China DominatesMarket Basket

New York — The source code has changed.

In 2008, China — for the first time ever — is the supplier nation of more than half of all the items in the HTT Market Basket.

Five years ago, about half of all products in the survey were “Made in USA.” That 2003 Market Basket showed China producing less than 30% of all items.

Last year, China had expanded that share to 49%, showing its dominance, which has only continued to grow.

Fully three-quarters of all the 2008 survey items originated in Asia. Along with China, the nations of India, Pakistan, Taiwan, Thailand and Vietnam combined to supply 76% of this year's Market Basket.

The only non-Asian country to show an increase in the survey was Brazil, which drove its wedge from 4% to 7%, clearly due to the new ownership of Springs by Brazil-based Coteminas.

The price picture was mixed. Inflation has something to do with the results of our Market Basket “snapshot” of nine stores in two major American markets. The falling value of the dollar means it takes more of them to purchase the same goods — even in a bruising retail environment characterized by steady, heavy promotional activity.

Inflation is one reason this year's batch of top price point market baskets showed five of the nine with totals of more than $1,000 each. Still, five of the nine stores had a lower basket than last year — and that's following the 2007 results, when six of the nine had lower top-price baskets than in the previous year.

On the opening price point side, there were no baskets over $1,000 — Macy's had posted one in 2007 — and four of the nine chains showed a lower basket total, just as in 2007.

Off-pricer Marshalls, which took part in the strong, profitable year posted by parent TJX Companies, was definitely responding to consumers burdened with real cash flow and credit concerns. The Marshalls market baskets were lower in both the opening price and top price brackets, falling 15.7% and 7.8% respectively.

Marshalls boasted the lowest price tag of any chain for “highest priced item in top-tier basket,” namely a queen-sized bed-in-a-bag for a mere $59.99. (It is worth pointing out here that all prices tabulated in the HTT Market Basket are everyday prices — sale and clearance items are not used in the survey.)

Further, the spread between bottom and top at Marshalls is exceedingly thin: $58 separates the lowest and highest priced items at this bargain-hunter's bazaar, compared to about $88 at both Wal-Mart and Target — and $353.01 at JCPenney, the retailer with the broadest price spread.

Meanwhile, the merchandiser that arguably faces the most critical challenges at the moment, Linens 'n Things seemed to be in a stronger pricing position than a year ago, when it was engulfed in massive clearance of stale inventories.

The 2008 LNT price tag on the most expensive item rose by $100, mirroring the $100 broadening of its overall price spread — and pushing LNT to the top of price-raisers, with a total top-price basket increase of 19.8%.

As one of only three chains that amplified its top price basket for 2008, LNT also was among the six chains where the opening price segment showed an upswing.

Most interesting, all this jockeying put our latest Market Basket sampling of Linens 'n Things tightly in parallel with its specialty archrival, Bed Bath & Beyond.

The total opening price baskets of LNT and BBB this year are within 1.5% of each other, while the two chain's top price baskets are 16.6% apart. The highest priced item in each store was exactly the same price: $249.99 for a queen bed-in-a-bag. And the lowest priced wash cloth tag was identical, too: $2.99.

Most remarkable is what this means regarding the superstores' price differential: Bed Bath & Beyond and Linens 'n Things each have a $247 spread between their lowest and highest priced items. Last year they were $102 apart in this measure.

The HTT Market Basket results represent what a customer who shopped these stores in these markets — during the period between March 7 and March 18 — would have found if she were looking for either the least expensive goods or the presumed top-of-the-line products. While not an exhaustive examination of retailer pricing strategies, the HTT Market Basket nevertheless leads to some interesting questions.

For example, what do Macy's, Kmart and Marshalls have in common? They offer consumers distinct choices in shopping environment, pricing policy and merchandise selection — but all three showed year-to-year price declines in both the upper and lower segments.

Their totals fell in both the opening and top price baskets:

Macy's, down 38.4% in opening, down 11.0% in top; Kmart, down 22.9% in opening, down 8.5% in top; Marshalls, down 15.7% in opening, down 7.8% in top.

But before concluding that economic pressures are forcing merchants to cut, cut, cut — check out the next data set.

The following retailers' market baskets rose in both the opening and top price segments: JCPenney, up 17.7% in opening, up 4.2% in top; Linens 'n Things, up 7.1% in opening, up 19.8% in top; Wal-Mart, up 1.0% in opening, up 16.1% in top.

The downward moves are, on the whole, more dramatic in scope than the upward turns. Still, three business models as diverse as Wal-Mart, LNT and JCPenney found ways to attempt to generate more margin dollars in 2008. The success of those attempts will depend on a range of factors, of course — number of consumer visits per store per month, promotional schedule and markdown aggressiveness, sell-through and in-stock efficiency, as well as the whims of fashion and brand loyalty.

Also worth noting, a year ago only Target and Wal-Mart showed declines in both basket segments, and the lone chain that showed an increase in both segments was: Marshalls.