Target tests matching rival Wal-Mart's prices

Maple Grove is a key battleground between Target and its nemesis, Wal-Mart. About a mile from this SuperTarget is a Wal-Mart SuperCenter.

With the economy in the tank, more people are shopping where they figure they're getting the lowest prices. That's good for Wal-Mart, which promises unbeatable prices. Not so good for Target, even though Target insists its prices are in line with Wal-Mart's.

Target's sales have been flat or falling during this recession. Wal-Mart's have been rising. That's largely because Wal-Mart tries relentlessly to beat competitors on price, even if it's just by one slim cent.

Even some shoppers here at the Maple Grove SuperTarget agree Wal-Mart wins on price.

"When we only have grocery things to do, we'll just go to Wal-Mart," said Jaci Donlan of Hanover.

Donlan said Target's prices are on par with Wal-Mart's about half the time.

"The rest of the time, a little bit above, especially on their grocery."

Donlan said that if Target were to match Wal-Mart's advertised prices that would get her to shop Target at more. She said Target sells more of the things she wants.

"Although their prices aren't always better than a Wal-Mart their selection of products, clothing and grocery are better," she said.

Target is testing a price-match policy at two Minnesota stores, those in Medina and downtown Minneapolis. But while the trial lasts, Target said all Minnesota stores will match competitors' advertised prices.

Spokeswoman Lena Michaud said Target wants to bring home its commitment to low prices.

"We don't ever want price to be a barrier to shopping at Target," she said. "We realize that guests think sometimes that a clean, bright store or differentiated merchandise is associated with something that might cost more. So, what we want to emphasize for them is that you can have that experience without having to pay more for it."

Analysts say Target has to push price more if it's to compete with Wal-Mart. Wal-Mart is intently wooing Target shoppers who are finding they must squeeze more buying power out of their bucks.

In one especially cutting TV ad, Wal-Mart shows three slim 30-something women pushing shopping carts. Their carts change from Target red to Wal-Mart blue. The voiceover includes the phrase, "unbeatable prices" three times in the ad's first few seconds.

Target is fighting back with ads promising style, quality, selection and low prices.

The TV ads are backed by print ads and store signs that tout Target's prices.

Retail consultant Howard Davidowtiz said Target is doing a good job on the pricing front. He said the company is cutting prices on existing products, introducing more lower-priced goods, including high-quality Target brands, especially in its grocery departments.

"Target is making moves that are in tune with the American consumer," said Davidowitz.

Davidowitz said price-matching policies are pretty much standard among big retailers now.

"It's not complicated. We want whatever we've got to have as cheap as possible."

It can be a headache to administer price-match policies, especially if disputes -- and lawsuits -- arise over when a price match is or is not warranted under a store's policy.

But the programs generally don't cost retailers that much. Merchants can often boast they'll match competitors' prices, yet face relatively few requests to deliver on that commitment.

"This is often something they can promise that doesn't have a lot of effect on them," said Mark Bergen, a pricing expert at the Carlson School of Management at the University of Minnesota.

Bergen said there's often not much difference in the prices of major retailers, to start with.

"Retailers spend a lot of time looking at other retailers' prices. They keep them very close," he said.

But Bergen said Target could seriously improve its low-cost image if it launches a company-wide price matching policy.

That could mean more sales -- and profits -- for Target, even as consumers try to reign in their spending as the economy slinks along.

Gallery

Fullscreen SlidePrevious Slide

1 of 1

Next Slide