Can Target Compete With Wal-Mart?

One thing about this whole economic mess and its impact on retail that we haven’t gotten a strong grip on is why Target is faring so poorly while other discounters are able to keep their heads above water.

Well, now Target is planning to combat its rough results (Q4 net income fell 41%) “plans to place greater emphasis on food, health-care products, personal items and other necessities, while offering fewer discretionary items to avoid big markdowns that have hobbled its earnings,” says one article.

The problem, as one Target exec puts it, is that “perceptions do not reflect the reality” of Target’s comparable prices to Wal-Mart on everyday items. We were always under impression that Target and Wal-Mart essentially had different shoppers. Does that mean Wal-Mart has grabbed up some of that consumer base?

One analyst argues that Target can’t “become too much like Wal-Mart because that would jeopardize their higher-end image.” But isn’t this higher-end image that thing that’s hurting the chain right now?

6 Responses to “Can Target Compete With Wal-Mart?”

  1. 1 Derrich February 25, 2009 at 9:25 am

    Precisely. Everyone knows that Wal-Mart is where we all get ‘cR@p’ and Target is where we get the ‘stuff’. Regardless, consumables is definitely where it’s at in today’s economic climate.

    Just ask CostCo: “Results were hurt by a slowdown in non-food discretionary sales and related reductions in margins associated with these sales…”

  2. 2 SC February 25, 2009 at 9:45 am

    Last time I was looking for hair spray in Target, they did not have any cans under $10. I am not looking for the $1 cheap stuff, but Target is out of touch with consumers and value. I am not a Wal-mart shopper either, CVS and Walgreen’s offer better values than Target.

  3. 3 Broker February 25, 2009 at 9:59 am

    Most of the drop in profit was due to losses in their credit card operation of which they own 50%. The credit losses will moderate and their customers will eventually buy more discretionary items. People are reading way to much into Target’s momentary profit issues.

  4. 4 Jim February 25, 2009 at 11:19 am

    Target should forget about appealing to the Wal-Mart customer base and focus on grabbing customers from the traditional department stores. Women’s RTW and children’s clothing is a huge market opportunity for expanding the bullseye’s current lines!

  5. 5 Brad February 25, 2009 at 11:58 am

    Stylish + inexpensive are the mantras that Target has not communicated well. If “perceptions do not reflect the reality” of Target’s comparable prices to Wal-Mart on everyday items” it follows that it’s Target’s responsibility to change those preceptions. The question is not so much if they can compete, but if Target has a plan for a well balanced solution between style/value & price.

  6. 6 charlie February 26, 2009 at 9:17 am

    If you remove the grocery business from both companies sales, I bet they are doing roughly identical. WalMart appears to be holding up better because they are much more of a grocery retailer (2/3 of units are Supercenters).

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