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An Interesting Piece on Target

By JLP | March 24, 2008

I just read a pretty interesting Fortune piece, Target’s Inner Circle, which is about retailer, Target. According to the article, Target is shy when it comes to press attention, which explains why I don’t remember ever reading an article about the company until tonight. Some interesting stuff from the article:

Over the past decade, revenues have increased at an annual rate of 12%, to $63 billion. Since 1994, when Ulrich became CEO of what was then the parent company, Dayton Hudson, Target stores’ operating margins have jumped from 5.4% to 8.6%, while Wal-Mart stores’ have flattened, from 8.1% to 7.3%. The stock has returned 795%, compared with 284% for the S&P retail index and 354% for Wal-Mart.

I don’t think there’s any doubt that Target is “hipper” than Wally World. I HATE Wal-Mart but don’t mind Target so much, while my wife (and 3-year old daughter) LOVES Target. Their stores are always clean and neat, while Wal-Mart always seems a bit bland.

Regarding Target’s prices vs. Wa-Mart’s, I found this quite interesting:

In February, Citigroup managing director and analyst Deborah Weinswig polled shoppers and found that though Target consistently underprices supermarkets on groceries by about 10% to 15%, shoppers perceived the opposite: that Target’s prices were a full 20% higher. Moreover, though prices at Target average out to within 1% to 3% of those of Wal-Mart, 87% of respondents said they shopped at Wal-Mart because it was the cheapest. “The problem could be that some of these stores are so clean that you just assume you’re paying more,” says Weinswig.

I’m afraid I would have been one of those people who thought Wal-Mart was cheaper than Target.

Finally, this last little tidbit ticks me off (long-time readers of this blog will understand why):

…some have noticed that both Target’s and Wal-Mart’s average pay in Minnesota, for example, falls below the $12.24-per-hour that advocacy group Jobs Now calls a living wage. “We feel they are worse than Wal-Mart because they are masquerading as this benign employer,” says Bernie Hesse, director of special projects for Local 789 of the United Food and Commercial Workers Union in St. Paul, which has unsuccessfully tried to unionize local Target employees (no Target employees are unionized). “They have gotten this pass because they have set up this foundation and have this chic look, and that’s more cruel than Wal-Mart. Wal-Mart doesn’t pretend.”

I don’t think most people understand the retail environment. Most of the jobs in retail are pretty much menial jobs that LOTS of people can do. Those kinds of jobs should pay minimum wage. Since a retail store has lots of part-time, low-wage employees, with smaller numbers of managers, it shouldn’t be a big surprise that their average pay is on the low end of the scale.

Anyway, I thought it was an interesting piece. I wonder how many Target employees have read it?

Topics: Miscellaneous | 30 Comments »


30 Responses to “An Interesting Piece on Target”

  1. Ron@TheWisdomJournal Says:
    March 25th, 2008 at 5:07 am

    When a Wal Mart store opens and has 3,000 applicants for 150 positions at the store level, their average pay must be acceptable to someone.

    My father works there as a truck driver (18 years) and my aunt works at Sam’s. Both love it. Their co-workers are generally very happy.

    It all boils down to supply and demand economics. When, like you said, thousands can do a job such as retail workers, it’s pay is negotiated downward. When very, very few can perform a job – pro athletes, CEO’s – it’s pay is negotiated upward.

  2. Duane Gran Says:
    March 25th, 2008 at 6:08 am

    A union has more utility for employees than just to negotiate wages. Even if you are aren’t fond of unions I think we can all rally around the notion of free association — people have a fundamental right to organize themselves if they so choose.

  3. RS Says:
    March 25th, 2008 at 6:45 am

    I was just going to make that same exact point. You actually put it perfectly.

    Now that I re-read that last section, I find myself a little confused about which part ticks you off…I originally thought that you were arguing that they get paid too little. Now I think that you are ticked that this advocacy group thinks that they should be getting over $12 to do a job anyone can do.

    If I am correct that it is the latter, I totally agree with you…that is ridiculous.
    -RS

  4. JLP Says:
    March 25th, 2008 at 7:22 am

    RS,

    Sorry for the confusion. I was ticked off by the advocacy group.

    Duane,

    (Good name by the way. It was my Dad’s name and is spelled the same way.)

    I’m all for freedom of choice. If you are an employee and you don’t like how you are being paid or treated by your employer, you have the right to seek employment elsewhere.

    Ron,

    EXACTLY!

  5. Heidi Says:
    March 25th, 2008 at 8:15 am

    I love Target – and was one of those individuals that always assumed that groceries there were more expensive than WalMart. Thanks for passing this along.

