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?