Target has never claimed to have the lowest prices, but it might want to rethink that strategy now that it has the benefit of its REDcard loyalty program.
A recent monthly pricing study conducted by Credit Suisse shows that Walmart still has the lowest prices, but indicates the gap is narrowing and that on basket of 60 items it is now at the lowest level in three years. More specifically, Target’s price gap with Walmart narrowed from 4% in November to 3.7% in December. Target’s prices decreased sequentially by 0.4% compared with Walmart’s 0.1% decline. The kicker here is that those who shopped at Target and used their REDcard to take advantage of the 5% Rewards discounts actually would have paid less at Target than at Walmart. That finding is similar to research conducted by Citigroup which look at holiday toy pricing.
According to Credit Suisse, “while 2010 proved to be a challenging year in consumables pricing and unit demand, we believe 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.”