Target Corp. (TGT) this month had lower prices than Wal-Mart for the first time since October, according to Bloomberg Industries. The Minneapolis-based chain also led by its widest margin since the monthly study began two years ago. The study examined the gap in average price across a basket of 150 like items at stores within five miles of each other.
The discounters are fighting for U.S. customers who are still dealing with high unemployment and slow wage growth. The chains also are facing more competition from online retailers such as Amazon.com Inc. (AMZN), which offers free shipping and is adding distribution centers to speed up delivery time.
Consumers who shop at discount chains "are trying to stretch their budgetary dollars as much as possible," Jennifer Bartashus, an analyst for Bloomberg Industries in Skillman, New Jersey, said in an interview. "They will be driven to whatever store offers the better value."
The second-largest U.S. discounter won this month by cutting into Wal-Mart's lead in food prices. Bentonville, Arkansas-based Wal-Mart's advantage in groceries fell to 1.35 percentage points from 4.5 percentage points in July. Target's improvement in food may have come because of more promotions tied to back-to-school shopping, Bartashus said.
Wal-Mart also lost ground on food prices to Bottom Dollar, a grocery store chain owned by Delhaize Group SA (DELB), according to a separate Bloomberg Industries study released Aug. 20.
Wal-Mart is still the price leader, and if a rival shows lower prices, it is either because of a temporary sale or promotion, Deisha Galberth Barnett, a company spokeswoman, said in a phone interview.
"Anytime there's an environment with high-low retailers, pricing surveys will reflect some differences," Galberth Barnett said in an e-mailed statement. "Walmart is delivering everyday low prices -- not pricing gimmicks -- every day, 365 days per year, not just during a single week or during a particular season. Our customers don't have to wait for a sale or look for an ad."
Wal-Mart also has its Ad Match Guarantee, through which it will match local competitors' advertised prices on identical products, Galberth Barnett said.
Wal-Mart, which has "Save money. Live better." in its logo, has focused on cutting prices and adding items to bring consumers back to its stores after same-store sales in the U.S., its largest market, declined for more than two years. Revenue by that measure has since rebounded with gains in four straight quarters for the world's largest retailer.
"Wal-Mart has been rolling out 88-cent deals and very publicly communicating its ad-match campaign, so it's a real blow that Target has managed to trump them on price," Natalie Berg, an analyst with London research firm Planet Retail, said in an e-mail. "When it comes to seasonal, nobody does it better than Target. This year, they've gone in all guns blazing, getting more aggressive on price and creating a far more compelling in-store environment than Wal-Mart."
The price leadership by Target is a surprise because the retailer doesn't try to beat Wal-Mart on price across the entire store, said Patrick McKeever, managing director with MKM Partners in Stamford, Connecticut. The two retailers will battle on key categories, he said.
© 2017 Jobs & Hire All rights reserved. Do not reproduce without permission.
