Target Goes to the Wal Again…Never A Good Thing

For decades Target and Walmart have coexisted in a kind of retail détente, each staking out a different positioning within the discount/mass merchant channel. And it’s basically worked out well for both of them…with the occasional speed bumps.

Target tends to do better when times are good and Walmart when times are tough. It’s not an exact science but it does tend to go that way for the most part.

The problem is when each retailer decides it wants to be more like the other. And that has hardly ever worked out well. When Walmart tries to go upscale, introduce more fashionable apparel and trade up price points its customers say “WTF” and walk on by all of those spiffier upmarket offerings. And when Target tries to get more promotional with its pricing and products, its customers too say, “Hey, if I wanted cheap stuff I’d go to Walmart.” 

Each usually retreats back to the safety of its core positioning and life goes on.

So, the news last week that Target was introducing a new brand called Dealworthy that will encompass some 400 products, mostly in the beauty and personal care space, but also in electronics, apparel and home, raises a big red flag. Prices start at $1 and according to reports – we didn’t price check all 400 items – most retail for under $10. This replaces its previous low-end private label program under the Smartly name, we understand.

We get that Target believes it is missing out on the ultra-discount end of the marketplace and needs to be a player in this space to attract shoppers who are feeling inflationary price pressures these days…even as the overall economy remains pretty good. And they are probably figuring that a fair number of consumers – please don’t call them guests, that’s just ridiculous – will check out these bargain items and end up buying the better stuff that has better margins and higher price tags.

And we’re sure Target will do a nice job packaging and styling these products, they are very good at all of this, much better than the boys from Bentonville. Sometimes their private label goods look better than a lot of the national brands out there.

But here’s the thing: Up against the Wal is a bad place to be for Target. Walmart, not to mention the dollar stores, the big drug chains and the off-pricers all do this for a living every day and do it better than Target ever could. They have the sourcing structure, the in-house talent and the overhead to be able to make this deep discount model work. And Target doesn’t.

And Target’s customers know it too. They will indeed take a look at this and come back with that expected response: “If I wanted cheap stuff, I’d go to Walmart.” Not only that but they might question the better merchandise also, wondering if Target was messing around with that stuff too. Sure, Target will drive some business but at what ultimate cost to its business model?

Target is a brilliant retailer that has screwed up a few things recently, particularly in logistics and at the store level. But it’s been brilliant – just like Walmart — because it stays in its lane and knows who it is.

And Target is not Walmart. Never has been, never will be.