Target Invites Direct Comparison with Wal-Mart

Discussion
Feb 24, 2010
George Anderson

By George Anderson

Target made its way to the upper echelons
of American retailing by presenting its differences with Wal-Mart. Now, the
company’s CEO believes it should go head-to-head and invite consumers to
compare the quality of the products sold in its stores and prices to those
at the world’s largest retailer.

Gregg Steinhafel, Target’s CEO, told the Dow
Jones Newswires
that the retailer would continue to “maintain our focus
on fashion, design and a superior store experience.”

At the same time, Mr. Steinhafel said, “We’ll
continue to address the gap between the perception and the reality of our
pricing.”

Target is currently feeling optimistic about its prospects
and the company maintains it gained market share over the past year as it remade
its private label lineup, tested fresh food sales in its general merchandise
stores, remodeled locations and played up in-store savings more than in the
past. Recent visits to the retailer’s website show it with a much larger number
of downloadable coupons, for example, than in the past.

Wal-Mart, for its part, has stumbled somewhat recently,
with same-store sales declining in the past quarter.

Some believe that an improving economy alone will bring
more shoppers Target’s way even if they strayed from the chain during the recession.

“Target is now in a better position being less of a discounter
with the prospect that some consumers are beginning to be a little less conservative
with their money,” David Abella, money manager at Rochdale Investment Management,
told Dow Jones.

Discussion Questions: Will 2010
be Target’s year? Is it ready to invite direct price comparisons with Wal-Mart?
What will it take for Target to overcome the perception that Wal-Mart has
lower prices?

Please practice The RetailWire Golden Rule when submitting your comments.

Join the Discussion!

30 Comments on "Target Invites Direct Comparison with Wal-Mart"


Sort by:   newest | oldest | most voted
Dick Seesel
Guest
11 years 2 months ago

Target is walking a fine line: Can it improve its value positioning vs. Walmart while being true to its own image? It’s possible that the 90% of Americans who are employed feel more secure about their economic prospects than they did a year ago–there is evidence in consumer spending on the home–and are willing to trade back up. So Target’s biggest opportunity for a win is to be true to its longtime brand position as the leader in value-priced but well-designed family apparel and items for the home.

It’s important to be price-competitive on commodity businesses but Target has to be careful not to expend too much effort or brand equity doing so. The retail landscape is littered with former competitors of Walmart who tried to compete strictly on the basis of price.

Max Goldberg
Guest
11 years 2 months ago

Why would Target want to compare itself to Wal-Mart? Target should stay on message and work to build its brand. Between multiple symbols, the bullseye and the arrow and an uneven attempt at carrying groceries, Target should continue to put its own house in order.

In the past, whenever Target strayed from its core story, its image and sales were hurt. Rather than focusing on comparisons to WM, Target should continue to build its own brand.

Ryan Mathews
Guest
11 years 2 months ago

Target appears to be under the influence of the Retail Sirens who draw unwitting companies into the rocks of brand devolution with their hypnotic promise that, “You too can be all things to all people.”

Kmart tried to be all things to all customers and failed. Wal-Mart’s efforts at moving up the demographic ladder have been slow and sometimes painful. Now, Target would appear to be taking tentative steps at going down the ladder Wal-Mart is trying to climb.

It could get very ugly out there.

If everybody is selling roughly the same stuff for roughly the same price the mass channel will collapse into commodification.

Let’s hope there is enough will in the Target boardroom to block the Siren’s song.

Dr. Stephen Needel
Guest
11 years 2 months ago

If Target pushes direct price comparisons with Wal-Mart, they’ll negate much of the good work they’ve done already. Having differentiated themselves from Wal-Mart and Kmart with slightly more upscale offerings and a good store experience, why try to diminish that by saying “and we’re as cheap as Wal-Mart too”? Nothing wrong with saying “we have low prices” but to invite WM into the comparison is a bad move. This might be a case of a retailer trying to be all things to all people.

Warren Thayer
Guest
11 years 2 months ago

Max and Ryan said it all.

