Target pushes basics to reverse sales slide
NEW YORK — Target Corp. is going bananas to keep up with Wal-Mart Stores Inc.
The discounter has long sold groceries. But it is barely holding onto its customers while its chief rival, Wal-Mart, is rapidly picking up new shoppers as its powerful low-cost message resonates in the recession. So Minneapolis-based Target plans to stock more fresh food — including bananas — and play up its low prices.
Meanwhile, Wal-Mart, the world’s largest retailer, is expanding its selection of nonessentials like home furnishings, while improving the quality of its store-brand food like thin-crust pizza and ice cream.
Facing criticism from Wall Street analysts who believe it’s been late to respond to the recession, Target — which is about one-sixth the size of Wal-Mart — is becoming more vulnerable. But New York-based retail consultant Walter Loeb says Target has "plenty of opportunities to get better," particularly in groceries, and is making the right moves.
Target’s cheap chic mantra — its advantage in boom times — became a drag in late 2007 as the recession began and shoppers focused on basics. At the same time, Wal-Mart, based in Bentonville, Ark., found a balance of merchandise and marketing to enhance its renewed focus on price.
Target’s same-store sales — the comparison of sales at stores open at least a year and a key indicator of a retailer’s health — has lagged Wal-Mart’s since late 2007 fast cash. In the most recent quarter, sales at established Target stores dropped 3.7 percent, while the indicator rose 3.7 percent at Wal-Mart, excluding fuel.
"Consumers are buying what they need to have, so Target is stuck where they are, because that’s the mouse trap they built," said Howard Davidowitz, chairman of retail consulting and investment banking firm Davidowitz & Associates. "Wal-Mart is pounding away at its price message relentlessly."
While Target wants to keep its innovative edge, for growth, it is clearly turning to groceries, including the introduction late last year in some of its general merchandise stores — as opposed to its supercenters — of prepackaged perishables like bananas and bagged lettuce. It plans to expand the concept to 100 new or remodeled stores by year’s end.
Target also is testing a "low-price" promise in advertising for certain locations. It’s also relaunching its store-label Target Brand as Up & Up, to span 40 categories such as health and beauty items by summer when new marketing begins.
But Wal-Mart keeps rolling out new programs too. Wal-Mart relaunched its Great Value food brand in March with an improved selection and reformulated recipes, and it is revamping its electronics aisles and adding exclusive home furnishing brands.