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Can Walmart afford not to be the low price leader?

February 14, 2014

Over the past several years, market basket studies have been published showing Walmart or its dollar store competitors — alternately — with the lowest comparative prices. For companies with consumers so focused on stretching their dollars, the perception of having the lowest price is critically important. The latest study, this time comparing prices at Dollar General, Family Dollar and Walmart, concludes the dollar store chains have lower prices than their big box competitor.

Stern Agee recently compared 42 identical food, beverage, household and other consumable items at locations for each chain in northern New Jersey.

Last May when the firm did a similar study, "Walmart was the clear pricing leader," wrote Charles Grom, a retail analyst at Stern Agee, in a research note. "In the four subsequent price checks since that time, [Wal-Mart] has continued to lose ground."

According to a Business Insider report, the price on Family Dollar's basket has dropped $9.37 since May. Dollar General has lowered its prices by $4 while Walmart has gone up $2.36 during the same period.

In the past three months, Family Dollar has cut prices 3.4 percent to $145.59, Dollar General 2.2 percent to $149.15, and Walmart 0.7 percent to $149.51.

Discussion Questions:

How closely is the success of dollar store chains and Walmart tied to price perception on behalf of shoppers? Can Walmart afford not to be viewed by consumers as the low price leader?

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Instant Poll:

For which is the perception as low price leader most important to success?


Walmart has a problem. Dollar stores are nibbling around the edge of its basket, and even in head-to-head competition with grocers (a TV ad campaign Walmart itself started) it also don't always win the price race. Publix, (for example) has shown price comparisons and come out pretty favorably. And that doesn't even take private label into account.

A gazillion years ago my father named his store "Sam's Outlet" because back then "Outlet" had an immediate perception of low-price. "Dollar" has the same perception today.

So the net is, low-price is implicit in the Dollar store names, and low-price is explicit in Walmart's commercials. Let the price wars begin.

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Paula Rosenblum, Managing Partner, RSR Research

Both dollar stores and Walmart are closely tied to price, each trying to be the low price leader. WM has spend millions of dollars telling consumers to compare prices. This study, if widely reported, could put a dent in the Walmart brand.

This is not the first time that WM's low price leadership has been challenged. Past studies showed that WM was lower priced in some areas and higher in others. The studies rankled Bentonville and WM cut prices to reclaim the crown. Let's see if this study causes them to do it again.

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Max Goldberg, President, Max Goldberg & Associates

Dollar store chains have been growing like crazy over the past decade, in part because they correctly sensed a strong market for neighborhood discount outlets. These smaller-footprint stores didn't fit Walmart's distribution model, but it's a missed opportunity for them. Between them, Dollar General, Family Dollar and Dollar Tree operate over 23,000 stores. Add in better pricing, and that's a formidable opponent to Walmart.

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Cathy Hotka, Principal, Cathy Hotka & Associates

For smart shoppers, Walmart has not been viewed at the low price leader for a long time. In my studies we now view Walmart as the middle of the road benchmark for pricing. In Wisconsin, Aldi, dollar stores, Target (with REDcard), and Woodmans, will usually be lower than Walmart. This is fact, not perception. With regards to perception, Walmart is probably considered to be even with the lower priced stores. The conventional supermarkets are now considered to be the premium priced stores. Walmart can afford to not be viewed as the low price leader because 1) in metro areas they usually have a huge market share and 2) in rural areas they usually don't have any big-box price operators to compete with.

David Livingston, Principal, DJL Research


Walmart and dollar stores do compete for similar customers and price is one of the elements that both pay attention to as part of their strategy mix. Although the consumer entering a dollar store has a more limited selection than at Walmart, they do have the convenience of an easy to shop format (from parking to in-store navigation to checkout).

