trailing position in edible (especially) and nonedible grocery categories demonstrates the difficulty it has in convincing its core low-income shopper of its price leadership in categories that drive traffic.

The retailer’s inconsistent messaging about its private label brands also needs to be addressed in this context. That said, value and low-price promises remain one of Walmart’s top priorities, and suppliers can expect continued—if not increased—pressure to lower costs as the retailer’s investments elsewhere put pressure on margins.

Save-A-Lot emerges as an attractive option for shoppers, and, therefore, as a significant disrupter for other retailers. Although its private label-oriented assortment should have resulted in a cheaper overall basket, the retailer nevertheless provided clear OPP leadership in the edible sub-basket. And although the retailer placed lower in the nonedible and HBA sub-baskets, Save-A-Lot’s pricing on select items within those sub-baskets was very sharp (e.g., paper towels and bar soap).

Save-A-Lot’s private label assortment often puts it on the periphery of many suppliers’ (and retailers’) radars, but this study amplifies the need to consider Save-A-Lot’s proposition to lower-income shoppers more seriously.

Family Dollar’s drop from third to fifth position overall was perhaps the study’s most surprising finding given that its core shoppers focus on spending as little as possible on the basket. The retailer’s performance in the study certainly explains its soft price perception among shoppers, illustrating the deficit it must recover from to claim shoppers’ trust.

That said, given its relatively strong performance in the nonedible and HBA sub-baskets, Family Dollar’s efforts to assert price leadership should focus squarely on edible categories. Family Dollar cannot credibly drive price perception when OPP edible grocery is over 50 percent more expensive than Save-A-Lot’s.

Of note, Aldi’s overall position must be seen in context: Its focus remains primarily in edible grocery, where it came within 5 percent of edible leader Save-A-Lot. Its last place OPP position was driven by HBA, in which the retailer is clearly not competing for OPP-item shoppers. At the same time, Aldi’s marketplace success indicates that its ability to accent sharp edible pricing drives its low price perception, perhaps masking the reality of higher prices in other categories.

As in past years, Stop & Shop maintained its position in the middle of the pack. While its pricing on select items was particularly sharp, savvy shoppers are more likely to cherry-pick the retailer for specific items rather than devote an entire trip to Stop & Shop for OPP items.

In sum, low-income shoppers continue to have an array of competitively priced options to fulfill their needs. What’s more, all of these retailers offer consistent and reliable pricing, which is foundational to the low-income shopper’s mission of spending as little as possible. The implication for suppliers, then, is clear: Adopt a more holistic view – not only of the retailer relative to its competition, but also of the category relative to the larger basket. A richer understanding of your category’s role in both of these contexts is more important than ever.