    I’m with you guys on the the union/”living wage” issue. That ticks me off as well.

  6. Geoff Says:
    March 25th, 2008 at 8:27 am

    I wonder what the difference in hourly wage is between Wal-Mart and Target, and what the difference in benefits are. I think that would tell me more about how I would think of each company than just saying they pay below the “living wage”.

  7. Lily Says:
    March 25th, 2008 at 11:11 am

    I worked at Target for a few months as a college student. When I interviewed, I almost didn’t get the position because I was “over-qualified.” My coworkers were mainly high school students on summer break. I made $9 per hour (this was a few years ago), and my cohorts and I were perfectly happy with this wage. We were there to supplement our allowances (well, I was there to save up for college textbooks). I did work with a couple of “lifers,” but they were management and seemed happy with their pay, too.

    I can’t speak to Wal-Mart, but Target does push neatness and appearance at its stores. Even before I worked there, I preferred shopping at Target because it was cleaner, more organized, more fashionable, and just as cheap. (Clothes I bought at Target got me through a Wall Street internship when I was too poor to afford Ann Taylor Loft.)

    I’m not sure what Bernie Hesse means when he says Target is “masquerading as this benign employer.” Is Target hiding its compensation info? Is it mistreating employees? What exactly is Target concealing under its mask?

    I think it’s absolutely ridiculous that Hesse would say “They have gotten this pass because they have set up this foundation and have this chic look, and that’s more cruel than Wal-Mart. Wal-Mart doesn’t pretend.” Would he rather that Target not invest in education or philanthropy? That managers walk around floors with cat-o’-nine tails just to make it very obvious that Target is evil? This guy’s nonsensical.

  8. Alma Cornwell Says:
    March 25th, 2008 at 11:57 am

    I do not know what Target you are shopping at, but the one I occassionally go in is cramped and junky. It is dark and I usually leave without buying. I do not like Target. On the other hand the Wal Mart I shop at are actually bright and clean. I do not understand this piece.

  9. sam Says:
    March 25th, 2008 at 12:03 pm

    I will have to argue with the contention that Target has competitively-priced groceries. My comparisons have indicated to me that they cost more than the local supermarket I shop at. (I don’t shop at Wal-Mart that often.)

    I do like shopping at Target and will pick up grocery items along with whatever I go there for, but don’t go there specifically to shop for groceries.

  10. Ron Says:
    March 25th, 2008 at 6:11 pm

    To the gentleman who stated unions are simply another way for free men to associate, I must disagree.

    I work in an environment in which the union is per se mandatory because of a “fair share” clause. I have no choice but to participate. Dues are drawn from my pay without my consent and against my will. The only way I can choose not to participate is to leave employment. This is something I have seriously considered.

    Let me tell you what the union has done for me personally. For several years, I led my department in productivity. When it came time for yearly raises I received exactly what my co-workers who did the bare minimum during that time. I don’t blame the employer. I don’t even blame the co-worker (to a degree). I blame the union. It has killed the incentive to produce. While I do not do the bare minimum now I don’t go overboard as I did in earlier years. There simply is no reason to.

    I could give several more reasons why I am against unions but the this is the biggest one. I am not being paid for what I can produce. I’m paid what the union has agreed is a fair wage.

    Unions exist to protect the under achievers.

  11. No Debt Plan Says:
    March 25th, 2008 at 7:05 pm

    As several have mentioned, this is simple economics. If people are willing to work at $12/hour — which isn’t half bad, about $25,000 per year for retail work — then how is it an “unfair” wage?

    Unions are such a good idea. They truly are. But the implementation is similar to our democracy. Full of loopholes and gaps that let fat cats in. The free market is the better choice 9 times out of 10, and that 10th time it is probably something illegal ($2/hr) that the union would stop.

  12. thomas Says:
    March 25th, 2008 at 10:56 pm

    Ron,

    Are you a teacher? My wife is and I can’t stand the dues. Just like you, she has no choice. What have they done? Absolutely nothing.

    I get really sick and tired of wage control in this country. Artificially raising wages does nothing but impact the consumer.

    I’ve worked retail, and for the low wage jobs it is just that – a low job. No way people should be making 12 an hour. That just means my detergent is going to go up $.10, or the socks will go up $.05 a pair.

    What really ticks me off is the restaurant industry. Here they are, paying the wait staff low wages so that the consumer can supplement their cheap @sses. Meanwhile, the cost of meals have gone higher and higher. So, not only do we have to pay more (usually for less food), now we have to tip more as well.

    to sum up my comments – unions suck, unfair dues suck, and the restaurant industry is a scam.

