Target steals title of 'cheapest' from Wal-Mart

This month, the retailer boasts even lower prices than its bigger rival.

By InvestorPlace Aug 24, 2012 11:01AM

By Alyssa Oursler

The famous Target (TGT) vs. Wal-Mart (WMT) battle rages on, and this month, a tally goes to the former. 

For the first time since October, Target has reclaimed the title of "cheapest" from its fellow big-box retailer, Bloomberg reported, and the gap was the biggest its been in the two years the difference has been tracked.

Post continues below.

That's especially important in today's economy, as cheap is exactly what consumers are looking for. High unemployment, coupled with rising gas and food prices, means customers are as cash-conscious as ever. And while retail sales finally improved in July, that was one of the first good signs for the sector in months.

Both companies have thus been trying to lure in those penny-pinching customers with discounts and slashed prices. The key to Target's success in the pricing department  came from the addition of a groceries to many stores, which cut into Wal-Mart's advantage on food prices. The company has also added discount incentives through its REDCard.

Cheap, though, can have its downside. Target's margins have declined for the past eight quarters, thanks in part to such deals.

And generally, Wal-Mart is still the name that tends to be associated with discount retailers like Costco (COST), as are dollar stores like Dollar Tree (DLTR) and Family Dollar (FDO). The larger company claims that its prices remain lower every day and that Target relies more on seasonal sales.

Target will have to prove that isn't the case when next month rolls around and the back-to-school promotion season has come and gone.

Both retailers are also trying to gain an edge in other ways -- by squeezing their large stores into cities, for example -- especially as competition from online giant Amazon (AMZN) remains tough.

While Wal-Mart and Target have lower prices than Amazon, one could argue that you can't put a price on the convenience the online retailer provides over a brick-and-mortar model.

For now, though, things seem to be going just fine for both companies. Wal-Mart has seen gains of nearly 37% in the past year, while Target's shares have climbed around 23%. Maybe with a price gap in its back pocket, Target will be able to climb some more and close that gap as well.

As of this writing, Alyssa Oursler did not own a position in any of the aforementioned securities.

More from InvestorPlace

Aug 24, 2012 4:10PM
avatar is what the consumer need to realize about Wal-Mart.......After managing a meat dept at a store very close to the Wal-Mart Home offices in Arkansas for two and a half years, I am appalled at how they keep on advertising low prices and the fact that they are not raising prices.....this is because they are the home of the incredible shrinking product sizes......when you shop there pay close attention to the weight and volume of many of their highest volume selling products....chips, less weight per package but bigger bags to make you think you're getting more,  their own Great Value drinks (now you get an eight pack for the same price that a twelve pack cost less than six months ago)   frozen shrimp 12oz for the same price 1lb was less than a year ago,  cookies approximately half the weight for the same price etc...... and you will notice an increasing trend of selling you many other products, especially in the food category, for the same price they were a year or two years ago but with an average of 10-30% less weight or volume....most shoppers are unaware of this fact and therefore don't realize they are caught right in the middle of believing this company is not raising prices.....correct me  if you think I am wrong but doesn't less product at the same price equate to HIGHER PRICES?  This company has been misleading people for years and if you shop ther observantly will find that I am not making this up........oh.......but their not raising prices are they!!!!!!!!.........There is a reason they are now the 2nd largest company in the world with only Apple being bigger after only recenly surpassing them in gross sale and net worth along with cash reserves........every time Wal-Mart opens a new store they do not do so without it being FULLY PAID FOR AT THE TIME OF OPENING. 
Aug 24, 2012 2:43PM
Target was started as an off-shoot of the Dayton/Hudson Co. of Minneapolis. It is still headquartered in Minneapolis and is owned by American shareholders. It is NOT French owned. That rumor was started by some uneducated trailer park types who when the heard the tongue-in-cheek pronunciation of "Tar-zhay" they didn't get the joke and actually thought it was French. I am amazed anyone still believes that nonsense.
Aug 27, 2012 5:02AM
I work at a Walmart because they work around my school hours.  I have to say that I prefer by far to shop at Target even without my 10% discount because it's always a better shopping experience for me.  The people who shop at Target seem to have a bit more class than those who shop at Walmart (hence the website, and I try to run away from work as soon as possible whenever my shift is over because of it.  In just this week alone, I was threatened by a customer who knew he had been seen trying to shoplift, did double the workload because Walmart tends to cut employees' hours after hiring, was belittled by a man who was completely sexist, and yelled at by another who demanded I explain something to him.  Unfortunately, this is the norm at my Walmart, and I'm finally fed up and ready to look for something else to make ends meet.  

