The two US department giants are going head-to-head in a pricing war, as Target looks to match, and in some cases beat, Walmart’s online store’s price points on a range of household essentials.
The online research team from Clark Howard has compared the prices of a number of branded household essentials that are sold both on Walmart.com and Target.com and has found that Target has lowered its process on a number of its products.
Last year, Target announced it would be drilling down its prices on the products that matter most to consumers, keeping everyday prices low, rather than bombarding shoppers with short-term bonus offers and specials.
According to the findings of Clark Howard’s informal study, overall, a full cart of the same products purchased online from both Walmart and Target only have a $5 difference in price.
Filling a cart from both retailers with 30 of the same SKUs, the tab at Target came to $593.31, compared to Walmart’s at $588.58. According to the research firm, this minor pricing difference would then even out with Target RedCard holders getting an additional five percent off.
Formal research conducted by Profitero earlier in the year came to a similar conclusion, claiming the pricing war was most rampant between Walmart, Target, Jet and Amazon. The online prices of the three American businesses combined only sat marginally higher than Amazon, at an average of 4.5 percent.
The company also determined that Walmart is offering the same prices as Amazon on 53 percent of its products, followed by Target at 37 percent. However, Amazon appears to be keeping close tabs on the prices of its main competitors, often dropping its prices further to remain the best value option for consumers. This is great for shoppers, but Profitero has warned that the aggressive price matching strategy is destructive for brands.
Brands are also under risk of being dropped from the US marketplace’s virtual shop front, as Amazon reportedly removes products or brands that are too cheap to be profitable from its site on a regular basis.
“One strategy is redesigning products so that they’re smaller or require less packaging, thereby making them less costly for Amazon to stock and ship. Another strategy is developing products that cost less to make and therefore have more of a margin buffer when prices inevitably drop,” Mike Black, the vice president of marketing at Profitero said in a blog post.
For a number of US-based retailers, including the likes of Target, strategists are making up for lean margins by establishing private label brands. Target in America, as well as its Australian counterpart, have implemented this by introducing a range of affordable products in its apparel, home goods, furniture, and electronic categories.
Similar pricing wars have been plaguing retailers a little closer to home, with Priceline blaming its declining sales on “discount pressure”. After reporting a 14.4 percent drop in sales back in February, Australian Pharmaceutical Industries (API) – the owner of Priceline – attributed the loss to shrinking margins, stiffer competition and slower consumer spending.
“There’s only so much money left in the wallet after you pay all your household and utility costs,” API’s Chief Executive, Richard Vincent said. “The fight for a share of wallet has led to this. It’s coming through in more discretionary categories, not in health products but in skincare, hair care, and cosmetics.”
According to Vincent, big supermarket chains like Coles and Woolworths are heavily discounting well-known beauty brands, including Revlon and Maybelline’s makeup ranges, in a bid to break through a highly competitive landscape.
So far, Amazon hasn’t caused too much strife for the Australian e-commerce industry, but that could be about to change, as the global company slowly ramps up its Australian offerings.
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