Cornell will present the core of his turnaround plans soon. According to Dow Jones, one focus will be a new grocery selection, though Target is not primarily a grocery store. Cornell apparently will open some new stores that are smaller than most of its current big box locations, though Target is a big-box retailer. He may lay off more employees. That part of his plans is like those of every other struggling retailer.
What Cornell may not focus on is Target’s old but still present model, at least according to its marketing slogan “Expect More. Pay Less.” Pay less remains at the core of the strategy of Target’s largest rival Wal-Mart Stores Inc. (NYSE: WMT). The slogans “Savings” and “Everyday Low Prices” litter its Walmart.com website. The messages posted in its stores are not much different.
Even Amazon.com Inc.’s (NASDAQ: AMZN) approach to gaining sales depends to some extent on “savings.” Amazon even cuts prices on its own products. Presently that includes a price cut on its Kindle e-reader, which Amazon has chopped from $99 to $79. Unfortunately, it is a “limited time offer.” However, that limited time could last forever.
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Another part of the war among the country’s largest retailers to gain customers are various forms of “free shipping.” Target’s is barely ordinary. It stands at “free” if an order is above $25. However, the shipping takes three to five business days. Wal-Mart’s free shipping is attached to a $50 or greater purchase, but it is full of caveats. Amazon has a sort of free shipping attached to its Prime service, which also includes movies. Membership costs $99 a year, so breaking out the free part is impossible.
Amazon and Wal-Mart are larger than Target and presumably have larger marketing budgets and stronger balance sheets. The websites of Amazon and Wal-Mart have more monthly unique visitors, according to comScore. Target has to come from behind by nearly every measure.
Target’s revenue rose only 1.9% last year to $72.6 billion. EBIT dropped 4% to $4.8 billion. Its share price growth over two years has been 17%, compared to the S&P 500 at 39%.
Cornell better slash prices and enhance the free shipping. Groceries and other small changes won’t cut it.
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