Narrowing the price gap a little more
A monthly pricing survey conducted by Credit Suisse in December shows that Walmart remains the lowest price on a basket of 60 products across two major markets, Target is closer than ever and is actually less expensive for those who take advantage of the 5% Rewards program.
Target was Walmart’s closest competitor in December with prices that were 3.7% higher. Largest prices differences were seen with such conventional supermarket chains as Kroger, Safeway and Supervalu, whose prices were higher than Walmart’s by 10%, 17% and 19% higher, respectively. Drug chains Walgreens and CVS were higher by 23.8% and 24.7%, respectively.
“Our monthly pricing survey showed that Walmart’s price gap remains relatively stable, an encouraging trend that suggests more rational pricing for the entire industry,” according to the Credit Suisse report from earlier this week.
Overall, the firm said 2010 proved to be a challenging year in consumables pricing and unit demand and noted that concerns over Walmart’s aggressive pricing strategy turned out to be overblown.
“Our survey results indicated Walmart’s average pricing gap relative to competitors in both Dallas and Chicago narrowed to its lowest level in nearly three years,” according the firm.
This is seen as an encouraging sign by those in the financial community who interpret the data as evidence of a rational pricing environment, although concerns about an acceleration of product inflation persist.
According to Credit Suisse, meaningful inflation failed to surface in 2010 although the situation began to change during the past five months with moderate inflation in food and health and beauty products.
“We believe inflation is poised to possibly accelerate further in 2011 largely due to higher prices in dry grocery. We think the ability to pass on further price increases ultimately depends on the health of the consumer, the degree of consumer demand elasticity, and the overall competitive environment, i.e. Walmart. We believe dry grocery inflation will be easier to pass through versus commoditized categories such as dairy and that the retail pricing environment will remain rational, consistent with the last five months of 2010.”