You’ve heard it before: “A jack of all trades is a master of none.” This can be positive or negative, depending on the case, and it seems like Target is stuck right in the middle.
The retailer has always been in an odd position because Walmart’s brick-and-mortar footprint is much bigger, with 4,623 Walmart locations in the U.S. compared to 1,956 Target stores, and Amazon is clearly a more prominent online player. Plus, both companies “generate far more revenue,” according to Inc. But Target constantly remains in business thanks to “a loyal following that any company would envy. That’s largely the result of the way the company has [built] a brand as a place people like to shop.”
The Street expressed how “Target has managed to be a discount retailer that’s also cool. The chain has a better reputation than similar retailers like Walmart and Kohl’s.”
Since its inception, Target has evolved into a destination that blurs the line between a traditional department store and an upscale discount store. This makes Target a place that’s both convenient and trendy for shoppers. Through strategic and curated partnerships with big-name companies, celebrities, and designers, like Kendra Scott, Target has even earned the nickname “Tar-jay,” further adding to its charm and upscale feel.
Additionally, the store-within-a-store concepts found in Target, encompassing brands like Walt Disney, Apple, and Ulta Beauty, serve as substantial customer magnets. Starbucks and Ulta play a particularly significant role in this pattern — patrons may initially step in for a coffee or to pick up some cosmetics and often end up with a cart full of other merchandise.
However, Walmart currently reigns supreme by offering the lowest prices (with some price matching) and expanding its online marketplace to rival that of Amazon. Target is willing to price match most competitors, but it can’t match Walmart’s cheaper generic brands.
What sets Target apart from its competitors are its “wider aisles, less crowded shelves, department store-like merchandising and trendy design touches,” as described by Reader’s Digest. “Target also has several brands it carries exclusively or owns altogether under the company’s umbrella,” in addition to its growing portfolio of private labels.
The biggest contributing factor to Walmart’s dominance is its inclusion of groceries. Even though most Target locations now offer food, CNBC noted last year that “groceries account for 56% of Walmart’s annual revenue, compared with just about 20% at Target, according to company filings. Walmart is the country’s largest grocer by revenue.”
In its recent Q3 earnings report, Walmart announced a 5.2% increase in revenue and stated that e-commerce was up 24% in the U.S. The retailer also reported “strong share gains in grocery.” Following these results, Walmart has slightly elevated its full-year forecast.
In comparison, Target’s third-quarter earnings report showed a 4.2% decline in revenue year over year, though its operating income was 28.9% higher than last year, “driven by a higher gross margin rate.” Additionally, according to Reuters, Target’s forecast for holiday-quarter profit is “largely above analyst expectations as supply chain costs finally eased and its efforts to control inventory started to pay off, sending shares up 17%.”
Meanwhile, in late September, Target announced the closure of nine stores due to theft, but some experts are saying that crime might not be the true cause.
Even with its own grocery offerings and trendy appeal, Target has not been able to consistently grow like Walmart or rule online like Amazon, leading many to wonder if it has missed the mark somewhere.
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