Walmart has its pricing mojo working

Discussion
Feb 25, 2015

Walmart is crushing much of the competition when it comes to pricing. That’s the conclusion of research conducted by Credit Suisse, which found the difference between Walmart’s pricing and that of its mass peers has widened for five straight months. For one competitor in particular, Target, the gap in pricing with Walmart has never been wider.

According to Credit Suisse’s Monthly Mass Channel Pricing Survey, the gap between Walmart and its competitors on consumables grew to 17.9 percent in January, up from 17.2 percent in December and the one-year average of 16.2 percent.





ALSO READ: Defining 'Affordability': Private Label and National Brands, Part 1




The pricing difference between Walmart and Target grew to 6.9 percent in January, well above the one-year average of 4.2 percent. Credit Suisse’s numbers do not account for the five percent discount Target gives to customers who pay with its REDcard. Purchases made with the REDcard represented roughly 21 percent of Target’s sales last year.

Credit Suisse has maintained its outperform rating on Walmart, in part, because of the pricing advantage the retailer holds over Target and other peers. Walmart reported total comparable store sales were up 1.5 percent for the quarter ending Jan. 31 while comps for Neighborhood Market were up 7.7 percent. Store traffic was up during the holidays and the company’s e-commerce sales, a point of emphasis, were up 22 percent during the period.

Earlier this week, Walmart announced plans to increase wages for roughly 500,000 of its hourly employees along with new training and scheduling programs intended to attract and retain retail talent.

What are your expectations for Walmart over the next year? Do you see the changes being made by Walmart putting some distance between itself and its competitors?

Please practice The RetailWire Golden Rule when submitting your comments.

Join the Discussion!

12 Comments on "Walmart has its pricing mojo working"


Sort by:   newest | oldest | most voted
Dr. Stephen Needel
Guest
7 years 5 months ago

Walmart has shown us over the years that while they may be slow to react at times, they react well to market conditions and customer feedback. I don’t know if this price gap is meaningful or whether Target is the right competitor in many cases. I could argue that dollar stores are a bigger competitor for Walmart as Target has its own problems that lower prices aren’t going to solve.

RIchard Hernandez
Guest
7 years 5 months ago

I believe Walmart’s pricing got a bit sloppy over the past year or so, but it looks like they are focusing on making that a priority again. However I also believe they really need to be looking at dollar stores as well—they are definitely nipping at Walmart’s heels in regards to price, convenience and basic items.

Mark Heckman
Guest
7 years 5 months ago

To the extent that Walmart gains ground against their out-of-stocks and continues to extend their reach into e-commerce, I would expect Walmart to re-invest some of these gains into “price.”

While Target and others are moving towards shopping apps, promotions, and points programs, Walmart may indeed increase the measure gap on pure price between them and the competition as they make these price investments.

One wild card remains the price of gasoline. Lower gas prices seem to effect Walmart more positively than their competitors, as their shoppers have more disposable income to spend at Walmart. If the price of fuel goes back into the mid to high $3/gallon level anytime soon, all of the aforementioned gains could change radically.

Shep Hyken
Guest
7 years 5 months ago

Walmart is doing what Walmart does best. None of this is surprising. They are known as a low-price retailer, and as long as they continue to offer that low price, they will succeed. Paying a little higher wage doesn’t cost as much as everyone thinks. They will retain their best, most productive people. They will reduce turnover. The savings from not having to hire and train as many new highers will help offset the higher wages.

Christina Ellwood
Guest
Christina Ellwood
7 years 5 months ago

Walmart will continue to be the low-priced leader, but the competitors will gain advantages with customer experience. I agree with Dr. Needel that price competition will come from dollar stores rather than Target.

Kenneth Leung
Guest
7 years 5 months ago

Walmart’s competititive advantage has been price and availability, driven by its superior logistics and supply chain practices. If it can continue to excel in those two areas, many other mis-steps can be forgiven by its core shopper base. This will allow it to outpace the competition in the omnichannel world.

Arie Shpanya
Guest
7 years 5 months ago

I think Walmart will really knock it out of the park this year. The retailer recently released its Q4 results and even though global online sales were up 22%, they’re not satisfied. Online retail competition in 2015 is getting fierce already and competitive pricing and shipping policies will have a huge impact on which retailer is victorious.

Kai Clarke
Guest
7 years 5 months ago

Walmart will continue to aggressively pursue their ELP model, and this includes more efficient pricing, product positioning, and corporate efficiencies, as they expand categorically, systemically and logistically.

David Livingston
Guest
7 years 5 months ago

This is like a horse race, and Walmart is going to the whip early, to get out front. They need to pay for these wage increases with increased sales and opening up big lead might be a tactical advantage. Now is the time to jump way ahead of Target while Target is struggling and distracted by their failure in Canada. Maybe Walmart will even be able to steal some of Target’s better employees.

Kim Souza
Guest
Kim Souza
7 years 5 months ago
Walmart has almost always outperformed Target on price, that is nothing new. Target shoppers don’t chose that retailer because they are looking for the lowest price. Retailers that more closely align with Walmart are Dollar General and other dollar store chains as well as Aldi. I can tell you for CERTAIN that Walmart is most definitely closely watching these retailers. As an avid user of Walmart’s Savings Catcher app, the savings returned to me most regularly for items found are cheaper at Dollar General or those dollar store chains. Aldi is not a match because it sells mostly private label, but there is not a lower cost retailer for fresh produce and dairy than Aldi. Oddly enough, Walmart has opted not to compare produce or dairy—eggs and milk—prices in its Savings Catcher app. CEO Doug McMillon recently told suppliers that Walmart buyers would be asking for their lowest (best ) prices this year. He warned them to avoid promotional agendas because Walmart is not interested. Walmart US CEO Greg Foran has vowed to clean up… Read more »
Gordon Arnold
Guest
7 years 5 months ago
Even with all of the store closings over the past several years the market is not able to sustain anything for the survivors except more declining sales as in traffic and transactions. This makes market share more important to those investors willing to stay the course. Not that there are a lot of other businesses doing anything special. As for Walmart, the fact that they are passing through price savings at an accelerated pace demonstrates how hard it is to even sell price in this economy. The two things Walmart has discovered, with or without their own awareness, is that floor space utilization and turn are the means of keeping a big box open. The adds and subtracts within the four walls over these past ten years has been nothing less than amazing. The continuing changes in the market and Walmart’s search for positive press is a demonstration of how they are very careful in keeping a positive message as much as they can without abandoning their market plan. When you look at their size… Read more »
Gajendra Ratnavel
Guest
7 years 5 months ago

Walmart has been putting distance between its competitors for a long time and yes this will continue. The real interesting news here is the 22% growth in online. I think Walmart will eventually catch up to Amazon and possible start moving ahead online as well.

wpDiscuz

Take Our Instant Poll

Are you bullish or bearish on Walmart’s prospects for 2015?

View Results

Loading ... Loading ...