Gregory Belkin
Guest
Gregory Belkin
11 years 2 months ago

When I walk into a Target, I am keenly aware of the differences between this experience, and Wal-mart. People who shop at either store go with the expectation that they will benefit from those differences. Target should be very careful about blurring the lines between those differences as they may disappoint a very specific type of shopper who depends on the retailer for specific wants and needs.

Doron Levy
Guest
Doron Levy
11 years 2 months ago
A few years back, I was working with a major toy retailer up here in Canukistan and for some strange reason, the powers that be decided that they would be reactive to good ol’ Walmart and match pricing on brand name and hot trend items instead of being pro-active and differentiating themselves from the blue vested people. As you can imagine, it didn’t work. Walmart always had low allocations for brand name and trendy toys while the chain I was working for sold their excellent allocations at or below cost to remain competitive. Another way to put it: the Walmart cherry pickers came to our stores instead. Not the best strategy and and I foresee Target going down the same path. Target is not Walmart. Target customers are not Walmart customers. Target can make money with smaller baskets as long as they maintain margin integrity. Target surpasses Walmart in so many different ways, I would say it’s fair to charge a small premium for that. Target should not engage in a battle they cannot win.… Read more »
Roger Saunders
Guest
11 years 2 months ago
Max Goldberg is offering the right advice. Don’t make it comparative to WM, it’s a path that will be far too difficult to travel, and it will be even harder for TARGET to extricate itself. The consumer is not out spending wildly. Retailers need to keep an eye on “Consumer Confidence.” Respondents to the BIGresearch Consumer Intentions & Actions monthly surveys of 8,500+ Adults continue to respond cautiously to the question, “Which one of the following best describes your feelings about the chances for a strong economy in the next 6 months?” Only 30% of Americans are saying that they are Very Confident/Confident. Fully 53% have Little Confidence, and 17% have No Confidence. When this same question is asked of consumers in households earning $50,000+, the figures improve only marginally, with 33% saying they are Very Confident/Confident. The “Expect More, Pay Less” theme drives home the message of competitiveness, while emphasizing value. Stay off the slippery slope of direct comparison. Show the customer the merchandise in promotion and in-store, and those sales will ramp back… Read more »
Bill Emerson
Guest
Bill Emerson
11 years 2 months ago

Target is well-positioned for 2010. The economy appears stable, but uncertain enough to keep consumers focused on value, even consumers with the financial means to shop in more upscale venues. Target has always done much better than Walmart in attracting this particular market group. If you doubt this, take a look at the cars parked in their respective parking lots (Mercedes/BMW vs. Taurus).

There are a lot of reasons for this success, but going head to head on price is not one of them. It seems odd that Target would even bring this up. Competing on price with Walmart, even for Target, is like sparring with Mike Tyson–a dreadful idea. They should stick with a winning formula–great value in a pleasing environment.

David Livingston
Guest
11 years 2 months ago

Overcoming the perception that Walmart has lower prices than Target would require that Target actually have lower prices. My theory is Target only exists because Walmart allows them to exist. All Walmart has to do is remind shoppers they can bring their Target ad to Walmart and Walmart will match the price. I don’t think Target would be able to do the same.

Target doesn’t need to be in the same price zone as Walmart. People shop at Target because they desire the same products sold at Walmart, don’t want to overpay too much, and most important, do not want to walk among the poor and downtrodden.

Ted Hurlbut
Guest
Ted Hurlbut
11 years 2 months ago

I’ve felt for a while now that Target was caught in a trap between Walmart and Kohl’s. They’d like to be thought of as a lower priced fashion alternative to Kohl’s, but the price spread isn’t great and Kohl’s does it better. On the other hand, Walmart simply does everyday basics better, and cheaper.

The idea that the way out is to go head-up against Walmart not only negates all of the image marketing they’ve been doing, but Walmart also has far deeper pockets if Target’s idea is to compete on price.

It seems to me that the better strategy is to re-emphasize and re-invigorate their fashion offerings and focus on taking share from Kohl’s above them. It’s not a great alternative, but it seems more prudent than going after Walmart. That’s why I feel like they are caught in a trap, with no immediate path out.

