EDLP in spotlight as Target squeaks under Walmart

Walmart saw its low price supremacy challenged this week by a Bloomberg report indicating Target had lower prices on a basket of 150 comparable items.

The news organization said Target’s prices were 0.46% lower than Walmart’s at stores within five miles of one another, reversing the prior month’s results which showed Walmart 2.01% lower. Either way, the results are largely immaterial, but it is perception that matters and nothing gets Walmart’s dander up or does more to erode shopper trust in its value proposition than headlines declaring that Target is cheaper than Walmart.

In reality, the gap has been very narrow for a long time as Target’s stated goal has been to hover within a few percentage points of Walmart on food and consumables prices. Meanwhile, Walmart doesn’t want to price any lower than it absolutely has to in order to maintain its price leadership perception while protecting profitability. Target is willing to suffer some on the food and consumables side of the store because it can offset the margin hit with sales of fashionable apparel and home goods. Ironically, what Bloomberg failed to mention, but analysts regularly take note of, is that Target shoppers who participate in Target’s REDcard Rewards program save an additional 5%, which regularly brings a comparable basket of goods below Walmart’s prices.

Walmart will gladly match Target’s prices, but it doesn’t have an answer yet for the 5% rewards program.

To read the Bloomberg piece and Walmart’s response, click here.