retail news in context, analysis with attitude

CNBC reports that Walmart "is running a new price-comparison test in at least 1,200 U.S. stores and squeezing packaged goods suppliers in a bid to close a pricing gap with German-based discount grocery chain Aldi and other U.S. rivals like Kroger."

According to the story, Walmart "launched the price test across 11 Midwest and Southeastern states such as Iowa, Illinois and Florida, focusing on price competition in the grocery business that accounts for 56 percent of the company's revenue ... The competition at these stores is intense, with both competitors selling a dozen large eggs for less than a dollar. A gallon of milk at some stores was priced at around $1."

The goal, CNBC writes, is "finding the right price point across a range of products that will attract more shoppers, and then adjusting prices as needed."

The CNBC also provides some context: "The big box retailer ... held meetings last week in Bentonville, Arkansas with food and consumer products vendors, including Procter & Gamble, Unilever, Conagra Brands, and demanded they reduce the cost they charge the retailer by 15 percent, sources said. Wal-Mart also said it expects suppliers to help the company beat rivals on head-to-head pricing 80 percent of the time, these vendor sources said. The wide-ranging meeting with suppliers - where Wal-Mart discussed other topics - was also attended by Johnson & Johnson and Kraft Heinz, among others."
KC's View:
Walmart essentially has to avoid its UK problem.

The Wall Street Journal reported over the weekend that Walmart-owned Asda Group in the UK has been dealing with a problem that it generally has been unused to over the years - the perception that its prices are too high. That's largely been because discounters such as Aldi and Lidl have so effectively undercut its low-price image, leaving Asda to search for a solution.

CEO Sean Clarke, the story says, "has been given the go-ahead to compete more on price with discount retailers, according to people familiar with those plans. Last month, Asda halved prices on popular items such as Napolina canned tomatoes and Pot Noodle soups." Beyond that, Asda is endeavoring to bring in US products not generally available in the UK, as well as "working on more quickly identifying product shortages and putting more staff on shop floors."

But as we've been saying here for a while, US retailers have to use the UK as an object lesson for what can happen when you lose - or just give up through complacency - your competitive edge and differential advantages.