It's not an easy time to be Walmart. First, economic worries are hanging heaviest on lower-income shoppers, its core audience. Next, there's a growing sense among those shoppers that Walmart's "Everyday Low Price" positioning is eroding, and that there are better deals in dollar stores, supermarkets, and even at Target.
For now, shopping at Walmart is cheaper than Target, one of its primary rivals. A just-released pricing study from Kantar Retail shows the Bentonville, Ark.-based chain has regained its edge, with a basket price 1.2% below Target's. But for shoppers using Target's REDcard to purchase items in the basket, the price would have beaten Walmart by 4%. (Previous Kantar research has shown that 14% of Target shoppers do sign up for the card, in order to get the 5% discount.)
"Looking ahead, Walmart's EDLP strategy appears set to intensify," writes Leon Nicholas, SVP/insights for Kantar Retail, and a contributor to the study. "Management's direction indicates that Walmart is aggressively working to advance its lower price position."
Demographics play a major role, Kantar says, with 26% of up-market ($85K+) Walmart shoppers now cruising the Target aisles more often -- higher than at any other single retailer, it says.
Of course, Target is not Walmart's only headache. A recent report from WSL/Strategic Retail shows that dollar stores, supermarkets, and other mass merchants are all more appealing to bargain hunters, and that 86% of the Walmart shoppers it surveyed no longer believe that Walmart has the lowest prices. Walmart's most frequent shoppers "agree that dollar stores have lower prices than Walmart, more national brands than they used to carry, are nicer to shop, and are more accepted by everyone as they are now mainstream."
The study also confirms that the economy is weighing more heavily on those in the Walmart demographic, with 82% of its shoppers saying they haven't seen any improvement in their financial situation in the past year; 70% don't expect their finances to get better next year. "The economic downturn, credit crunch and higher gas prices, among other factors, squeezed the discretionary spending out of the wallets of Walmart shoppers," it notes.
Earlier this summer, an analysis from Blueocean found that Walmart was losing sales precisely because of that continued economic uncertainty. Walmart's high engagement shoppers, its most valuable customers, are reportedly making the most significant cuts in Walmart trip frequency.
Walmart recently released its second-quarter results, which included a bigger-than-expected decline in its U.S. sales. On a same-store basis, sales in its U.S. Walmart stores fell 0.9%, when observers had been expecting a decline of just 0.6%. At the time, Walmart executives cited concerns about the economic pressure on its customers. "With this volatility," it says, "it is as important as ever to deliver on Walmart's one-stop shopping promise for broad assortment and everyday low prices."