Walmart's strategy is about delivering value to their customers and it turns not only on price, but also breadth and depth of assortment (and even shopping experience). So, that means Walmart will not have the lowest price on every item, but on key items they realize that their customers expect them to set the low-price mark. People pay close attention to the price of milk or toilet paper and not as much to spice or jam. While a 42 item basket sounds scientific and repeatable, it may not necessarily reflect how you and I perceive value or price of our own baskets (and our own locality) - the way people shop is driven more by key item pricing that translates to a wider perception of the store's price image.

The dollar stores are competing among themselves as well as with big box retailers like Walmart. This calls for more investments in technology, people, stores, as well as creating lean and responsive supply chains. In the end, the consumer is the winner as all fight for her loyalty and share of wallet.

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Mohamed Amer, Global Head of Strategic Communications, Consumer Industries, SAP

The reality is that it does not matter what the research, price checking surveys, and market basket comparison results actually show. The fact is, perception is reality. Walmart is perceived as having low prices. All of this type of study shows is the numbers. It does not show consumer perception.

It isn't hard to find lower prices elsewhere than Walmart. Our shopping experiences tell us that Target has been out performing Walmart on price for some time.

Has information like this study or others helped to shift consumer perception? That is the question. My thought would be that perception is driven by consumer experience with only a small amount of influence by this type of study.

Further, the true indicator would be to simply look at Walmart's same store sales in comparison to dollar stores and other similar retailers. Therein lies the real measurement of the shift.


What is a bit confusing here is that the low dollar competitors and Walmart operate with a different level of assortments. In a way they are a different category of retailers. You can only buy so many items at a certain dollar store vs. clothes, car parts, food, and new glasses at Walmart. People like me are will to pay for this convenience. There is a VALUE with the way that Walmart serves many needs in one store.

Tom...Hey, where is my Valentines Day gift?

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Tom Redd, Global Vice President, Strategic Communications, SAP Global Retail Business Unit

According to Accenture, there are three basic market models and while I do not completely agree, it is instructive to review. These are 1) market innovator or disruptor (Amazon?), 2) low price leader or 3) sector dominator (making it convenient and easy or rewarding to do business with - Amazon again?). Of these, Walmart has long been committed to being the low price leader, so yes, this remains critical to them. It may be possible for them to transition toward overall selection and convenience, but then that also puts them right on with Amazon yet again.

Currently it would seem to be dangerous for Walmart to lose their pricing reputation which of course is why it is under attack. The implication remains for now that margins, ASPs and comps will remain under pressure.

Robert Heiblim, Principal, RH Associates

There is more to the comparison of dollar stores and Walmart than price. In fairness, most of my Walmarts are new or refurbished. That said, I can find pretty much everything I want in the way of grocery/household at Walmart - the same can't be said for dollar stores.

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Dr. Stephen Needel, Managing Partner, Advanced Simulations

Walmart can survive not being the low price leader as long as it maintains overall value. For many years now, Walmart has not been the low priced leader, especially in the grocery business. Aldi and Save-A-Lot will kick Walmart to the curb any day on pricing. Family Dollar and Dollar General seem to have an advantage in locations, especially in low income areas and their pricing is sometimes lower than Walmart, but never the equal of Aldi and Save-A-Lot. Heck, I can buy certain grocery items in a local Harris Teeter 20% less that the equivalent item at Walmart and Harris Teeter does not in any way pretend to compete on price and exudes an attitude of "if you can't afford it, you shouldn't be in here."

Now not many Walmart customers ever walk into a Harris Teeter, but the fact is that Walmart really doesn't seem to care if they compete on every item. They will rock your world on some items, like beverages, beer and what little wine they have. They seem to be keeping their customers fairly happy and I look for them to continue to increase prices, not decrease them. They might be planning to trade the ultra low income shopper for a little higher income crowd.

Ed Dennis, Sales, Dennis Enterprises

The dollar stores seem to be evolving into a first stop for household shoppers. This is not just for extras shopping, now people are looking for the availability of weekly and monthly shopping needs. After that they are turning to the big boxes for what wasn't in the dollar store, which is still a lot by any standard.

