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Discount chain Target has narrowed Walmart’s basket advantage since the last iteration of Boston-based Kantar Retail’s semi-annual pricing study.
Kantar Retail's latest study finds that Walmart’s overall price gap has still remained within a few percentage points of Target’s, with an overall branded basket 2.4 percent less expensive than Target’s. However, Walmart's lead has narrowed since the last study.
Of even greater interest to grocers, Target’s edible basket was within cents of Walmart’s. “Though bolstered by TPCs [temporary price cuts], Target’s ability to match Walmart’s pricing in a department where Walmart has focused its price leadership efforts is most impressive,” noted Robin Sherk, director of retail insights for Kantar Retail and leading contributor to the study.
The 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.
Kantar Retail revisited the same co-located Walmart and Target stores in the northeastern U.S. in June 2013 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.
“The two retailers continue to strategically diverge in how they reach relative basket comparability, with Walmart very much focused on building a strong value proposition through EDLP,” said Sherk. “In contrast, Target selectively relies on temporary discounts to narrow the gap, and then offers guests ways to save even more through loyalty programs such as its REDcard.”
Highlights of the study include:
- Driven by non-edible grocery, Walmart’s overall branded basket was 2.4 percent less expensive than Target’s, with only Target’s HBA sub-basket leading Walmart’s in price.
- Walmart’s edible grocery basket was only 6 cents cheaper than Target’s, practically eliminating its 14.1 percent lead in January 2013. Target achieved this near comparability through four temporary price cuts (TPCs).
- On an individual item basis, Target’s basket narrowed the spread recorded in January 2013. Only 19 percent of the items in the two retailers’ baskets were more than 10 percent more expensive at Target.
- Target narrowed prices primarily through TPCs. Walmart maintained its lead through everyday low prices (EDLP), with its basket recording only one Rollback. Target increased its use of TPCs to a total of 10, an increase from seven in January 2013.
- With 5 percent rewards (available to REDcard holders), Target’s overall basket would have been 2.7 percent less expensive than Walmart’s. Although Target continues to offer a very competitive basket price to its REDcard holders, the non-edible grocery sub-basket this iteration would still be 3.5 percent more expensive at Target.
Kantar noted that Target has recently shifted to a more balanced “Expect More. Pay Less” proposition to incentivize more trips from all guests, not just VIPs. The retailer is placing greater emphasis on savings to boost its shrinking shopper penetration and overall drop in transactions.