Dollar General edges out Wal-Mart in low price study

by The City Wire staff ([email protected]) 92 views 

Wal-Mart talks a lot about low prices with aggressive marketing campaigns, but a recent study by Kantar Retail found it was Dollar General that offered the lowest opening price points.

Kantar’s third annual pricing study, released Oct. 25, was conducted in stores located in the Northeast and the basket selection was based on cross-category needs of a low-income consumer seeking the best possible prices for the entire basket.

While the price gap between Dollar General and Wal-Mart narrowed from last year, researchers said their findings suggest that shoppers looking to spend the least on a single food and consumables basket should look to Dollar General. That said, it should be noted that with the exception of health and beauty aids each of Dollar General’s segment basket totals increased year over year.

Last year Wal-Mart pledged to invest $2 billion in efforts to lower prices through 2014. Chief Merchandising Officer Duncan Mac Naughton recently told analysts some of those investments were paying off in marketshare gains.

“We're comfortable with our price position across the markets we operate in. Our price investments, they're well planned, and they're very thoughtful. We've targeted price investments in specific categories in our grocery business, and we've invested in specific categories. Categories like adult beverage, produce, and our paper goods business. We've invested 300 basis points in adult beverages, and enhanced our mix of private labeled brands at the same time,” Mac Naughton said.

In the recent quarter Wal-Mart reported its market share rose 90 basis points in adult beverage.

“We'll continue to invest strategically in categories that deliver basket savings, as well as overall price perception to create a sustainable competitive advantage,” he added.

Kantar notes Wal-Mart’s efforts were visible in this year’s study as the big box retailer had the lowest opening price point in 12 of the 21 categories examined.

“The retailer particularly asserted its non-edible grocery basket position, supported by a greater emphasis of private labels relative to the retailer’s other sub­baskets,” the study notes.

In this year’s study, Kantar Retail selected 21 categories across the edible grocery, non-edible grocery, and health and beauty aid (HBA) segments. In a change from last year, Walgreens was left out of the study due to a lack of opening price point competitiveness in previous years. All other retailers from last year were included. For each retailer, Kantar assessed the lowest price point available to the shopper in that category (excluding trial sizes) so that the low-income shopper could minimally meet her purchase requirements across categories.

For the second year in a row, Dollar General’s total basket was the least expensive, though edging out Wal-Mart’s basket by only 12 cents this year. This represents a substantial closing of the gap identified last year, when Dollar General’s basket of items was 18% cheaper than Wal-Mart’s.

Following are the overall basket cost comparisons.
$28.70: Dollar General
$28.82: Wal-Mart
$30.81: Family Dollar
$37.89: Aldi
$42.49: Target

Kantar said the results were not part of temporary price cuts, rollbacks as for the most part the retailers in this study achieved their opening price point positions with everyday pricing.

One interesting note in this year’s study was the impact of private labels.

“The retailer with the least expensive sub-basket achieved that standing primarily through private labels in each case. In the edible and non-edible sub-baskets, private brands accounted for more than half the lowest opening price point recorded,” the study noted.

Aldi recorded the lowest edible grocery basket across the retailers surveyed at $11.40. Driving its lead position, 90% of edible grocery items in Aldi’s basket were private label and priced under $2.

Dollar General fell to second, at $13.20, after providing the least expensive edible grocery basket the previous year. Roughly half of the items were private label at Family Dollar and Dollar General. Just under 40% of the items were private label at Wal-Mart and Target.

The edible grocery sub-basket included 10 items: cereal, dry spaghetti, canned tuna, bread, half gallon of milk, peanut butter, canned vegetable, ketchup, pasta sauce and eggs.

Following are the edible-grocery cost comparisons.
$11.40: Aldi
$13.20: Dollar General
$13.81: Family Dollar
$14.18: Wal-Mart
$14.79: Target

There were six items in the non-edible sub-basket including: toilet paper, paper towel, liquid sink dish soap, laundry detergent, blue window cleaner and diapers.

Wal-Mart’s non­edible basket was the lowest across retailers, registering $1.24 less expensive than Dollar General’s. The retailer made notable gains in the non-edible basket this year, after registering nearly 40% more expensive than Dollar General in the same categories last year.

Kantar said five out of six opening price point items in Wal-Mart’s sub-basket were non-edible, up from three last year.

Following are the non-edible cost comparisons.
$9.26: Wal-Mart
$10.50: Dollar General
$12: Family Dollar
$12.44: Aldi
$19.97: Target

More than 80% of Wal-Mart’s and Aldi’s non-edible sub-basket was private level. This compared to 60% private label at Family Dollar and Dollar General. Target’s sub-basket was evenly split between national brand and private label.

Dollar General and Family Dollar tied for the least expensive health, beauty aid basket at $5. Both retailers’ baskets remained consistently priced compared to last year, according to the study.

Wal-Mart’s sub­basket was more expensive than Family Dollar and Dollar General’s by 38 cents, driven by only one item, disposable razors. Each of its other items registered less expensive than the competition.

For the third year in a row, Aldi had the most expensive health, beauty aid basket, registering nearly three times more expensive than Family Dollar and Dollar General. The health, beauty aid sub-basket included these items: bar soap, tooth paste, shampoo, aspirin and disposable razor.

Following are the HBA cost comparisons.
$5: Dollar General
$5: Family Dollar
$5.38: Wal-Mart
$7.73: Target
$14.05: Aldi

Dollar General, Target and Family Dollar achieved their results with 40% branded products, where Wal-Mart’s lower price points were 85% national brands. Roughly 40% of Aldi’s sub-basket items were national brands.