  13. josh Says:
    March 26th, 2008 at 7:49 am

    alma> Not sure what is wrong with the Target you’ve been in but most are not like that. Off the top of my head I have probably been in 7 targets and 4 walmarts in the last year alone. All targets were uncramped and tidy except one (it looked like it was in an older building, not a built-for-target building) and the walmarts were all the opposite.

  14. Awesome Mom Says:
    March 26th, 2008 at 8:36 am

    I have worked at Target and it was a good job. I worked on the night shift so we got more money and did not have to deal with customers as much. Honestly I thought that they were as good as any retail employers. The base pay was the same as I could get anywhere and the job was mindless. I happen to believe that Unions are scams and not all that helpful any more, so I was glad to not have to spend money on dues.

  15. larry Says:
    March 26th, 2008 at 8:55 am

    After reading this article and the comments I can see that there is no point in saving this site in favorites. The article is poorly written and the comments are worse.

  16. Adrienne Says:
    March 26th, 2008 at 9:18 am

    I don’t know about the groceries so much, but for health and beauty products and household things like cleaning products or lightbulbs, Target is *definitely* more expensive than WalMart. I usually shop for those things at WM and if I happen to go to Target instead I notice when I’m paying $7 for something that I *know* is $6 at WM.

    I think WalMart’s bad reputation comes from news stories a few years back about people being locked in the store and forced to work overtime for no pay. But realistically, the employees of WM and Target do the same kinds of jobs, so shouldn’t they have similar pay and benefits?

  17. Catherine Says:
    March 26th, 2008 at 9:50 am

    I am a comparison shopper. I’m always comparing prices – and not just Targets to Walmarts, but I compare the brands that are on the shelf to each other.

    With Target, they have very few products that are similar (ie, ONE brand of lamp shades, ONE brand of XYZ) and thus I am not able to do my comparison shopping. Also, a lot of times they will just have their “Target Brand” stuff and no name brand. This drives me crazy.

    At Walmart, I can get a much wider selection and more likely I will be able to choose best quality with the lowest price that is reasonable to me.

  18. JLP Says:
    March 26th, 2008 at 9:56 am

    Catherine,

    That’s a good point. I do like Wal-Mart’s grocery department. Our Target isn’t a Super Target so we don’t have a grocery department.

  19. Kat Says:
    March 26th, 2008 at 10:23 am

    I find the workers at Target to be much nicer than Walmart. They are willing to help you locate items, check you out and are just generally more friendly. Every Walmart I have been in has been crowded, dirty and the workers act like you are puttin them out by asking a question. Some Walmarts in the area are having issues with people being robbed in broad daylight in the parking lots.

    This article shows that Walmarts smily face ads are working on the general public.

  20. Deb Says:
    March 26th, 2008 at 12:11 pm

    I don’t know what you’ve been smoking, but I would pick Target anyday over Walmart. Having been a former employee of Target, I was never asked to work off the clock overtime, get crappy wages, or be forced to go on Welfare because the health care my employer offered was inadequate.

    Have you seen the DVD “Walmart: The High Cost of a Low Price?” It was an eye opener for me.

    It’s not worth it to save 50 cents on an item so some Walmart worker can get screwed.

  21. David B Says:
    March 26th, 2008 at 1:45 pm

    So does the author of the article think that all jobs should pay a “living wage”? That would be ridiculous. Every high school kid working as a cashier does not have the skills to contribute enough to justify that kind level of pay. Nor is Target obligated in any way to determine its pay scales according to somebody’s idea of a “living wage”.

    Target’s only obligation is to continue to please its customers so that it stays in business. I will concede that in order to please its customers, it needs to have good employees, but the pay for “good” employees is determined by market forces, not what a group of biased extortionists think is “fair”. Basically, Target pays what it needs to in order to attract the type of employees they need, and those employees are fine with it, otherwise they would go and find work elsewhere. Target and Wal-mart do not participate in slave trading (contrary to what some would have you believe), all of their employees choose to work their voluntary. It is a voluntary interaction in which both parties benefit.

    This is the main problem I have with unions. They seem to be of the mentality that their employer exists for the sole purpose of providing them with a job. That could not be farther from the truth. Their employer exists to provide a product or service for their customers. Their employees either contribute to that end or they don’t. It is an individual’s responsibility to make themselves invaluable to their company in order to remain employed. And if they feel that their employer does not recognize their performance, they should take their skills elsewhere.

