Walmart Extends Price Lead Over Target: Kantar

Walmart continues to extend its price leadership position over Target, so finds Kantar Retail’s semi-annual pricing study. Target’s overall grocery and consumables basket has been more expensive than Walmart’s since the study was performed in January 2011.

With an overall branded basket of products priced 3.8 percent less expensive than Target’s, Walmart extended its lead over its Minneapolis-based mass rival from June 2013, when Walmart’s overall basket was 2 percent cheaper than Target’s.

“Walmart depended almost entirely on its central EDLP value proposition to achieve price leadership,” notes Laura Kennedy, principal analyst and contributor to the study. “While Walmart opened up a bigger lead versus Target in this particular study, the overall gap has remained steady in recent years,” she adds. “And, despite Target’s renewed efforts to emphasize the 'Pay Less' aspect of its brand proposition, the steadily increasing price-gap trend diminishes its ability to project an image of 'unbeatable value' for its guests,” according to Kennedy.

The 11th iteration of Kantar Retail’s semi-annual mass channel pricing study determines which retailer’s basket of grocery and consumable items offers shoppers the lowest price. The study reviews national brands and a sub-set of private label items, and also examines how retailers’ stances are evolving as Target renews its efforts to emphasize the “Pay Less” side of its brand proposition and Walmart continues to reinforce its value proposition beyond shelf prices.

Kantar Retail revisited the same co-located Walmart and Target stores in Northeastern United States in January 2014 to re-assess a previously established basket of national brand items including edible grocery, non-edible grocery, and health & beauty aids (HBA) items. Only identical SKUs from both retailers were assessed.

Highlights of this study include:

• Walmart’s overall branded basket was 3.8 percent less expensive than Target’s.
• Walmart’s prices were less expensive in all three sub-baskets including edible grocery, non-edible grocery and HBA. Target reversed the gains it made in edible grocery in June 2013.
• Target decreased its use of TPCs from 10 to just eight across all three branded baskets while Walmart posted only two price reductions in this iteration.
• On an individual item basis, Target’s basket had more products than in previous studies that were at least 30 percent more expensive than they were at Walmart.
• REDcard holders benefited from the 5 percent discount, with Target’s branded basket being 1.4 percent less expensive for cardholders.

Overall Branded Basket Results

Supplier Implications

“Given Target’s price positioning and strategic focus, suppliers should prepare for greater pressure from the retailer’s private brands and should monitor price gaps to branded products and reinforce the product premium to rationalize a branded purchase,” notes Amy Koo, senior analyst. “Target’s suppliers should also consider ways to reward guests who sign up for a REDcard,” she adds.

Walmart’s price advantage brings several implications for its suppliers as well. Suppliers should anticipate more selective price cutting as Walmart seeks to drive traffic and increase margin dollars and should consider offering exclusives and “newness” to lure more shoppers to the store and build a sense of unique value.

To receive a copy of the Kantar Retail pricing study or to speak with a Kantar Retail analyst directly, contact Katherine Clarke at [email protected].