This effect on shopping habits may become a very serious issue for the big boxes in the next few years if the corporate buyers and planners in "dollar-ville" can successfully anticipate and stock for larger portions of the shopping list with bargains galore. Retailers also stand to acquire a wealth of insight as to how far consumers will go substituting quality for price from the dollar stores' turns.

That said, I see the small and medium retail businesses taking it on the chin for this market expansion. The small and medium businesses tied to shopping malls will most likely be the hardest hit as they are now. The big boxes should not limit their expansion efforts against small and medium businesses.

The next few years will see a lot of attention from the big boxes aimed at e-commerce and financing. Amazon and the big banks will soon be getting some serious competition with big money in support of these ventures. This is simply because there are few opportunities outside these markets with a potential for return in the high billions of dollars where the big boxes need to play.


Walmart and Dollar General are fighting for the grocery and general merchandise title, and let them beat each other up. They will never win in the perishable business, as well run supermarkets will always do a better job. If Walmart wanted to put a huge dent into DG, they know how to get down and dirty on pricing, so IMO Walmart can and probably will do what ever it takes to remain low in groceries.

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Tony Orlando, Owner, Tony O's Supermarket & Catering

Excuse me for saying it but both of them are perceived as low price leaders. Do they shift back and forth on baskets? Yep. Does that really matter so much? Nope. and I'll tell you why....

Dollar stores don't have near the merchandise as WM. We hop in the car and head to WM for our staples but we hit the Dollar store on the way home for wrapping paper, party favors, and birthday cards.

They do need to stay competitive with their prices or maybe flea markets or slightly used goods stores will emerge for distraction.

Lee Kent, Sharing Insights for Success in Retail, YourRetailAuthority

A different way to think about this is to compare it to the threat of local and/or niche CPG represents to big national brands. Direct sales channels like Amazon can bring specialized products to consumers otherwise having little choice but to purchase big brands at the local supermarket. If you assume dollar stores offer a more local/personal assortment and community presence, while meeting or exceeding the price savings of Walmart (the "big brand" in this case), then you can imagine the dollar stores threatening Walmart's low price advantage.

Overall consumer buying trends seem to converging toward more personal, local and possibly custom (and away from general, homogenous) - I wonder if and how low price affects that.

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Gib Bassett, Retail and Consumer Goods Industry Principal, Oracle

Retailers who have invested such a great deal of their marketing and identity dollars and energy CANNOT afford to fail to convince their target consumers that they are the lowest price guy in town. Failure to maintain this identity will result in significant confusion for the consumer, severely damaging consumer loyalty.

Ray Windsor, President, German Maestro

Those most likely to shop at Walmart are those most likely not to read surveys. The perception of lower prices becomes reality. If Walmart's customers believe Walmart's prices are high, then the first one to know will be Walmart; their sales will decline.

We can talk theories from 30,000 feet. But the reality is the cash register. And, as you know, Walmart has very good handle on reality.

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Christopher P. Ramey, President, Affluent Insights

The success of dollar store chains is directly tied to price. That's their differentiator! Not convenience, not assortment - just price. With chains like Family Dollar investing heavily in their business, it remains to be seen what does that do to their overall pricing structure in the near to long term.

For WMT, as mentioned by several others, a low price perception in key categories, for certain products, would be enough to drive the low price perception. Just a couple blocks down the road from the Rogers supercentre (couple miles from the Home Office) - ALDI has a regular stream of "smart shoppers" who understand that they can get by paying less so long as they don't need to see all the brand labels and don't have a need to choose from, let's say, 7 types of strawberry jam. A selection of 2 is good for them.


A lot. That's what they stand for. While dollar stores are about convenience, WM is for depth and breadth of assortment. While low prices are important for Dollar stores, it's even more important for WM. Dollar stores go with an image of convenience and customer would be willing to pay more compared to WM (especially if she knows what's available and what she wants).

AmolRatna Srivastav, VP, Accenture

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