Wal-Mart, Dollar General lead pricing in Atlanta - grocery prices, market statistics; Atlanta, Georgia - Statistical Data Included

DSN Retailing Today, August 12, 2002 by Laura Heller

ATLANTA -- A depressed economy, unemployment fears and stock market turmoil add up to increasingly price-sensitive consumers, and nowhere is this more apparent than in the grocery channel, where shoppers have been known to drive miles to save pennies on staple items. In the interest of gauging consumer response to the wide variety of price points found in any given market, DSN Retailing Today has partnered with consulting firm McMillan/Doolittle to emulate the typical family shopping trip, with the specific goal of securing the absolute best price.

DSN Retailing Today conducted a similar market basket study one year ago in the Atlanta market, comparing prices based on specific brands and sizes. This year we visited the same stores with a different objective: we would buy the lowest-cost item in a category, regardless of brand.

In the previous study, supercenters consistently bested traditional supermarkets with the lowest prices for national brands. We expected the same to be true this time for private-label and sale items, which make up the majority of items in each basket. In those areas, this study was no exception.

What was surprising was how high the differential was between Wal-Mart (the baseline at $72.12) and the highest price retailer, in this case Publix (with a total of $98.44). While both go to market in dramatically different ways, McMillan/Doolittle's Nell Stern didn't expect the price differential to be so great, given this fictional shopper's willingness to substitute brands and sale items.

"Publix does an amazing job of presentation and serving their customer," said Stern. "But what about price?" Publix differentiates itself by offering high levels of customer service and on every occasion DSNRT visited, this location did distinguish itself with friendly, eager-to-help employees, an easy-to-shop store, assistance carrying groceries to the car and even free diapers in the restroom.

But assistance comes at a premium. In some cases shoppers were paying nearly twice the price at Publix than Wal-Mart, and Publix came in 36.4% higher on the total list than Wal-Mart. Interestingly, Publix was priced more competitive in last year's study, coming in 26.1% higher than the EDLP retailer on 38 items. This could be attributed to Wal-Mart's heavy reliance on brands. While 20 of the lowest-priced items in the Publix basket were private label, it had the least variety and in several categories offered no house brand alternative.

Stern had expected Kroger to be more competitive with a low-priced study than a branded one, and Kroger did show a marked improvement this time at just 15.7% higher than Wal-Mart, compared with 33% higher last year. Kroger implemented a loyalty program in this market just prior to the original study that encourages shoppers to purchase featured items. Twenty-six of the 47 items were specially priced with the chain's loyalty card, cutting the total price of the basket to within a much more competitive range.

So competitive that Kroger was actually $36 cheaper than SuperTarget, which was more competitive against Wal-Mart than in the branded study.

Since last year, Target has rolled out Market Pantry as opening price point private-label products plus its Archer Farms label. But a mere eight items were Market Pantry with 14 other items labeled either Archer Farms or Target brand.

One of the more surprising results came from Save-Rite, part of the Winn-Dixie chain that exited Atlanta with its namesake stores in the past year to operate this value-conscious, warehouse style format instead. But in spite of 30 proprietary brands, the supposed low-cost retailer was $17.25 higher than Wal-Mart's total basket and nearly $9 more than Kroger. Save-Rite was not shopped during last year's branded study, but was included here for the value theme of the lowest-priced item basket.

Not all shopping experiences or consumer preferences are created equal, Stern said. Nor do all retailers consistently perform in the same manner. In spite of its ability to come out ahead, Wal-Mart did not have the absolute lowest price on every item. Even highest priced Publix won that honor on some items, such as yogurt and paper towels.

Although the majority of items in the baskets were private label, there were instances when a national label underpriced the house brand. But the bottom line is clear: Consumers seeking rock bottom prices need look to the low-cost leader and supermarkets hoping to keep share among these shoppers need to be looking over their shoulder.