Comparing Walmart and Target No Longer Makes Sense (But I’m Doing It Anyway)
The one-two punch of Q2 earnings reports from Walmart and Target is always a harbinger of retail’s health as Halloween, Thanksgiving, and the make-or-break holiday season loom. Yet the daylight between these power players keeps getting brighter. Direct comparisons between Walmart and Target do a disservice to both as their priorities, capabilities, and business models diverge. Carol Spieckerman teases out uncommon takeaways from this second-quarter double feature, highlighting the growing differences that now set Walmart and Target apart.
Episode highlights:
How Walmart’s diversification slays retail setbacks.
Why product sales will take a back seat.
How “mix shifts” and “frequency categories” bring on the pain.
Why retail crime isn’t an equal opportunity crisis.
KEY TAKEAWAYS
Walmart’s advertising business was up 35%, it doubled over a two-year period – Sam’s advertising business was up 33%, and Walmart’s international advertising business was up 40%. Walmart’s diversification, particularly new business models LIKE advertising, fulfillment, and its online marketplace will drive its next-level platform monetization opportunities. Increasingly, product sales will play a smaller role in Walmart’s overall profitability.
In contrast, Target mentioned a 1.3% increase in what it called “other revenue” which would include advertising. This was quite surprising given that Target is known for its marketing prowess, brand alliances, and general customer loyalty.
Walmart used the term “mix shifts” again to address the fact that shoppers are buying more groceries and backing off discretionary categories and general merchandise. Target reprised its favored term for this dynamic when it once again talked about how increased purchases of “frequency categories” were a stubborn situation. Both retailers use groceries to drive traffic yet are arguably making it too convenient to grab and go. If shoppers are picking up items curbside or having them delivered to their homes, the opportunity to lure those shoppers to higher-margin categories is forfeited.
Both retailers have cited retail crime as a major problem, however, Target was far more vocal about it. Walmart seems to have backed off of the panic surrounding retail crime and is minimizing it as a profitability killer.
Target still operates with many strengths. It enjoys a loyal shopper base, its hip, upbeat marketing vibe has largely remained intact. It may be just diversified enough to keep Target fans playing on its platform.
Even so, Walmart’s tone was far more confident and proactive this go round.
