VS.
Introduction
The retail industry is said to be the second large industry, generating an annual $3.8 trillion annually. Wal-Mart is the world’s largest retailing company and it generates an annual revenue of USD 256 billion. United States sees two large players namely Wal-Mart and Target Corp, while they have different market segments that they target. Wal-Mart has considerable footprint outside of the United States, while Target Corp predominantly focuses on the domestic US market. This paper is a compare and contrast of the world’s most sought after retail giants – Wal-Mart and Target Corp.
Wal-Mart has a significantly broader market segment, while Target Corp has specific affluent market segments within the United States domestic market.
Wal-Mart opened its first retail store in the year 1962 at Rogers, Arkansas. They have consistently led by the belief that they need to make a difference to their customers. Sam Walton started this business and over generations, associates have helped Wal-Mart customers as well as communities in not only saving money, but also living in a better way. Sam Walton started off on the premise of giving lowest prices to his customers anytime and anywhere. By the year 1967, the Walton family owned 24 stores across the United States with about 12.7 million dollars in sales turnover. It was only in the year 1969 that Wal-Mart was formally incorporated as Wal-Mart Stores Inc. It was in the 70s that the company spread its wings nationwide and went public in 1970. It was in the year following this, that the first distribution centre and home office in Benton Ville, Arkansas. The company went on to be listed on the New York Stock Exchange with the ticker symbol of WMT in the year 1972 and notched up a sale of $78 million with 51 stores across the United States. A 1975 visit to Korea inspired Sam Walton to introduce Wal-Mart Cheer. The year 1979 saw the establishment of Wal-Mart foundation. 1980s was a decisive period for Wal-Mart and they started targeting retailers also. The same year Wal-Mart reached a USD billion turnover mark, with 276 stores and 21, 000 associates. In 1983, Wal-Mart replaced cash registers with computerized POS systems towards providing fast and more accurate checkouts. Towards the end of 1980s, the company also established a private satellite communication system, which provided companywide voice data and video communication. In 1988, Wal-Mart opened its first super centre, having general merchandise, super market, and one-stop shopping convenience.
Early in the 1990s, Wal-Mart became the top retailer in the United States and actually became synonymous with convenience and one-stop shopping. It was in 1991, through a joint venture route, Wal-Mart went global and opened its first outlet outside of the United States in Mexico City. In 1993, Wal-Mart recorded its first $ 1 billion in sales in a week. In 1994, the company expanded into Canada by taking over 122 of Woolco stores. In 1996, it opened its first store in China and in 1997, it crossed $ 100 billion in sales, and in 1999, Wal-Mart entered United Kingdom after acquiring ASDA.
In the year 2002, Wal-Mart topped the 500 ranking of America’s largest companies, and by donating $ 18 million and 2, 450 truckloads of supplies to the victims of Hurricanes Katrina and Rita, the number of milestones in Wal-Mart’s history continues, and today, the company has 2.2 million associates, serving in 11, 000 stores across 27 countries and 200 million customers week after week.
Thought Wal-Mart has a number of milestones in its history, Target Corp was the one that made its entry in to the market first into the United States. It was in the year 1902, that George Draper Dayton opened a store named Goodfellow Dry goods – the current day Target Corporation in Minneapolis. A year later, the store was given a corporate name and was made Dayton Dry Goods Company. In the year 1910, this name was shortened and made Dayton Company. In the year 1938 on the death of Dayton, the reigns of the company were taken over by his son Nelson and the company was worth $14 billion then.
In the year 1956, Dayton Company establishes the world’s first shopping mall in suburban Minneapolis that is fully enclosed and this was named Southdale. 1962 saw the launch of the first discount Target chain. Five years after this, in the year 1967, Dayton Company goes public and the name is changed to Dayton Corporation. In the year 1969, Dayton Corporation merges with J.L. Hudson Company, a Detroit-based department store chain and eventually transforms to Dayton Hudson Corporation. Mervyns’s chain of moderate-priced department stores, based out of California is acquired by Dayton Hudson Corporation in the year 1978 and a year after this, the Target chain becomes the largest revenue producer of the Dayton Hudson Corporation. This spree of acquisition continues for almost two decades. In 2001, the company’s name is changed to Target Corporation and its ticker symbol is TGT. Target Corporation makes its entry into the Canadian market by its acquisition of Zellers.
General Difference
While Target Corp. is a supposed mid-range convenience store, Wal-Mart is a regarded as a lower-end depot. The merchandise offered by both these chain of supermarkets are almost similar. Hwoever, Target is a supposedly believed to be a store that offers a higher grade of goods and commodities when compared to Wal-Mart. The tagline for Target Corp is “Expect More, Pay Less,” while that of Wal-Mart’ is “Low Prices. Every day. On everything.”
Variation in the 4Ps
Price
In terms of pricing, both Target Corp. and Wal-Mart are almost akin to each other, as both of them do their best to keep the prices at the least possible level. Wal-Mart has created a niche for itself and Target Corp. always tries to stay away from this niche. In order to do so, Target Corp. continuously persuades its suppliers to offer goods at the lowest possible price. Target Corp. strives to offer a better in-store experience and superior brands to its customers when compared to Wal-Mart, and thus the prices of Target Corp. for a few commodities are higher than Wal-Mart. Wal-Mart’s business model itself is based on the concept of low price offering of products and this makes the company the classic discount retailer.
