Comparing grocery prices, Aldi wins overall, but Target beats Walmart

Food shoppingWhen you see studies that compare prices at grocery or discount stores, do you believe the results? I rarely do and for good reason. The studies are often poorly devised or flawed in some way. But not this one.

Walletpop asked retail consulting company McMillan/Doolittle to conduct its own grocery pricing survey this summer in Chicago. We wanted to see if the Albertsons price cuts in this region have really made it more competitive. If discount stores and supercenters were really as cheap as we're led to believe, and if buying store brands will really save us money.

The answers were no, yes and yes. Read on...
First the methodology. McMillan/Doolittle used one master list of products of brands and sizes available at all the stores shopped (except for store brands, but I'll get to that in a minute). You can't really compare prices unless items are identical, and stores go to great lengths to make that very difficult. Retailers like to negotiate a few extra ounces for a "value pack" to set it apart or confuse shoppers.

Experienced companies like McMillan/Doolittle have a list of standard items but even so, once they start shopping, some no longer fit the criteria. For this study, a total of 40 products could be found at all the retailers shopped.

All the stores must be within the same trade area, usually one to two miles apart. And, they need to be shopped within a few days of each other, usually early in the week. We used Dominick's, Jewel, Target and Walmart. All in the Naperville, Ill. area outside of Chicago, during late July.

Now, I've done these studies and it's a thankless task. Days of wandering grocery aisles, taking notes, dutifully double checking prices only to find that the very last store visited has changed inventory and messes with the list. That's just one reason why some of the studies most consumers see quoted aren't terribly accurate. Good methodology is not for the faint of heart.

You have to account for sale items (and make special notations), loyalty card pricing and buy one get one free deals. Our study uses sale prices, not the original ones like some, since the goal is to shop these store like a real shopper. If there's a sale price, you'd get that price so why shouldn't the comparison shopper? Getting two for the price of one cuts the listed price in half and loyalty club prices hold true and are used.

Because the goal, after all, is to tell YOU the shopper where you can save the most money. And when it comes to everyday brand name and specialty items, that answer was a big surprise: Target, by a nose.

Target was $1.35 lower than Walmart. It's a pretty slim difference and could be argued that over time, any pricing differential could be evened out. But it's significant that Walmart and Target were so close in pricing.

Years ago, when I used this list, Target was higher priced than Walmart. Both were significantly less than supermarkets, which still holds true today. Safeway-owned Dominick's was 25% higher than low price leader Target and SuperValu-owned Jewel was 19.5% higher.

Both Dominick's and Jewel have recently started cutting prices to be more competitive with supercenters and discount stores. While a lot of those high/low pricing strategies are going away, even the new, lower prices are coming in higher than Target and Walmart.

When it comes to private label or store brands, Walmart is the low cost leader of the four. This is an even trickier kind of list to shop and a pretty valid argument can be made that it's not a true comparison. Store brands will vary in quality and ingredients, so comparisons aren't scientific.

But how much does that matter when you're trying to feed a family on a budget? The bottom line is the bottom line.

And a price comparison of store brands wouldn't be complete without including two retailers best known for selling store brands almost exclusively: Aldi and Trader Joe's.

Here is where Aldi really shines, with rock bottom prices even cheaper than Walmart's store brands. Nearly 29% cheaper than Walmart and 32.5% less than Target. The two supermarkets were 86% and 76.3% more expensive on these private label products than Aldi.

On those same 10 items, Trader Joe's ranked fourth, more expensive than Target but less than Dominick's and Jewel. Again, this isn't a fair comparison since Trader Joe's really competes more directly with Whole Foods or other natural and organic foods retailers. But even there, it's telling that Trader Joe's store brands beat more mainstream grocers Dominick's and Jewel.

For me, this study busted some myths, most notably that Walmart is always the lowest price. Target has come a long way toward narrowing that gap and has the muscle to back up its recent low price guarantees. And I'll definitely be giving Aldi another try. At those prices, I'd be a fool not too.
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