Target feels Wal-Mart’s pain; more trouble for big box retailers

Those of you who read me regularly know that I see Wal-Mart’s continuing decline in same store sales as the result of a permanent shift in consumer buying habits.  Rather than a temporary decline in sales, I contend that big box retailers are losing consumers to the Internet in just enough numbers that they suffering a slow and inevitable decline.  This is a phenomenon that will only heighten in importance as the technologically savvy Millennial generation grows ever more important as consumers.

Lending support to my theory is the news that Target is suffering some of the same problems afflicting Wal-Mart.  Here is how a Wall Street Journal article, “More Target Than Tar-zhay?” puts it:

Target shoppers are stocking up on toilet paper and foodstuffs, but the stores are having a hard time enticing customers to spend money on stylish clothing and home goods—which are more profitable and make up more than 40% of annual sales. It was these apparel and decorating items—mixing mass with class—that set Target apart and allowed it to be one of the few discount chains to thrive against Wal-Mart Stores Inc.'s relentlessly low prices.

Target management blames the economy: 

Our guests continue to shop cautiously," Target Chief Executive Gregg Steinhafel said last week, echoing his earlier sentiments. "We believe these households need to see further improvements in housing and income growth before they'll meaningfully increase their discretionary spending."

I think that part of what is happening is that as those who shop on line tend to be more affluent.  That means that as they shop from home instead of at bricks and mortar stores, retailers like Target and Wal-Mart are left with lower income, less sophisticated shoppers.  These folks are always going to be far more about food on the table and clothes on their backs than trendy fashions and home goods.

Special thanks to Steve Velte of RSV Productions for bringing the above Wall Street Journal article to my attention.

5 thoughts

  1. @Bob,
    You would do well to educate yourself about what Design really is. “Make your Summer Funner” is an advertising slogan.
    Design is the discipline of adding value to a product or experience without adding cost- through an understanding of the habits, sensibilities, and values of consumers.
    Commoditizing people, places, and products to gain absolute leverage against competitors is inherently anti-design ( which I assume is where your value system lies)- but is not the only way to make a buck. As the world continues to get effectively smaller and our living becomes more localized- these imperialist and adversarial practices become increasingly archaic.
    Design is a way to increase everyone’s quality of life- but there are pragmatic reasons why becoming “more bigger” isn’t always “more better”.
    …even WalMart will reach a pivotal threshold- when fuel prices are high enough that it costs more to produce and ship goods from China than it does to make or buy them locally. It’s coming, my friend.

  2. Great point here Richard. Further, I would argue that there is a seismic shift affecting these retailers that goes well beyond online shopping by more affluent consumers.
    In the early 2000’s, how many dollars were pulled out of home equity to fund non-essential or more “premium” oriented products? Those dollars are no longer available as home values have dramatically slumped.
    And how many jobs have been lost since that time, primarily impacting the middle class shopper?
    And how has the dramatic increase in savings rate over the last 5 years impacted traditional “disposable” income levels?
    Bottom line, there are simply fewer dollars in the market. And if the dollars that ARE available are spent online vs. in stores, all brick & mortar retail will suffer exponentially.
    Not to be “Chicken Little”, but I really think we’re in for a wild ride as the plates shift under our feet in this brave new economic world!

  3. So you say it’s about Target educating the mass buying public about design?, while also having a healthy, community focused agenda?…amazing how this mumjo jumbo does little or nothing for cash flow and profits…it does make flush the advertzing guys who create the visuals and jingles….like…”MAKE YOUR SUMMER FUNNER”!

  4. Huge factor in the decline: Target stopped doing store wide design oriented, alternate character branded programs.
    Shoppers were VERY excited by J.Otto Seibold’s reading program, Naughty Pets Easter, Domokun Halloween, Skellanimals Halloween through Christmas run, and the others which came before these, some based on in-house art. What did we get this past Halloween and Holiday? Generic, very “Wal-Marty” signage and designs.
    And no, you can’t slap any ole character up there like Dora and make come back. J.Otto was PERFECT…appeals to the design aware and smart moms.
    Those programs gave us a voice and soul we wanted to identify with.
    It made the local well to do mom-Starbucks meet ups feel right.
    Now, with that element gone ( perhaps Target wanted to avoid the licensing fees? ) it’s just Wal Mart in red.

  5. You know- I genuinely hope you are off on this one. Target is a great example of how an internal design culture can provide leverage within a hyper competitive market. I am personally tired of hearing from major news sources that only science and engineering can lead innovation. Most of the public ( and most smaller companies for that matter) are horribly misinformed about what Design really is.
    Target is one of those commercial giants that serves to educate the mass buying public about design, in my mind. And they also have a healthy, community focused agenda.

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