There are couple commonly-held retail myths that are lately being proven false. Concepts so deeply ingrained that it's taking studies and documentation to make even hardened industry insiders like myself into believers. But here you go: Walmart is actually raising prices on some items and is no longer consistently cheaper than Target, even on groceries.
Walmart has long been known as the low price leader and for good reason. It built its reputation on Every Day Low Prices (EDLP), and customers felt pretty safe in assuming those prices were, in fact, the lowest. Thanks to Walmart's size, efficiency and use of technology, other retailers had a hard time matching or beating these prices, even large chains.
But in the past year, Walmart began relying on price rollbacks more than EDLP. It was part of a plan to upgrade stores and remove some clutter, namely those aisle displays that were unsightly, in the way of shopping carts, and piled high with some obvious deals. Once those deals were less on display, items throughout the store were called out as rollbacks, even as some popular brand-name products were phased out to make more room.
This upset a lot of shoppers and Walmart has done an about-face, bringing back hundreds of items and restocking some aisle displays. It is also eliminating some rollbacks. Analysts for JP Morgan Chase have been tracking prices at Walmart, using a basket of the same 50 items each month, and they found fewer rollbacks and higher prices each month since May.
It's all further evidence that Walmart is returning to its EDLP roots. But a second study from Kantar Retail consultants shows that not only is Walmart backing off its deep discount strategy, it's having a harder time beating the competition on price. In fact, on many items, Target was priced below Walmart.
It's important to note, that prices aren't increasing in aggregate. Overall, the total shopping basket continues to actually cost less over time. I'm no economist and this is not a declaration of deflation, but both Target and Walmart keep getting better at driving down the cost of doing business (and strong arming suppliers) so they can keep prices low and still make money.
It's just becoming less likely the two stores can differentiate on price.
"The key is for shoppers to understand, that on the overall basket, they may be getting just as low or lower a price at Target than Walmart," says Leon Nicholas director of Retail insights at Kantar Retail. If you're comparing on an item by item basis, Walmart may win, but overall, Target has been less expensive, Nicholas informs Walletpop in an interview. It's pretty close, according to Kantar's survey, with Walmart and Target being just about $1 apart.
We had similar results last fall pricing identical baskets of items at Chicago area stores. We wanted to see how discounters Target and Walmart compared to supermarkets, and the results proved Aldi the bare bones cheapest and had Target beating Walmart on total market basket even then.
Here are some things to keep in mind when trying to save the most:
Item to item comparisons will get you the absolute lowest price. It may cost in terms of time, energy and travel, but you can not rely on a single store to deliver the lowest price on a single product with consistency.
As Target expands its selection of fresh grocery items it is also proving to be cheaper on food items than Walmart, the nation's largest food retailer. According to the JP Morgan Chase report, Target's grocery basket was less than Walmart's.
Target relies less on national brands than Walmart does, and has a wider selection of private label or house brands comparatively. But Target fancies itself a bit higher end than Walmart and prices its proprietary labels like Archer Farms higher than Walmart's. That's one area where Walmart will consistently come out cheaper, according to Kantar Retail's Nicholas.
Perception can be misleading. Deep discounts on select items, called out with screaming signage, may just give the impression that a store is cheaper. As the Kantar study found, the bottom line tallies up quite differently.
A retailer's pricing and strategy can shift quickly. But knowing a little bit about how and why a retailer is changing policies, like Walmart is with the reduction of rollbacks, can help save some at the register. Or at the very least, make you feel less confused if it seems like the store has higher prices. You are not imagining things.
Which is cheaper, Target or Walmart? The answer may surprise you