Pricing gap holds steady

Target’s longstanding pricing philosophy of remaining within a few percentage points of Walmart remains intact, according to the most recently monthly pricing survey from Credit Suisse. The firm looks at prices on a basket of goods in Dallas and Chicago each month, and in January it revealed the gap between Walmart and Target had widened to 3.9% from 3.7% in December. While that is an inconsequential month-to-month change, the firm noted that the price differential doesn’t take into account Target’s new REDcard Rewards program which reduces prices cardholders pay by 5%, thus negating Walmart’s lower shelf price.

Overall, Walmart’s price gap remains relatively stable compared to Target, but diverged somewhat from grocers and drugstores, according to Credit Suisse.

“This isn’t all that surprising since grocers have recently commented that they have been passing along price increases and have experienced little competitive resistance,” according to Credit Suisse analyst Edward Kelly. “On the other hand, it would also make sense that Target would try to avoid widening its pricing gap with Walmart as it continues to ramp up its P-fresh and the Red Card initiatives. If Walmart reduces prices further or delays pricing increases, it could heighten the price gap between the grocers and discounters, making it more difficult for the grocers to pass along further price increases to the consumer.”