Bloomberg has a story about how “a slew of retailers are beefing up their grocery investments to lure in consumers cutting back on non-essentials like clothing and electronics. But as they lay out plans to improve their food offerings and supply chains, the big question is how does one compete with the mighty Walmart Inc. on its home turf.
“Mass merchant Target Corp. may have an answer — don’t compete with Walmart at all.
“While Target is often compared with Walmart as a budding grocer, its shoppers look a lot more like the overeducated and underpaid demographic Trader Joe’s founder Joe Coulombe identified as his core audience. It’s in this space, which includes Amazon.com Inc.’s Whole Foods and Sprouts Farmers Market Inc., where a new wave of competition is playing out.”
Bloomberg describes this as “a sensible bet for Target,” which “already commands an enviable level of loyalty among its customers … It has a reputation for offering quality private labels such as kids clothing line Cat & Jack and personal care brand Up & Up, both of which are now worth more than $1 billion. Chief Executive Officer Brian Cornell also has a track record of building on the company’s strengths to respond to new trends, as he did with the ‘stores as hubs’ strategy that used Target’s store fleet as fulfillment centers for online orders.”
The argument goes like this: Trader Joe’s and Sprouts may be aiming to attract the same customers as Target, but together they have only 900 stores, compared to Target’s 1,900. While not all Target stores have food, changing that is the company’s long-term plan.
At the same time, “Amazon has done little to leverage the full potential of Whole Foods. When the e-commerce behemoth acquired the high-end grocer in 2017, supermarket stocks fell as industry watchers warned of the coming disruption.” But that hasn’t happened, and Bloomberg writes that there may be “an opportunity for Target to capture disillusioned shoppers who like the experience of shopping at Whole Foods but not the price.”
KC’s View:
Maybe I’m wrong. Maybe I’ve not been to the right Target stores. But when I’ve been in Target stores with groceries, I don’t see that there is a huge separation between it and Walmart. Maybe a bit, but not enough to compare it to Trader Joe’s, Sprouts, or Whole Foods.
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