Retail giant Wal-Mart has said it will reduce its grocery prices by US$1bn across the US in 2013.

Speaking last week at the CIBC World Markets Retail and Consumer Conference in Toronto, Canada, Wal-Mart EVP and chief merchandising officer Duncan MacNaughton told attendees that the retailer will make cuts to food and consumable prices. 

“We’re going to invest $1bn in retail price in fiscal 2013,” MacNaughton said. “We’re going to drive that price investment in two key areas – in our food business and in our consumables business. That’s because it drives traffic, it drives interest and it drives great relevance with our customer.

“Our job as merchants and operators then is to convert that traffic on the other side of the store, which is the general merchandise side of that store. So we can convert in soft lines and general merchandise and make sure we build that basket and make it profitability.”

MacNaughton said the investment will be funded by Wal-Mart’s own productivity improvements.

“You’ll see throughout the year there is a bit of margin depletion, but all funded by productivity and expense savings that we’re reinvesting back in the business,” he said.

“I’m very excited about the price investment because we re-engaged with Nielsen and we now have local data on pricing, item by item, market by market … We can see what products sell for what price in which marketplace. So we are ensuring that we’ll have price leadership and price separation across our categories and across the US. This is a big investment for us and we feel very strongly about this.”

The price investment will be supported by three commercials to air throughout the year, one of which will focus on Wal-Mart’s 50th anniversary this year.