As the customer base of Wal-Mart is really extensive, this acts as a leveraging factor for the company thus helping it to procure merchandise at an extremely low price. This additionally is also because of the volumes that the company purchases.
Product
Target Corp. has always tried to differentiate itself from Wal-Mart in terms of the product. Target Corp. brought in high-end fashion designers on board to design clothes exclusively for the company. The cleanliness and in-store experience of Target Corp. is definitely better when compared to the same inside a Wal-Mart Store. Target brings in high quality products and offers the same to the middle-class at an extremely affordable price. In order to keep pace with their prime business objective of offering lower prices on their products, Wal-Mart’s focus on the quality of the product is not so great when compared to Target Corp.
While Wal-Mart’s target customers are low-end customers and the people who look for only low-priced products, Target Corp. focuses more on the middle-class and high-income groups. Wal-Mart succeeds in maintaining their prices so low, sheer volumes in their sales. The products offered by Target Corp. portray a class and chic image, while being priced very reasonably. Another way in which Target Corp. tries to differentiate itself from Wal-Mart is through having people try out the products in their labs, thus fostering innovation. Ultimately, the image that Target Corp. has created for itself in the market is that of a brand that offers high quality at an extremely affordable or slightly higher price.
Promotion
The target customers for Target Corp. are the younger generation middle-class people having a great disposable income who are interested more in the quality of the products rather than the price of the same, and who are willing to pay a little more money to get the desired quality. Further, Target Corp’s target market is the people who are keener on having a better shopping experience as well as a better in-store experience.
Wal-Mart, as already mentioned functions true to their business strategy “Save Money, Liver Better,” as it offers goods at the cheapest possible price. Wal-Mart also strives hard to maintain its brand recognition by promoting its brand extensively by using various forms of promotional media.
Place
Target Corp. has always stayed away from many of the rural areas of the United States, thus showcasing itself as not being as omnipresent as Wal-Mart, because Wal-Mart has its presence in almost the whole of the United States. Target Corp., due to its lesser footprint, did not have to taste bad press like in the case of Wal-Mart, known for its legal complexities. Wal-Mart has an extremely large customer base, and thus also has a larger footprint when compared to Target Corp. The store appearance of Target Corp. supermarkets is much sophisticated when compared to Wal-Mart, as it wishes to offer a modern look and better quality and in-store experience to its customers.
Comparing the Stock prices of both companies
Source: http://www.ftsmodules.com/public/texts/valuationtutor/VTchp3/topic8/topic8.htm
The above chart reveals a comparative performance of the stocks of both the companies, which is pretty different, regardless of them being immediate competitors in the market. First of all, it is evident from the above chart that Wal-Mart was less unpredictable and instable when compared to Target Corp. In the years 2001 and 2002, the United States was hit by the most catastrophic recessions, and the stock prices of both the companies dropped significantly. It can also be understood from the chart that recovery of Target Corp. was pretty strong, till the time the American economy was hit yet another time by a deeper recession in the year 2008. The recession of 2008 had a serious effect on Target Corp. when compared to Wal-Mart. Yet again, Target Corp. successfully recuperated from the recession of 2008. Although Wal-Mart was also affected by the 2008 recession, the impact was much lesser and insignificant when compared to the impact it had on Target Corp.
Similarities
Though there is a constant encounter for the heart and purse of every shopper in the United States, the allegiance is more inclined towards the tastes of individual customers and both the retail giants have their own loyalists and disapproval as well. Both of these retail giants market extensively varied descriptions of the American exceptionalism. While Wal-Mart campaigns for efficiency and prudence, Target Corp., on the other hand provides aspiration and elegance. While Wal-Mart offers extremely low-prices on every product that it sells, Target Corp., offers what customers need – precisely the highest quality at a slightly premium pricing. Irrespective of all these myriad range of differences, both these companies are similar in numerous ways.
The most remarkable similarity between these two retail giants is that almost 80% of the merchandise in both the stores is alike. More often than not, even the prices are similar in quite a few cases. “The most recent comparison by Bloomberg Businessweek found only a 46-cent difference between the two retailers per $100 of purchases.”
In nutshell, it can be stated that both Wal-Mart and Target Corp are precisely amicable twins of the retail industry of the United States, which are extraordinarily different, but sharing an identical genes. For both Wal-Mart and Target, success was innately achieved from the Southern and Midwestern principles and ideals that were precisely advocated by their individual founders. Sam Walton, the founder of Wal-Mart might not have recognised that his discount store would transform into the world’s leading private employer one day; and George Draper Dayton would not have fathomed that Goodfellow Dry Goods, the current day Target Corporation would democratize strategy for the whole nation.
References
Boyle, K. (2012, October 23). Walmart vs Target Redux: More Alike Than You Think. Retrieved from Reclaim Democracy: http://reclaimdemocracy.org/walmart-vs-target-redux-they-have-more-in-common-than-you-think/
Financial Trading System. (2011). Wal-Mart and Target: Strategic Differences. Retrieved from Financial Trading System: http://www.ftsmodules.com/public/texts/valuationtutor/VTchp3/topic8/topic8.htm
Funding Universe. (2013). Target Corporation History. Retrieved from Funding Universe: http://www.fundinguniverse.com/company-histories/target-corporation-history/
Target Corporation. (2014). About Target. Retrieved from Target Corporation: https://corporate.target.com/about/
Walmart . (2014). History Timeline. Retrieved from Walmart: http://corporate.walmart.com/our-story/history/history-timeline