Anne Bieler
Guest
Anne Bieler
11 years 2 months ago

This could be a slippery slope for Target–they must continue to demonstrate value to their shoppers, and provide compelling reasons to come to the store. Having Target promotions that resonate with core shoppers will continue to be important, and can increase the number of trips. 2010 could be the year for Target!

Robert Heiblim
Guest
Robert Heiblim
11 years 2 months ago

The issue is really not price, but perception. With so much pricing transparency for a lot of the best demographics, it is a table stake to be there. Just look at Best Buy who definitely wants and needs their actual pricing to compare to Walmart. It is the store experience and the actual assortment that needs to be differentiated. One cannot run from the reality that many of the most valuable shoppers will know the “right price” before they enter the door. Trying to ignore that is insulting the consumer. On the other hand, if one is in the price “ballpark” then the actual experience–the perception can make a big difference. This is what Target and also Best Buy are doing, they are trying to take the price itself off the table so that shoppers will compare and perhaps find their experience more satisfying. While I agree with others that simply price competing with Walmart is a dumb move, so also is ignoring this and thinking that selection or environment alone will do.

Craig Espelien
Guest
Craig Espelien
11 years 2 months ago
In my years in the retail industry, the truly successful companies focus on two things–the consumer and who they (the company) want to be or “what is their brand.” Companies who maintain brand relevance (it means something unique to the consumer) and resonance (the emotional appeal goes beyond a single dimension) will continue to perform well–regardless of the economy. Granted, these companies have evolved as the consumer evolves and that is often driven by the economy, but they are still true to who they are. Should Target begin to focus too much on being like Walmart instead of being the best Target they can be (most consumers perceive Target to the the best overall “value” – better quality at great prices), they will become a commodity as Ryan so astutely points out. They showed they could move with the consumer by focusing more on food (but let’s not forget that they were still doing image commercials as the economy tanked and they were clearly late to the extreme value party in 2008 and early 2009)… Read more »
Stephen Greenside
Guest
Stephen Greenside
11 years 2 months ago

Target has good quality merchandise. Their prices cannot compete with Walmart. Not strong enough or big enough.

Lee Peterson
Guest
11 years 2 months ago

This reminds me of a quote from Sam Walton: “If you want to compete against us, it’s simple; do what we don’t do.” And since he seems to have been pretty prophetic, I think if I were Target, I’d pay heed to that. Doing a “bring it on” with Walmart seems sheer suicide anyway. Their previous strategy, discount with style, would seem to be closer to hitting Sam’s comment on the head, even though they invested too much in the apparel category.

But let’s face it, the real reason Target is ‘behind’ Walmart is not only price perception, but the fact that they were very slow to move to consumables and groceries. Even Walmart’s non-grocery business slowed the last few years for macro reasons. So this ‘head-to-head’ strategy sure seems like one bad strategy that is intended to cover the initial bad strategy. Look out below!

Craig Sundstrom
Guest
11 years 2 months ago

Ooooooohh, now they’re gonna’ get in trouble! Well, perhaps it’s not that dire, but this strategy reminds me of that line from an old Jim Croce song “You don’t pull on Superman’s cape….” I see this idea as having much down potential, and little up. In fact, that seems to be the message I’m left with recently in practically every thread on Target…whoever is this busybody running around with ideas to “improve” things needs to be shown the door.

Paul R. Schottmiller
Guest
Paul R. Schottmiller
11 years 2 months ago

Part of the challenge for Target is that Walmart has significantly upgraded their stores with their latest round of remodels. My wife’s jaw dropped when we walked into one that recently opened near us. There used to be a more defined difference in the store environment with Target leading. Now it appears Walmart has eliminated that advantage (at least in the remodeled super centers).

Add to that the fresh focus/offerings, the lower prices, more commoditization in many categories (like CE), and the value-conscious consumer perspective and it is not hard to see why we are where we are. Saying we have low prices in this economy may be a good short term strategy, but a new strategy around differentiation will be key for long term prosperity.

Gene Detroyer
Guest
11 years 2 months ago

The opinions are pretty much unanimous. This could be a big mistake for Target. Target runs a different business than Wal-Mart. To win on comparison, they will have the same. If so, do we need another Wal-Mart? Can we beat Wal-Mart at their own game? The answer is “No!” Target has a great brand position that is very meaningful and as important, sustainable. A change in message is a reposition away from success.

