Tar-zhay-as devotees pronounce it in faux French-has created a powerhouse under its "Expect More. Pay Less" strategy featuring designer products with prices fit for low- to middle-income pocketbooks. The strategy has brought the chain $27.7 billion in revenue year to date through November. Target was also named Advertising Age's 2000 Marketer of the Year.
Of late, however, sales at Target stores open more than a year have lost steam, despite the opportunity to gain customers from bankrupt competitor Kmart and a slumping economy custom-made for discounters. Its cheap-chic sensibility is being copied by other chains as Target deals with tougher price comparisons with Wal-Mart and steeper competition from upstarts such as hybrid discount/department chain Kohl's.
For the four weeks ended Nov. 30, same-store sales at Target discount stores were down 5.7%, compared to a rise of 2.9% at Wal-Mart's discount-store division. For the two months covering the holiday, November and December, Target Chairman-CEO Bob Ulrich anticipates same-store sales to rise 2%. In the fourth quarter of last year, the chain's same-store sales were up 4.1%.
no `tractor pull'
However, Target Senior VP-Marketing Michael Francis said the chain is keeping its cash registers ringing this season without resorting to the deep discounting "tractor pull"-offering shoppers discounts of up to 70%-common at stores weathering a difficult Christmas. "We haven't been any more promotional. We've stayed the course," he said.
Rather than pitch price, Target's holiday campaign from Peterson Milla Hooks, Minneapolis, takes off on the classic tune "The Christmas Song (Merry Christmas to You)," replacing the line "for kids from 1 to 92" with "for gifts from 1 to 92." Dave Peterson, president and creative director for PMH, said, "We keep trying to do `trend-right' things." (See images from the TV ads, P. 26.)
Still, Target confronts the ultimate compliment, and, at the same time, curse: imitation from rivals. "Evolve or die," Mr. Francis said, adding the retailer's marketing challenge is to determine "how do we assure the ascendancy of the Target brand long term" while "consistently distancing Target from the competitive pack."
To do so, the chain plans to parlay into new marketing programs data obtained from users of its Target credit card. "This is our opportunity to gain market share, a huge strategic differentiator and a very important growth strategy as we go forward," Mr. Francis said. While declining to go into specifics, he also said the chain has "developed a number of [marketing] tools which will be uniquely deployed by Target."
In some respects, its renowned marketing acumen has added to its tribulations. "The hip, witty vibe created by the advertising doesn't always translate to the stores" some of which had "unusually shabby interiors," said Irma Zandl, president, Zandl Group, New York, a youth consulting and research firm, in a recent report.
She also questioned its designer product lines, such as the minimalist products from Philippe Starck and others, which Ms. Zandl believes may not appeal to the mainstream American aesthetic. "Many women with traditional tastes find Target's offerings too plain," she said.
Ellis Verdi, president DeVito/Verdi and a board member of the National Retail Federation's Retail Advertising and Marketing Association, said it's "too soon to predict the unraveling of Target." Nevertheless, he expressed concern that the chain's marketing strategy centered on a continually expanding cast of designers. "The issue with Target's strategy is you are as good as your last new product idea or new designer idea. It's impossible to hit every time."
Like many other retailers, Target also is faced with succumbing to a Wal-Mart-inflicted "price perception problem," said one retail marketing executive at a competing chain. Target, which has traditionally featured eye-popping creative with little mention of price, is now running three flights of spots prominently tagged, "Prices so low you don't have to hold back" from independent Kirshenbaum Bond & Partners, New York. Another move on the price front included the addition of in-store shelf talkers pointing to merchandise with reduced prices on Target's shelves.
But as Target looks more at price, Wal-Mart may also be flirting with a move on Target's cachet, particularly in apparel. Wal-Mart next year islaunching the Levi Strauss Signature collection and rolling out the George clothing line, the latter said to be aimed at lower-income office workers.
contributing: kate macarthur