A few days ago, another customer came in and told me that the environment used to be better when Walmart was still owned by the family, and my co-workers agree.  Now Walmart is owned by greedy people who donate practically nothing to charities.  I will always prefer shopping at Target, hands down.
Aug 24, 2012 11:59AM
Stop selling this cheap crap and discount the food prices,you idiots!
Aug 24, 2012 4:36PM
target has a better quality then wally world also the staff are spot on
Aug 24, 2012 2:53PM
These stores are just part of the reason why we continue to be in this economic quagmire.  Demand American products and services and our economy will boom people!  Americans need to be educated about the long term price of buying foreign  goods and services.   Buy local, buy American!
Aug 24, 2012 4:35PM
Great!  This may not last long....Wal-Mart years ago bragged about its "Made in America" goods, which have been gone for years.  Sure, Target has few American made stuff, but I prefer Target over WM anytime. 
Aug 27, 2012 1:50PM
Walmart may be cheaper with some things, but I'd rather pay a little more at Target. Their stores are cleaner, their products, such as tennis shoes, last longer and are better made, their lines are shorter, and above all, their customer service is way superior. I've been talked down to at Walmart, and dealt with rude employees who didn't know where to find things or want to take the time to help or answer a question. Now I know all employees are not the same, and of course there are good employees working at Walmart. I unfortunately, have not been lucky enough to have been helped by them however. Give me Target any day.
Aug 24, 2012 2:35PM
It would be so much easier to understand the comments of so many posters if they would spell correctly, use proper punctuation, and write with proper grammar.  Jeez, people, 'their' or 'there', 'your' or 'you're'? That's 3rd grade English!  Ever heard of a period?  It goes at the end of a sentence, like this.  If you're writing just to please yourself, fine.  If you want to get a message across, you're really missing your target by not writing so your message can be understood.
Aug 24, 2012 4:24PM

I have always preferred Target over Walmart. Target stores are lighter and brighter, don't have the merchandise crammed together, and doesn't have the "big box" feel of Walmart. I have priced many items between the two stores and have found in most cases, the difference is only a penny or two. Even if prices are slightly higher at Target, I would much prefer to shop there over Walmart.


Aug 27, 2012 8:48AM
Wal-Mart is not cheap, I buy most of my groceries at a competing store across the street that sells many things for less than Wal-Mart and they also pay Union wages. They sucked you in with their cheap Chinese crap, then raised prices right in front of you on the groceries.
Aug 24, 2012 3:44PM
Is there some sort of rule that if you have loud, uncontrolled, undisciplined, rambunctious, ill-mannered, indulged children then you must shop at Target or Wal-Mart?  I dislike shopping at those stores because it is a headache-inducing experience.  Not enough parents know to LEAVE the store with their children when their children are misbehaving.  But I digress.  This article was about pricing.
Aug 27, 2012 1:18PM

Here in Southern CA, Wal-Mart may be cheaper than Target but I always choose Target over Wal-Mart because Target stores are cleaner and there are no "Wal-Mart People" at Target. Seriously, The Wal-Marts around here are disgustingly filthy and have REALLY strange people shopping there.  I once saw a woman open a foot powder container, squirt some into her shoes and place the container back on the shelf. Seriously?? Ugh!

I also saw a kid in a shopping basket grab an apple, put it into his mouth and momma took the apple from him and placed it back in the produce bin. WTF?!? Gads!

I really dislike Wal-Mart.

I  have limited the amount of money I spend at our Rockland,Maine Wal-Mart since I saw a lady cashier crying and trying to hide it. I asked her what was wrong and she cautiously looked around to be sure she wasn't being listened to by other employees or managers. She said they cut everybodies hours from full time to part time so they wouldn't have to give any benefits. She said she had no idea how her family would make ends meet with no insurance and no benefits and fewer hours. I took a look around and noticed each and every employee had a worried distance look on their faces too.


I didn't like Wal-Mart before this experience but can't stand it since I saw first hand how their employees were treated. Now I spend much more money at local stores that care for their employees and are not afraid to give good customer service with a real smile.

Aug 24, 2012 10:35PM
Why doesn't a retailer ever strive for the title of " Highest Quality" ? I already know where I can buy cheap imported junk. I want value for my dollar.
Aug 27, 2012 1:37PM
Wal-Mart plays a game with prices, you have to be carefull when you shop there. They will advertize one item at a discount but have a related item marked up and you wind up paying up to 5% more over all. And the Quality sucks just about everything they sell comes from our enemies. Remember a few years back when the slogan of wallmrt was (made in America) and the materials were grown in the USA like cotton but then were shipped to third world countries to be manufactured or assembled. They got fined for false advertizing and doubled down on their imports. So as far as I'm concerned Wal-mart can you know what.
Aug 24, 2012 4:56PM
i now shop at ALDI i can feed a family of 4 and 2 cats & a dog  for 75 dollars a week & that includes all of the other household needs . if not for their cheap prices for quality food i would be visiting my local food bank. i never want to have to tell my children that they can not have something to eat.
Aug 24, 2012 3:56PM

The prices of cheaply made chinese goods could be even lower.  Bringing back and strengthening tariffs would bring back quality manufacturing.

My motto is, "I can't afford to buy cheap" meaning if I buy cheap, I will have to replace it 3 or 4 times.

Aug 24, 2012 2:46PM
um wal-mart hasnt been the cheapest in a long time and its now comming up. they have raised their prices to be HIGHER then most places now. i find no need for wal-mart since the food there cost more then my local grocery store and the other items as the ad says are most expensive then target or even kmart though i dont shop kmart either or know anyone who still does. end of the day wal-mart sucks and should burn to the ground
Aug 24, 2012 2:26PM
I will not buy clothes or meat from Walmart. Their clothes fall apart the day after you buy them and their meat is gross. All grisle...Yuck. I can get my food cheaper at Smith's anyway.
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