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[11 comments]

Target's Turkey Dinner Cheaper Than Walmart's

November 21, 2012

Recent reports suggest that Target might have a slight edge over Walmart heading into the holiday season largely because its consumer base is more affluent than its larger rival.

That said, the price competition between the two rivals remains intense and each side is using matching and aggressive advertising to establish itself as the place where consumers can go to save.

In reality, it's possible to cherry pick any number of items and make the lowest price case for either Target or Walmart. Thanks to an analysis by Bloomberg Industries, however, Target gets a win when it comes to the lowest price on Thanksgiving dinner.

Bloomberg looked at a market basket of 18 items including turkey and sides at 15 retailers on Nov. 17 and 18 including Acme (Supervalu), Sam's Club, Target, The Fresh Market, Walmart and Whole Foods. Pricing for the same items were $36.39 at Sam's, $45.48 at Target, $52.31 at Walmart, $70.18 at Whole Foods, $70.82 at Acme and $81.20 at The Fresh Market.

Target's pricing was able to undercut Walmart through the use of more aggressive promotions, according to Bloomberg.

"Target has been pretty clear, through their actions, that they want to have a very competitive holiday season so it's not surprising that it translated over to food," Jennifer Bartashus, a Bloomberg Industries analyst, told Bloomberg News.

Target's president and CEO Gregg Steinhafel, according to The Associated Press, recently discussed the chain's prospects for the fourth quarter. "We feel good about our ability to deliver inspiring merchandise, most-wanted gifts, and unbeatable value, while also generating expected profitability."

Walmart's chief financial officer Charles Holley was quoted in the same AP report as saying, "Macroeconomic conditions continue to pressure our customers."

FINANCIALS:     [NYSE:TGT] [ NYSE:WMT] [ ]

Discussion Questions:

How important will price be to the success of retailers such as Target and Walmart this holiday season? Do you think Target has closed the pricing gap with Walmart in the minds of consumers?

While we value unfettered opinion, we urge you to show respect and courtesy for people or companies about whom you comment. Keep in mind that this is a public, professional business discussion. RetailWire reserves the right to edit or refuse the publication of remarks that we deem unsuitable. We may also correct for unintended spelling and grammatical errors.

Instant Poll:

How much more or less is pricing this holiday season compared to past years?

Comments:

Price is always in the forefront of decision making, but buying food for a key holiday always embraces loyalty to your favorite store.

Re: the pricing gap between Walmart and Target in the mind of the consumers, we should remember that the march of the human mind is slow. And slowly, Target's pricing competitiveness has been penetrating the price-consciousness of consumers. The gap is closing between WM and TGT and, add to that, the experience is better at Target.

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Gene Hoffman, President/CEO, Corporate Strategies International

It has been my general observation that Target uses more deals and promotions in their merchandising mix than Walmart, so I am not surprised to learn that these promotions played a role in giving Target a "win" on a cheap Thanksgiving. I do think Target is making up some ground on Walmart on price imagery, but I also think that Walmart is about two or three years ahead of Target on other important aspects of grocery merchandising.

These elements include displays locations and content, assortment, inventory management, and private label development. It will be interesting to see how Target evolves regarding these elements as I find them to be a significant disadvantage to their overall efforts on the food side of their business.

It will also be of interest to see if either retailer will be able to significantly erode the loyalty of the other's base, given that Target shoppers do skew more upscale than Walmart patrons, and each have solid reasons for shopping where they do.

"Cheap Thanksgiving" may be a battle won for Target, but the war rages on with Target still being out-gunned in grocery by the folks from Bentonville.

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Mark Heckman, Principal, Mark Heckman Consulting

Price in relationship to quality is always important. As the article indicates, there can be a wide range in prices for similar items. I do wonder if when they were doing price comparison at Sam's, they used the case price (doubtful) or the individual can (mathematically accurate, but not valid when you have to buy a case).

The reason Target and Walmart got into food was to drive trip frequency so it is not surprising that they both place a lot of emphasis on price. Having read the details of different price comparison methods, what they are doing is creating the perception more than the reality when you leave perishables, etc. from shopping lists.

Not sure if Target has closed the gap in price comparison, but my question would be how many people shop both? I would expect that there is some crossover, but wonder if it is a significant percentage.

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Steve Montgomery, President, b2b Solutions, LLC

Target has closed the gap in pricing, but consumers still don't quite get it. I did a price check recently in Target. Target was about 2% higher than Walmart. Then factor in Target's RedCard that takes off 5%, and Target is the winner. The Walmart and Target stores were within a mile of each other. The Walmart is doing about $90 million per year with about 60% of sales in grocery comparable merchandize. The Target was doing about $24.5 million per year with about 28% in grocery comparable merchandize. Do the math, Target is cheaper, but they don't deliver the sales per unit or sales per square foot Walmart does. The above example is usually what we find, but often Target does slightly better. The message of Target Sells Groceries (cheaper) is not yet connecting with shoppers.

David Livingston, Principal, DJL Research

I should think that having the lowest price on some loss-leaders like the bird itself should be sufficient for most customers. You do not need to win the whole basket to win most customers and you don't want to, and can't afford, to make this a race to the bottom. When I worked in the merchandising department at Canada's largest grocer, people used to say "no-one knows the price of shoe laces." Be competitive wherever and whenever price-impression matters, make healthy margins on the rest.

Fabien Tiburce, CEO, Compliantia, Retail Audit & Task Management Software

The Thanksgiving basket exercise isn't particularly compelling given the differences in brand profiles and potential quality discrepancies between retailers.

That said, Target has done a terrific job of correcting its value perception and shifting focus toward the "pay less" portion of its brand promise. Target's private, proprietary/exclusive-weighted brand profile helps it hedge against like-for-like comparisons. Therefore, Target's main opportunity isn't so much to drive extreme price value as to ensure that its customers don't feel like they are getting fleeced. Mission accomplished.

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Carol Spieckerman, President, newmarketbuilders

Saving $6.83...isn't that what Thanksgiving is all about? Seriously though, I don't think one can attach much meaning to this survey when the authors freely admit that "Target ... want(s) to have a very competitive holiday season..." add that to "it's possible to cherry pick any number of items..." and I think people will return to whatever preconceptions they have. OTOH, what's up with Acme? Making Whole Foods look inexpensive doesn't sound like much of a strategy.

'notcom'

Price will be a key factor in purchases across all categories. Maximizing a shopping day, hour and/or minute will also mean something. Consumers know how to add it all up and direct their buying dollars to where it does the most for their wallets and peace of mind. Target is clearly working at having the competitive against these criteria.

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Joan Treistman, President, The Treistman Group LLC

Very. In today's economy, price is a key component that cannot be ignored. Add to this the traditional price pressures during the holiday season and price becomes a critical marketing component for a successful retail effort for most retailers.

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Kai Clarke, President, Kowa Optimed, Inc.

The price between Walmart and Target becomes even closer if the shopper uses their Walmart credit card.

'geohans'

I believe that Target has chosen to make price a key value this holiday season, and we will have to see what the impact is of such a decision down the road. Some customer segments are heavily motivated by price year-around, while others are more price-shoppers during the holiday season particularly (when they tend to make large-ticket purchases).

If the seasonally price-focused shoppers become trained to seek price as the ultimate value year-around, then Target may find themselves "penny-wise and pound-foolish."

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Mark Price, Managing Partner, LiftPoint Consulting, Inc.

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