Archive for the 'Discount stores' Category

Target’s brand position: We’re easy

Target is focused on “ease of shopping” as it refines its brand equity. My question (from RetailWire)…is it a credible claim, and can Target really sustain a competitive advantage here? Here’s my comment:

What makes Target “easier” than Walmart or Amazon? It’s a good tagline but is it supported by the facts? Target has a reputation for stockouts and other supply chain issues that a slogan by itself won’t cure. The company has a lot to prove, especially in light of Walmart’s laser focus on the same issue. Case in point: The new Walmart ad where the dad drives through in his PJ’s to pick up breakfast-in-bed fixings.

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Is Target’s turnaround on the right track?

A brief comment (below) from RetailWire, regarding Target CEO Brian Cornell’s evaluation of their improved comp sales and operating results. It’s all about the merchandising:

Given his CPG background, I give Mr. Cornell credit for recognizing at the outset that Target’s real niche is “cheap chic” apparel and home goods. This is what the brand was built on, not groceries and commodities. While these categories will continue to be important in-store and online, Target’s destiny doesn’t depend on them. The new brands’ product development didn’t happen overnight, but the strategy is beginning to pay off.

Did Walmart deserve the punishment?

By “punishment,” I mean the 10% drop in Walmart’s stock price yesterday (February 20) when the company reported slower-than-expected sales and profits in its e-commerce business. My comment at RetailWire expresses a contrary opinion about the market reaction:

Walmart’s stock took a similar hit a few years ago when management decided to investment-spend in the store experience — more payroll in areas like fresh food, remodeling and refixturing as needed, and so on. These were smart strategic choices that weren’t meant to please investors only interested in the latest quarter. Walmart’s decisions at the time have been rewarded with better results ever since.

I look at the 10 percent drop in stock price as a similar overreaction. Walmart is now starting to come up against its own numbers after the Jet.com acquisition, and (more importantly) it’s doing major spending on logistics and marketing to gain omnichannel market share. I’m no stock picker, but maybe this is a buy opportunity …

And now, a Google/Walmart tie-up

To expand on my last post (about Kohl’s and Amazon), now comes word of a stronger alliance between Walmart and Google. Here’s my comment from RetailWire, in which I comment that each company brings specific strengths and weaknesses to the partnership:

When the majority of product searches start at Amazon, that’s a huge advantage — it combines the predictive intelligence of an SEO company with the execution skill of a best-in-class e-tailer. But is Amazon invulnerable? Of course not, and that’s part of the reason why the company is filling in its portfolio with brick-and-mortar acquisitions (Whole Foods) or alliances (Kohl’s).

So an expanded partnership between Walmart and Google has potential: It provides Walmart with more robust search capacity and web traffic, and it offers Google a stronger e-commerce platform. But unless Walmart adds more second-party retailers (and their goods) to its site, it’s not going to catch up to Amazon’s head start for awhile.

Holiday hiring and the “omnichannel” challenge

Two recent (and related) comments from RetailWire on the subject of holiday hiring and whether stores are prepared to deal with the operational demands of omnichannel. First up, my take on the kinds of stresses on payroll and customer service that stores are trying to manage today:

BOPIS can have an impact on customer service especially in those stores where payroll is being stretched to manage “omnichannel” process instead of the shopper in the store. I’m thinking particularly of department stores (Macy’s, for one) whose higher-touch service standards have slipped while they are asking the same sales associates to cover additional tasks.

But there is another kind of “customer service” (in self-selection stores like Target and many others) that really depends on efficient restocking of fixtures and quick checkout. I don’t see BOPIS having the same kind of stressful effect on these stores’ service standards.

And here’s the second comment, published a few days later after Target and Macy’s revealed their holiday hiring plan:

Target’s hiring forecast vs. 2016 is a healthy sign, and Macy’s announcement is also a positive in light of the smaller store base. What both retailers are signaling is that they are figuring out the manpower requirements of omnichannel initiatives like BOPIS and ship-from-store without sacrificing the service standards they need to maintain in their core brick-and-mortar business. This seems to be a particular challenge at Macy’s, so it’s good to see them recognizing the cost of a solution.

 

 

 

Target’s choice: Cheap chic, or just cheap?

A brief RetailWire comment below on Target’s re-pricing of food and commodity basics,  which is something they periodically need to do:

Target periodically needs to reset its prices on commodities because of customers’ nagging perception that it charges too much. This has always been an issue with Walmart as its key competitor, and now Amazon adds to the challenge with its dive into the grocery price wars.

The key to making this work is to drive the higher-margin categories like apparel at the same time. (That’s really the key to the company’s success, not its grocery business.) Target’s reset of its private brands needs to accomplish this goal, otherwise the lower prices on food and household goods will only erode the company’s profitability.

Target finds small-format stores are more productive

Today’s RetailWire discussion centers on Target, which is enjoying more productivity in its expanding base of small-footprint stores. I don’t think this is rocket science:

Locating smaller-format stores in higher density areas (especially city neighborhoods) should drive more productivity. If these stores aren’t generating much higher sales per square foot, they are unlikely to be profitable given the higher occupancy costs (rent, loss prevention, etc.). So Target needs to hold these stores to a higher standard in the first place.

That being said, the focus on fewer categories and tightly edited assortments probably doesn’t hurt, either, and might be a lesson learned for the full-sized Target stores. I assume that most of the small-format stores contain much smaller grocery assortments, which is a good thing considering the low margins in an area where Target has struggled.


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