Walmart might have retired its “Always Low Prices” slogan, but the bargain mentality still reigns supreme at the world’s largest retailer. Nowhere is that more apparent than in the Walmart grocery department, where plunging prices are putting a dent in competitors’ profits.
Walmart is testing strategic price drops on food and other select goods sold at its stores in the Southeast and Midwest. Quoting Wolfe Research data, the Wall Street Journal listed prices for a basket of grocery items at Philadelphia area Walmart stores as 5.8 percent lower than a year ago. A basket of groceries in Atlanta and Southern California markets were 4.9 and 2.7 percent cheaper, respectively.
In 2015, Walmart executives said they would invest heavily to lower prices over a three-year span. Megan Cozier, Walmart’s senior vice president of packaged goods, said in a presentation to suppliers in February that Walmart wants its prices to be 15 percent lower than its competitors 80 percent of the time.
The aggressive price-decrease strategy — which comes amidst intense competition from online grocery retailers like Amazon and other deep-discount brick-and-mortar grocers like Aldi — has resulted in the longest stretch in year-to-year food retail price decline since 1956.
Walmart, which sells more food in the U.S. than any other grocer, has fought its competitors on price since its founding in 1962. However, it wasn’t until recently that other big grocers began to feel the pinch.
Kroger, the nation’s biggest supermarket chain, recently reported its first quarterly decrease in same-store sales in 13 years. Operating profits for all U.S. supermarkets declined about 5 percent last year.
Kroger has spent more than $3.7 billion to lower prices over the last decade to compete with Walmart prices, and Target has invested $400 million in online sales and price cuts.
While this food fight is far from over, there is already one clear winner: U.S. consumers. Federal data shows shoppers paid 1.3 percent less for eggs, meat and other staples than they did the previous year. The decrease represents the steepest drop since 1959.