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Kantar: Target Closing Walmart Price Advantage

After having launched price match programs in the United States and Canada, Target may be making inroads against major competitors. According to Kantar Retail’s semi-annual pricing study, Target has managed to somewhat narrow the gap between itself and Walmart.

However, Walmart continues to maintain a market basket price advantage over Target, the market research firm’s study indicate, as the retailer adopts a nuanced approach to its EDLP value proposition.

Walmart maintained a lower priced market basket as compared to Target, in part based on gains in non-edible grocery. Still, its cost to consumers in the study was only 1% less than Target’s market basket total, Kantar stated. The result reflects the smallest price gap since the firm’s June 2012 study, Kantar added.

“Walmart’s slightly weakened stronghold on price leadership shows the difficulty in creating basket separation based on price,” Laura Kennedy, principal analyst and primary contributor to the study, said as it was announced. “These results emphasize the need for both retailers to pursue alternative methods to drive impression and value perception by their shoppers. The smaller price gap seems to reflect Walmart’s general shift toward a more nuanced and customized approach to EDLP.”

The Kantar study, in its 12th version, gauges which retailer’s basket of edible grocery, non-edible grocery, and health and beauty aid items offers shoppers the lowest price, the firm noted. It includes national brand and a sub-set of private label items, and examines how these retailers’ pricing initiatives are evolving.

Kantar Retail revisited co-located Walmart and Target stores in the Northeastern United States in June 2014 to re-assess a previously established market basket. Only identical SKUs carried by the retailers were used, Kantar pointed out.

“One notable theme in this study was the incursion of more personalized pricing options at both retailers,” Kennedy stated, “that is, the idea that shoppers are ultimately not paying shelf price. It also affects shoppers’ perceptions of the effort it will take for them to achieve value.”

The study concluded that Target’s edible market basket was 10.5% more expensive than that at Walmart. In the non-edible grocery part, Walmart widened the gap to about 5.6%. Target beat Walmart in HBA pricing, the third element in Kantar’s review.

Kantar determined that Target’s use of TPCs declined, and that Walmart’s market basket featured twice as many Rollbacks as in the last study iteration.

Kantar pointed out that it had to eliminate five items from the total market basket used in assessing the retailers’ price positions to maintain comparability, a likely a result of Target’s efforts to rationalize national brand SKUs across its box.

In conclusion, Kantar maintained that Walmart’s use of Rollbacks provides a challenge and opportunity for suppliers who may have the chance to build promotional programs with the retailer but who should expect greater comparative pricing scrutiny. On the competitor’s side, Kantar emphasized the need to creatively engage various Target initiatives including programs such as Cartwheel, REDcard Reward and Pharmacy Reward to maintain or gain a position in the retailer’s offering at a time when it is scrutinizing the position of many products in its assortment.