Contending for price: Walmart vs. Target

Every six months, our team at Kantar Retail runs a basket study to compare Walmart’s and Target’s grocery and health & beauty prices in the northeastern U.S.

On the surface this doesn’t look very exciting.

Walmart’s reputation is based on having the lowest prices, while Target holds more of an “Expect More” chic.

How competitive can these two retailers actually be?

As it turns out, the answer is very.

In our latest report, released last month, Walmart’s basket was just 1 per cent less expensive than Target’s identical basket.

Looking at just the grocery items, Target’s tally was 2 per cent to 3 per cent cheaper than Walmart’s.

Moreover, these findings do not include the 5 per cent discount given to Target’s REDcard holders.

If included, then Target’s overall basket would have been about 4 per cent less expensive than Walmart’s.

This result was surprising.  Last October Walmart U.S. announced that it was investing US$2 billion through the end of 2013 to lower its prices, aiming to assert price leadership, especially in food.

Apparently Walmart cannot create a gap that easily–Target’s basket was more competitively priced this time versus January as it deftly applied discounts across key items.

Moreover, these overall findings are not anomalous.

Target’s basket has registered as cheaper than or equal to Walmart’s in exactly half of Kantar Retail’s semi-annual assessments since 2009.

Looking to 2013, we can only speculate what each retailer’s relative price position will be in Canada.

Given how these retailers compete in the U.S., we could see quite a showdown.

However, Target’s circumstances will be quite different in Canada.

As a new entrant, its operations will not be as cost efficient as in the U.S., particularly given the relationship with Sobeys in temperature-controlled goods.

Management may also position itself slightly differently, perhaps assuming that Canadians are unfamiliar with how Target contends on price south of the border.

Meanwhile, Walmart Canada has stepped up its price comparisons and use of Rollbacks to boost its authority.

All things considered, Walmart’s consumables price war with Target in the U.S. will likely extend into Canada.

Given that the market dynamics across the provinces are quite distinct from those in the U.S., we wonder: Should these two retailers be gunning for one another in Canada, or does the competition really lie with other retailers?