Originally printed in the February 2018 issue of Produce Business.
Walmart’s Produce Pricing Advantage Seems To Erode Further In Ft. Lauderdale
Publix, Winn-Dixie and Safeway give Walmart a run for the money while Lucky’s Market comes out on top as low-price leader.
Editor’s note: New for this edition of the Walmart Pricing Report, we asked veteran retailer and Produce Business columnist Don Harris to visit each store to give his observations and opinions. Please see “Don’s Notes” in the boxes that follow.
Walmart has been heavily focused on building its online business. One reason, of course, is simply that many believe this to be the future. Walmart has three times the sales of Amazon and six times the profits, yet the stock market values Amazon as the more valuable company. This tells us that many smart people who have the ability and incentive to study the situation carefully have determined that Amazon’s model is highly scalable and likely to grow far faster than Walmart’s.
These investors likely are concerned that many of Walmart’s assets, notably its large stores, may soon become liabilities, especially if large amounts of consumer shopping move online or switch to smaller discount concepts such as Aldi or Lidl. These big stores may not be easily liquidated.
Yet, that may not be the whole story. When you read the 31st edition of the Produce Business Walmart Pricing Study, one senses that Walmart’s impact on the brick part of the bricks-and-clicks continuum is not what it once was.
So Walmart invests in online at least in part because its awesome scale may give it a competitive advantage in that space. If Amazon’s acquisition of Whole Foods heralds a new age of omni-channel retailing, then those 200,000-square-foot behemoths that Walmart operates suddenly do not look like white elephants but like hubs for digital commerce.
When we began this study, Walmart won almost every battle and won each battle handily. It was common for conventional grocery stores to come in at 30 percent over Walmart on pricing. Today that is rare. In our first report, from Connecticut, Super Stop & Shop was priced at 23 percent over Walmart, Shaw’s at 34 percent over Walmart and Big Y at 36 percent over Walmart.
For this report, the Produce Business team rolled into Fort Lauderdale, FL, and the retail reaction to Walmart’s presence is clear.
Walmart still beats conventional supermarkets but by much smaller margins. Publix, known for a high-service attitude, including tip-free delivery of goods into the cars of its customers, comes in at the top of the market with a pricing position 15.05 percent more than Walmart. Winn-Dixie is only 7.39 percent above Walmart, and Safeway is just 2.63 percent more than Walmart. Although Walmart beats these three stores on price, the difference is sufficiently small that other issues — location, ease of shopping and parking, favored private label product, etc. — easily can sway consumers away from Walmart.
When the difference was 30 percent plus, Walmart was unstoppable.
Lucky’s Market, which didn’t exist when we started this survey and only launched its second store in 2013, tries to do to Whole Foods what Walmart did to conventional grocers. But it takes pricing seriously and actually beats Walmart on pricing, coming in 8.21 percent below Walmart’s prices. Lucky’s seems to be one of many new concepts that has not accepted the idea that it must live in a world where Walmart beats it in price.
We did a separate review of where the market stands on organic produce pricing, an area that most retail executives report as hot (see table above). There is indication here that Walmart is off-trend. Although Publix is still the highest priced in organics among the retailers surveyed – 19.76 percent more than Walmart — all other retailers surveyed improved their price positioning vis a vis Walmart when looking solely at organic produce pricing. Lucky’s Market beat Walmart by 9.15 percent, Safeway beat Walmart by a narrow 2.55 percent and Winn-Dixie lost by only 1.84 percent on organic pricing.
There was a time when a store manager at Walmart could be fired for allowing other retailers to beat it on the price of high marquee items such as bananas. Yet, in this market, Publix, Lucky’s Market and Safeway all beat Walmart on banana prices. One can just hear Sam Walton saying “We never started a price war. We never lost one either.” But now, Walmart seems content to have its price leadership challenged, and not by Aldi or Lidl but by conventional supermarkets.
It is almost as if in the decades of the Walmart concept rolling across the country, other retailers have adapted and changed. And Walmart’s business model no longer provides as substantial a cost advantage as it once did. So, Walmart must look to the digital age, where its vaunted logistical abilities, its depth of financial resources and its pre-positioning in the bricks component of omni-channel retailing may yet give it back its competitive edge.
We’ll see what future editions of the Produce Business Walmart Pricing Report will have in store.