    @Ron
    I’ve never been part of a union, but I have worked with them a lot and a portion of my company is unionized. Agree with everything you said.

    Unions such as the one Rob described are like miniature socialist societies. There is no incentive to work hard, because they are all paid collectively. As a result, productivity goes down, and prices go up for consumers. The chief consideration in an economy should always be the consumer.

  22. JLP Says:
    March 26th, 2008 at 2:14 pm

    Larry,

    Fair enough but why must you leave a comment to tell me that you don’t like my blog?

    David B,

    The author of the Target article doesn’t give their point of view one way or the other. They just tell us what the advocate thinks that both Target and Wal-Mart needs to pay their employees more.

  23. Lord Says:
    March 26th, 2008 at 11:26 pm

    Target is reasonable on groceries but they don’t beat sales prices. Comparable items are comparably priced at Target and Walmart, but Target carries higher priced lines. Sometimes design is worth it, sometimes not. They are usually nicer, but it never hurts to compare.

  24. Jennifer Says:
    March 28th, 2008 at 9:09 am

    “I don’t think most people understand the retail environment. Most of the jobs in retail are pretty much menial jobs that LOTS of people can do. Those kinds of jobs should pay minimum wage. Since a retail store has lots of part-time, low-wage employees, with smaller numbers of managers, it shouldn’t be a big surprise that their average pay is on the low end of the scale.”

    But seriously, go to hell. I work retail, and I have to say I have a much harder job than most of my office-bound friends. It’s not easy to go to work every day and work with the general public, smiling all day even when you don’t want to, and pleasing people who always want more for less, like a ten cent raise in the cost of bleach is worse than me not getting paid a fair wage. Why the hell not pay me a fair wage? Ask yourself a serious question: why do you deserve bleach that is ten cents cheaper?

  25. JLP Says:
    March 28th, 2008 at 9:19 am

    Jennifer,

    If your job sucks, then CHANGE JOBS! Nobody is holding a gun to your head and making you stay in a job that pays a low wage.

    It’s economics, plain and simple. Why can’t you figure that out?

  26. Dina Says:
    March 28th, 2008 at 12:15 pm

    Jennifer,

    We all know how frustrating it is to work in retail. That’s why we left when we developed enough skills to work for a different employer. The point isn’t that retail is a hard job, the point is that just about anyone can do it. Skilled jobs pay more, as they should. I work in an office now, and get paid worlds more than I ever did at Levi’s. However, when I wanted a flexible schedule, lax dress code, and the employee discount, I chose to work at Levi’s. You can choose to work elsewhere-the amount you are paid shouldn’t correspond to how frustrating the job is, but rather how hard it will be be to find someone else to replace you.

    And for the record, the hardest job I ever had was with McDonald’s. I’m an executive now.

  27. JLP Says:
    March 28th, 2008 at 11:28 pm

    Dina,

    Thanks for wording your comment in a way that I wish I could have worded mine!

    I agree with you 100%!

  28. DofNH Says:
    March 31st, 2008 at 10:10 am

    Ummm. I don’t think any retail store pays a “living wage”. I’ve worked at a lot of retail stores over the years and they all pretty much start you at close to minimum and then you work up from there.

    If you want to make somewhere close to a “living wage” you need to be in management.

    If you don’t think you get paid enough to do your job, I agree retail is hard work, you need to move up or move on to something else.

    I actually own a retail store of my own now and if I had to pay every employee $12 or more an hour I would be out of business.

  29. bc Says:
    March 6th, 2009 at 10:14 am

    The horribly low payscale is true and while 99% of the jobs CAN be done by most anyone, I hold my degree in Fashion Design cum laude and have not had one single interview in 4 years since graduation of one of the world’s top private fashion design colleges. So while I work at a job that pays near “slave wages” and the job COULD be done by most anyone, This economy is forcing highly educated people to do such work. One of the girls I work with just earned her Bachelors degree and she is in the same boat I am, “No Jobs for Anyone — Educated or NOT”.

  30. bc Says:
    March 6th, 2009 at 10:15 am

    The horribly low payscale is true and while 99% of the jobs CAN be done by most anyone, I hold my degree in Fashion Design cum laude and have not had one single interview in 4 years since graduation and over 350 resumes and cover letters mailed out. I graduated from one of the world’s top private fashion design colleges (FIDM LA). So while I work at a job that pays near “slave wages” and the job COULD be done by most anyone, This economy is forcing highly educated people to do such work. One of the girls I work with just earned her Bachelors degree and she is in the same boat I am, “No Jobs for Anyone — Educated or NOT”.

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