And they’re off! Two of the nation’s biggest discount retailers are neck and neck when it comes to attracting returning customers. But wait… Target is inching out ahead. We all know, only too well, that times are exceptionally hard on the economic horizon. Wal-Mart offers huge discounts, so they should seemingly be running away with the race. Target however, has gained a convincing lead and could realistically win out. Why? You can’t don’t like Target!
This rivalry is nothing new; we’re all familiar with the Wal-Mart/ Target feud. As Target sees it, the way into the pocket books of today’s frugal shoppers is to load its shelves with inexpensive but fun and funky colors and designs of clothing, shower curtains and bedspreads. Wal-Mart on the other hand, feels the need to put the things that people really consider necessities on their shelves; such as inexpensive paper plates, bulk meat, laundry detergent and Cheerios.
So how do these differences sit with their customers? Well basically Target is seen as an establishment that just has more fun… Kind of like Cyndi Lauper; whereas Wal-Mart is the frugal person’s choice… at least it should be. Shouldn’t it? Wal-Mart dutifully concentrates on getting its customers past these economic hardships with no nonsense; all value messages that hit home. But for some reason it hasn’t served them well as far as boosting sales is concerned. There has in fact been a decided down slide. According to the last ¾ of their annual numbers, same-store sales have declined.
According to Bill Simon, Wal-Mart’s CEO, consumers shopping at Wal-Mart for frugal deals or with walmart coupons are buying smaller packages of products consisting of cheaper brands. This is completely understandable since food prices are on the rise and budgets are increasingly tighter. Target uses a combination of designer brands, low prices, and target coupons to appeal to the frugal masses. One would think that with the economy in the horrendous condition that it’s in, fun and cute wouldn’t be enough. Apparently, however, nothing could be further from the truth. People love target, according to an industry analyst in retail; Gilford Securities’ Bernard Sosnick says that Target has transformed themselves into a fun and fantastic place to shop.
Whereas Wal-Mart’s same-store sales are down, Target has seen a marked increase in same-store sales; at least in the United States. What investors are looking for from Wal-Mart is growing sales on American ground; unfortunately for them overseas cost cutting and expansion accounts for most of Wal-Mart’s profits. So it’s not that the profits aren’t there for Wal-Mart, in fact they still remain the biggest American Company to date and upped their sales from last year by 5.7%. For the same time period, Target’s sales rose by only 3.7%. But the struggle that Wal-Mart is experiencing in America will more likely than not continue until this country’s economy bounces back… if and when it does.
Low income consumers have always been the bread and butter for both Target and Wal-Mart. But Target works harder at being different. One strategy that has proven successful is their lack of obvious competition and rivalry with Wal-Mart. They have other things to concentrate on such as low cost retail space, being design intensive, and staking its claim with a whimsical attitude toward both.
Take a look at both companies’ efforts toward cost savings:
• When Wal-Mart found out that customers were exceedingly concerned about the cost of gas, they attempted to assist their consumers with a discount of 10¢ per gallon if it was purchased between June and September with the Wal-Mart credit card. The ploy succeeded in increasing customer attendance, but the sluggish United States sales were not affected significantly.
• On the other hand, Target seems to concentrate their efforts on attracting the attention of consumers with a slightly larger cash flow. Their REDcard offered a discount of 5% on any purchase; but only consumers with good credit ratings qualified for these store credit cards. That left a good number of consumers with the lowest-incomes out of the picture. Yet somehow, that REDcard had a positive effect on Target’s sales. Even though their profit margin suffered because of the discounted prices applied to purchases with those cards, they still came out ahead in the long run. Admittedly, they took a marginal hit on profit, but the strategy is a sensible one because Target keeps inventing new, appealing ways for their customers to spend their cash.
Wal-Mart has to keep enforcing its same conservative values no matter how much they may want to try to change it up. They set sail with an attempt to improve their image in 2006 with the hiring of Julie Roehm. That ship capsized after 10 months. Why? You’ll love this; it seems that there was a clash of cultures evidenced by Julie’s first change being to paint a wall in one store chartreuse. Upper management apparently about had kittens over it and Ms. Roehm was let go.
Alas Wal-Mart, would it kill you to add a little color to the retail sector? Actually, it might kill you if you don’t.