As Moody’s Investors Service’s business reports have shown, Wal-Mart has been slowly but surely gaining ground in the grocery business compared to its rival as Target’s new strategy appears to be aimed towards a different market area.
So What Is Target’s New Strategy?
With both competitors having had a tough few years, with Target still recovering from its 2013 credit-card breach fall in reputation and facing the results of its departure from Canada, things seem to be finally looking up as the results of the two company’s big investments are starting to show.
Following a busy period of rebuilding, Wal-Mart’s strategy of inching its way into the online sector seems to be paying off as the company is now better prepared to take on internet giants such as Amazon.com Inc. Their Internet growth, coupled with the high expenditure in other departments is turning in positive results for Wal-Mart, as the company is showing early, but steady, signs of growth. Target, on the other hand, has yet to show signs of regaining its status.
The two company’s future was outlined when their most recent earning reports came in. While the Bentonville, Arkansas Wal-Mart not only beat its estimate but also increased their earnings, Minneapolis’s Target fell short in achieving its estimates.
The main difference between the two competitors and the thing that seems to be eating away at Target’s new strategy is Wal-Mart’s grocery sector. Whilst both chains sport a place in the food market, more than half of the nationwide revenue accounts to Walmart, who is almost twice as big in size compared to its nearest competition, Kroger Co. Although Target’s grocery sector comes to approximately 40% of its own revenue, it accounts for just about 15% when compared to Walmart.
These percentages are thought to be directly linked to the difference in market strategy. Wal-Mart maintains a Supercenter format that offers full-line grocery stores besides its merchandise stores, also stocked with full-line general products.
Target, who tries to compete with its SuperTarget-format stores, couldn’t quite reach the target as the range of products they offer differed from Walmart’s and their initiative, the Pfresh, couldn’t quite break into the market as consumer orientation shows their preference for packaged products over perishable ones. Also, their lack of stand-alone stores comes as a clear disadvantage when compared to Walmart’s Neighborhood Market.
Target’s new strategy, which is aimed towards home and children’s apparel may be its saving, as their products should gain the client’s interest and increase both sales and profitability. But food offerings should not be looked over, and analysts are afraid that without an increase in the area, Target will find it very difficult to gain its lost ground. What do you think of Target’s new strategy?
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