Why Target's Sales Are Outperforming Wal-Mart's Sales

As noted in the last post, a rising adult median age (which is now 45) is causing falling consumer demand because after the mid- to late-40's people generally begin buying less “stuff”. However, a rising median age also leads to other changes in buying behavior.

Around the late 30s to mid-40s many consumers begin focusing less on quantity and more on quality – more on getting better “stuff” than on getting more “stuff.” This is why we’re seeing a boom in luxury retail even as value retail sales have weakened.

The big gainers from age-onset changes in consumer behavior are not just the Tiffany’s and Neiman-Marcuses of the retail world. Target has adapted to consumer shift from quantity to quality with astonishing insight, resulting in its sales growth outperforming Wal-Mart’s.

By avoiding the warehouse look – narrow aisles, tall inventory stacks, etc. – that Wal-Mart sports – and with a value-priced inventory that reflects a dash of chic, Target is nicely positioned for consumers’ deepening qualitative consciousness.

Its same-store sales for this holiday season are projected to run between 3 to 5% while Wal-Mart’s figures have been adjusted downward to 1 to 3% after a humiliating showing on the weekend following Thanksgiving.

Sundry analysts blame the poor sales showing on Thanksgiving weekend on Wal-Mart’s decision to open the holiday season without big price slashes. However, there must be more to this given that sales projections for the rest of the holiday season have been lowered even after price slashing.

Consumer researcher Harvey Hartman recently told me he has discovered a remarkable poverty of emotional attachment to the Wal-Mart brand among its customers. This defect stands in the way of Wal-Mart’s adapting to the shift in consumer focus from a quantitative to a qualitative orientation, which in effect is a shift from a left brain rational orientation (calculate the savings) to a more right brain emotional orientation (delight in the feeling).

Comments

[Dick]

David,
What's your analysis as to why Target's banning Salvation Army Bell Ringers didn't hurt sales more than it did. With the mature consumer's desire to see the company as an analog of later life values, I was surprised that it did not have a greater impact.

[David Wolfe]

Dick:

I'm not sure that "mature minds" so much actively or consciously desire companies to be analogs of later life values" as pleased when they do see a company doing so. With insights gained from many years of experience in the marketplace, many older people tend to be suspicious of companies that wear their values on their sleeves.

We should also keep in mind that Target has a sterling reputation for giving back to the communities in which they operate, so there is some offset here when it comes to evaluating Target for its eleemosynary values.

Then too, running off the Salvation Army took place only a few days before Christmas -- not enough time for any big build-up of adverse response. I'd guess that no more than 1 shopper in 15 or 20 entering a Target knew about the flap.

Then there is the issue of Target's demo -- mostly shoppers under 50 for whom the issue is not a big enough deal to persuade them to give up the savings possible at a Target.

[steve]

why do they build wal-marts? to keep the rednecks out of target. i would honestly rather go to target and pay more than go to wal-mart and have to deal with the begging (salvation army) and white trash with no manners.wal-mart employees are notorious for being slightly off balance. i work hard for my money and in my years have come to the realization that even though i would like to save money i dont want to feel like like im shopping in a third world country.(wal-mart). so the more financially stable i become the more it occurs to me that i would rather spend more for less hassle and more comfort.

[george bruce]

why do people have to be so snobby what is wrong shopping at wal-mart. wal-mart attracts different people not just rednecks and i bet if you dont find what your looking for at target or any other retail store you will find it at wal-mart. I dont think target will refund you a damaged product or let you exchange after having it for a few months or compare prices like wal-mart. Wal-Mart is retail and the way they have grown and are still growing is because their discount sales and great customer service. i dont care who you are and what you do or even if you prefer quality over quanity eventually you will go inside a wal-mart because other retailer dont have it, cant get it, or their price is too high.

[David Wolfe]

George Bruce

Yes, your're right about Wal-Mart's inventory and price advantages for consumers. But Wal-Mart is able to give you these advantages in such dramatic fashion for a number of reasons that have brought much shame on the company in many people's minds.

First, Wal-Mart has a history of making suppliers dependent on it, then using that dependency to drive down the price it buys goods from them to sell to you, while the supplier heads toward bankruptcy and dissolution. Of course when that happens in the U.S., taxes that you, I and others have paid are needed to pay government administrative costs of the banckruptcy as well as unemployment and other costs of people thrown out of their jobs.

Second, Wal-Mart has a policy of staffing as much as possible,with part-time employees to avoid paying for benefits. Of course it passes the savings on to you in lower prices, but some of the taxes you pay go toward helping some of Wal-Mart's part-time employees' medical and other bills they can't cover with part-time pay. Yes, they can take 2nd and 3rd jobs -- and many do. But that turns many kids into latchkey kids, some of whom turn into "bad" kids without parental supervision who commit acts that throw them into the court system that is supported by your taxes.

Third, Wal-Mart welds such power that when it comes into a small town area it often kills the town economically because locally owned business cannot survive in Wal-Mart's shadow. This increases local poverty (resulting in more burdening of public treasuries) as well as ruining the lives of untold numbers of people who have become poverty-ridden.

So in some ways the money you save at Wal-Mart is an illusion because as a taxpayer you pay back some of those savings in higher public administration costs.

Now, one can say to hell with all the parents, kids, supplier companies and communities that are hurt by Wal-Mart's rapacious ways and continuing buying from it -- or one can regard the issue to be a matter of conscience.

Thanks for your comment,

DBW

[Norma]

Well I understand all the above about the differences in Target and Wal-Mart, so all I can say is that I did a lot less shopping at Target this year, (putting back many items I had snagged as gifts) because they were all made in China. I don't want anything I eat, eat from, cook with or that touches my skin, that is made in China. So I ended up spending about a hundred fifty less, because I just decided if it wasn't made in America, no one I knew needed it that bad. I am still reeling for the Dog Food Recall issue, after getting tainted dog food. All the cheap little things that end up in land fills because they are made in China and potentially dangerous, may have made you some profet, but are you counting one those who just don't want any of that stuff around them. Wake up Target, and you will really make some profits.