Study: Dollar General beat Wal-Mart prices

story by Kim Souza
ksouza@thecitywire.com

Wal-Mart executives had a lot to say to investors about how they were winning on price during the company’s annual investor conference in Rogers on Wednesday (Oct. 10).

They talked about an aggressive ad campaign that demonstrates how day-in and day-out their prices were lower than Dollar General, Albertsons, Kroger and Publix which was resonating well with customers across the country.

Research shows that is debatable at best. Earlier this week a price point survey recently conducted by Kantar Retail found Dollar General was the price leader among a handful of competitors including Wal-Mart.

The survey was conducted in stores located in the Northeast and the basket selection was based on cross-category needs of a low-income shopper seeking the best prices for the entire basket.

The economy is still struggling to gain momentum, and low income shoppers continue to seek ways to spend less. Shoppers on limited budgets are not able to take advantage of multi-packs with low price/volume ratios or bundled solutions, so opening price points, per se, are the value signal they seek, according to Kantar’s release.

Kantar selected 20 categories across the edible grocery, non-edible grocery, and health and beauty aid segments. The study was expanded this year to include Dollar General along with the same six retailers surveyed in 2011.

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.

TOTAL BASKET RESULTS
The addition of Dollar General this year was consequential, according to Kantar. Among the seven retailers surveyed, the study results indicated that Dollar General had the least expensive total basket by far; driven by lower opening price points in its edible and non-edible baskets.

At a total cost of $23.81 the basket savings were 18% more at Dollar General than their closest competitor – Wal-Mart, with a $28.12 basket total.

The other store results include:
Family Dollar:  $32.45
Aldi:  $34.70
Target:  $37.59
Walgreens:  $48.13

In last year’s study, Wal-Mart’s basket had been the least expensive – however, Dollar General was not included because the outlet had not opened yet in the market. This year, Wal-Mart did have the least expensive health and beauty aid sub-basket, based on their availability of lower everyday low price points.

The HBA items cost $4.48 at Wal-Mart compared to $5 at Dollar General. The highest retailer in this sub-basket was Aldi with a cost of $11.55.
 
The retailers’ use of temporary price cuts did not affect Kantar’s outcomes overall. In fact, Walgreens, which had the highest overall basket price, offered the most number of price cuts. Wal-Mart, Family Dollar and Aldi all achieved their opening price points without discounts.

Also of note, both the cheapest overall basket, as well as each of the cheapest sub-baskets, was achieved primarily through national brands.

EDIBLE/NON-EDIBLE GROCERY
Dollar General provided the least expensive edible grocery basket, beating Aldi by 2%. National brands comprise 56% of the edible items in Dollar General’s basket, while Aldi was 100% private label.

Wal-Mart ranked fifth out of seven in price savings in the edible grocery segment, with only Walgreens and Family Dollar ranking higher.

Dollar General was the clear price leader in non-edible grocery, driven by clearance pricing on diapers. At the same time, regular pricing on its diapers still would have resulted in the lowest non-edible basket.

The non-edible items cost $8 at Dollar General compared to $11.11 at Wal-Mart. Though 39% more costly than Dollar General, Wal-Mart was the second least expensive in the group, with a 50/50 split of private label to national brands.

At Target and Walgreens, non-edible baskets were more than double the price at Dollar General.

Kantar said a savvy shopper still could have spent less. Although Dollar General delivered the least expensive total basket available in one location, a shopper could save more money by shopping Dollar General for edible and non-edible grocery and Wal-Mart for their HBA items.

This total basket could save the shopper an additional 10% over a Dollar General only basket.

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Overall, the ability of Dollar General to offer a credible basket price advantage to the lower income shopper, largely without price cuts and via national brands, and despite competitors’ use of ad-match tactics, is impressive, according to Kantar researchers.

The reports states that temporary price cuts or use of known value items to create the perception of a price advantage, will not suffice in battle for the value shopper’s dollar.

Kantar said a retailer must pursue aggressive, everyday pricing across multiple categories to overtake Dollar General’s advantage at the opening price point.

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