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Target to Put More Focus on Value

Retailer Fears Cheap-Chic Not Cheap Enough for Consumers in Down Economy

By Published on . 3

NEW YORK (Adage.com) -- For years Target's cheap-chic reputation has made it a darling of the fashion world and a favorite among shoppers of all stripes. But now, in the face of a tough economy, its well-cultivated image is turning away consumers who believe its trendy assortments and hip marketing mean steeper prices.
To make certain its prices are in line with Wal-Mart's and that customers are aware it, too, can be a one-stop shopping destination, Target execs say the focus will now be on the latter half of their 'Expect More. Pay Less.' slogan.
To make certain its prices are in line with Wal-Mart's and that customers are aware it, too, can be a one-stop shopping destination, Target execs say the focus will now be on the latter half of their 'Expect More. Pay Less.' slogan.

To banish that notion, the retailer is taking pains to make certain its prices are in line with Wal-Mart's and that customers are aware it, too, can be a one-stop shopping destination. Its marketing messages, as a whole, are being tailored to focus on value and convenience. And, as Target's "Expect More. Pay Less" goes head to head with Wal-Mart's "Save Money. Live Better," execs say the focus will now be on the latter half of their slogan.

Cash-strapped consumers
"The customer is very cash strapped right now. And, in some ways, our greatest strength has become somewhat of a challenge, in that our stores are fun and unique, and we have both what you need and what you want," Gregg Steinhafel, president-CEO of Target, said during a conference call with analysts. "So, we're still trying to define and find the right balance between 'Expect More. Pay Less.' The current environment means that the focus is squarely on the 'Pay Less' side of it."

Kathryn Tesija, exec VP-merchandising at Target, said that in-store signage posted at the end of aisles is also being evaluated to ensure the value messaging is loud and clear. Circulars have also been revamped to feature strong value headlines, fewer products with bigger images and broad price points.

"We understand that guests sometimes equate clean, well-designed stores and fast and friendly service with higher prices," said Ms. Tesija. "But we believe guests can have a superior shopping experience and save money. ... By increasing communication to our guests about our value and convenience, we will ensure they turn to Target for their needs and wants."

From a merchandise perspective, the retailer said it is seeing consumers trade down in food categories and, to some extent, in home. National brand equivalents have been performing "exceptionally well," and the retailer said it has significantly increased the number of those Target brand commodities.

Sticking with designer roots
Still, Target won't be abandoning its designer roots anytime soon. Ms. Tesija outlined plans for several new designer partnerships across the apparel and beauty categories. Mr. Steinhafel also reiterated Target's commitment to "delivering the newness, innovative design and exceptional quality that Target is known for."

During the second quarter, Target saw profits decline 8% while sales at stores open at least a year slid 0.4%. In the last three quarters same-store sales growth has been relatively flat, with traffic at those stores down between 1% and 2%.

"The current environment is the harshest we have seen in many years," said Mr. Steinhafel. "In the short term, it's going to remain challenging, and I just don't really expect to see the traffic trends change until we see a stronger economic climate in the U.S., and so we're planning our business cautiously."

By comparison, Wal-Mart last week reported a 17% jump in profits and a 4.6% rise in same-store sales, excluding fuel sales. For the last several quarters, the company has posted gains that defy current economic trends and appear to prove the power of its discount message.
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