Mr. Steinhafel, read Ries & Trout, “Positioning: The Battle for Your Mind.” It is over 25-years old and still the best marketing book ever written.

Dave Wendland
Guest
11 years 2 months ago

Yikes. This would not be the strategy I would pursue. Obviously Target’s leadership knows something I am not privy to.

Mark Burr
Guest
11 years 2 months ago
Mrs. Scanner informs me that in our region, Target has become the price leader in many categories; much to her surprise in a lot of areas. Earlier this year, I had commented that they had also won the ‘Back to College’ award from the Scanner household for having all the right items at the right price. They had trounced Meijer and Wal-Mart locally. However, Wal-Mart was quite incredibly impressive in the college town. Target is a different store, marketed to a different customer. They are making gains. They have made them on delivering and executing much better from my view and beginning to win the price perception battle. Going head to head with anyone, especially Wal-Mart on price is just a mistake. Just do it and don’t talk about it. Don’t get drawn into a spitting match you can’t win, even if Wal-Mart starts one like they have in the recent online battles. Starting it yourself is like pointing the gun to your head and firing all six shots at once. When you do that,… Read more »
Bill Hanifin
Guest
11 years 2 months ago

The difference between the brands is evidenced by Target’s television advertising campaign.

Their ads are creative and clever and communicate style. They deliver a message that it is “fun and cool” to shop at Target, something Walmart is not speaking as it sticks to the family value message.

The quote of Target’s CEO from the Dow Jones Newswires story validates this point as the retailer continues to “maintain our focus on fashion, design and a superior store experience.”

I may be off base, but wonder if the two are fully in the same category. Target is almost Walmart with “style,” but their more carefree advertising persona does not deny that they are working the supply chain just as hard as Walmart.

George Anderson
Guest
George Anderson
11 years 2 months ago

A recent visit to Wal-Mart to buy like items normally purchased by our household found that prices on individual products varied by pennies. When all 20 or some items were totaled up, Target was actually about a 30 cents cheaper. With this in mind, we’re not likely to switch considering the more pleasant shopping environment at Target and a product mix that slightly better fits our needs.

Ed Dennis
Guest
Ed Dennis
11 years 2 months ago
Target should worry about price comparison as much as selection comparison. Target has miserable selections in almost every department in the store. Especially sporting goods! Target is a chic store and has virtually no draw for men. Walmart, on the other hand, has huge sporting goods sections that are usually well stocked with quality product at great prices. If I don’t go into a Target (they have never given me a reason) then how will I compare prices. Also, it has been my experience that chains crowing about checking prices are very careful to feature prices on items the competition doesn’t handle. Target could beat Walmart by selling Jiffy Cake Mix for 99 cents because Walmart doesn’t carry it, but a fair price is 29 cents. Target would do better by avoiding games and trying to appeal to a broader market (the 49% of us who are males). No let me retract that because I believe Target has a following among the “metrosexual” crowd. So they are probably only missing 38% OF THE TOTAL MARKET!
angiretlwire dixon
Guest
angiretlwire dixon
11 years 2 months ago

I shop at Target to find decorative products that look like items from Pottery Barn/Pier 1/West Elm/Ballards at a fraction of the price.

If Target trades down in quality in the Apparel or Home Goods categories to meet Walmart prices, I would be very disappointed.

Shilpa Rao
Guest
11 years 2 months ago
Well I have seen target working hard on its supply chain for the last 3-4 years from getting the visibility right up to the last mile and collaborating with vendors to get the supply chain costs right; or to be in the food chain which they are still working hard on but not complete there yet. They do have the best in class processes in place and so do the systems. Now with the blurring line of style which soon Walmart is adopting too with its remodels, which had been targets forte, Target might have to get down to price comparisons too. Yes the economy is on a rebound but consumers have not yet open their wallets wide. I think getting into a price war with Walmart apart from supply chain efficiencies needs a ruthless attitude with vendors and extracting the last drop. Target as a company is not cultured for this yet. If target can convey its value image in other ways and not in the traditional way of direct Walmart comparison would help… Read more »