Thriving, Not Surviving
With the holiday season rapidly approaching, big-box retailers are looking to capitalize on what has been a rough year. The continuous standoff with China, as well as the nonstop rise of Amazon, has left a sizable dent in the retail industry. Sears, who is currently facing bankruptcy, announced the closing of 51 stores by February, while Kmart is planning to shutter 45 stores of their own. Once known as one of the largest American economic pillars, J.C. Penny has closed 18 stores this year and expects to downsize even further in 2020. However, despite all the turmoil, Target and Walmart have managed to further grow by applying their own twist on the traditional “brick and mortar” approach.
When looking at the numbers, over the last 5 years, both Walmart and Target have seen their stock price increase, by 35% and 40%, respectively. As of December 2, 2019, Target has a stock price of $123.98, matched by Walmart’s $119.28. With those numbers in mind, Target has a market capitalization of $62.83 billion, while Walmart boasts a $339.27 billion market capitalization of their own. In 2019, Walmart posted an annual EBITDA of $32.36 billion, while Target raked in $6.584 billion. These key financials are a true barometer to the overall financial health of both companies as they enter 2020.
Target has seen steady but substantial growth over the course of the last few years. In early March, CEO Brian Cornell announced a $7 billion plan that would facelift the company. This strategy began with a doubling-down on their 1,800+ U.S. locations. Although this approach seems illogical, Target saw a 5% increase in same-store sales, a major metric in assessing the success of a retail company. Next, Target invested millions on remodeling their stores, with the hope of catering towards young parents and millennials. To appeal to this customer segment, Target has launched over 25 brands, including clothing lines Goodfellow and A New Day, whose trendy styles have caught the attention of low budget fashionistas. Additionally, Target has invested in developing its free loyalty program to gather data about customer’s shopping habits. They have opened smaller locations on college campuses which invite a free-flowing environment, and lastly, they have also beefed-up its online sales method through the introduction of a third-party marketplace Target +. Target + will establish a more accessible platform, while allowing Target to eliminate major costs, such as shipping.
Walmart has had its fair share of success with their business model of “everyday low prices” across the globe. Customers shop at Walmart because they are able to find anything they need at the best price available. As of March 2019, Walmart has nearly 12,000 worldwide locations, as well as various e-commerce websites. According to Charles Fishman, author of “The Wal-Mart Effect”, 90% of Americans live within 15 miles of a Walmart. Additionally, Walmart prides itself on having a nearly impeccable supply chain. They were amongst the early adopters of barcodes and RIFD (radio-frequency identification) tags which have allowed them to keep a good grasp on their inventory. With a detailed database, Walmart can reduce the number of out of stock products. Lastly, Walmart has established relationships that allow them to deal directly with manufacturers. Under this method Walmart slashes costs, eliminating the use of middlemen, in addition to having suppliers be responsible for inventory. With this effective pairing, Walmart has established itself as one of the truly elite retail giants, with the key ingredients to surviving a retail apocalypse.
Looking forward, both Target and Walmart will have to bring their A-game to further grow their revenues. With Amazon initiating their one-day shipping promotion, many analysts suspect that this will only further their lead. Alibaba has also shown significant signs of growth and also looks to further grow its international presence in the U.S. What does the future have in store for Walmart and Target? How will they respond? If there is one thing time has shown is that both companies will find a balance of sticking to their core principles, as well as integrating innovative ideas to help them remain worldwide staples.
Photo Caption: Retail War
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