Target, Amazon, and Walmart are part of an oligopoly. An oligopoly is when few companies control the majority of industry sales. Walmart, Target, and Amazon are part of and control the retail industry. They all offer similar products within a wide variety of departments including clothes, electronics, furniture, outdoor gear, and now most importantly, grocery. Customers in the retail industry have many options for where to shop, so department stores are in constant competition to attract the highest amount of customers in order for them to increase their profit.
The past few months have been difficult for Target. Target used to be one of the most successful department stores in the United States, but recently, Target has taken a loss, and is struggling to compete with similar businesses such as Walmart and Amazon.
Target has lost customers to Amazon and Walmart, who offer lower prices for similar products. Walmart’s value strategy is focussed on the best price, hence the corporate motto “Save money, live better”. Amazon Prime focusses on low prices, free shipping, and convenience. Target, however, focusses on best product: “Expect More. Pay Less.” As mentioned previously, grocery is now one of the most important departments for a department store. Target is in close competition with Amazon and Walmart for low prices, and is also in a competition with Walmart, Aldi, and Trader Joe’s for grocery items.
Target’s same store transactions that measures store traffic fell 2.2% in the second quarter of this year. The overall sales fell by 7.2% to $16.2 billion (Business Insider). Target is trying to find new ways to improve their grocery department. Walmart offers low prices, and recently developed an online grocery pickup, so that customers can order their groceries online and pick them up in store. Aldi is known for low prices for non-brand items. They offer great quality for low prices. Trader Joe’s is unique compared to other grocery stores, in the sense that the employees are very accommodating and go out of their way to help the customer. Instead of pointing to or telling you what aisle the bread is located, the employee will walk you to that aisle and are always willing to help. Trader Joe’s has high quality foods along with exceptional and accommodating customer service.
Target is making a major change to their stores, that might help customers go from only picking up a few grocery items at Target, to doing all of their shopping there. Target announced in early September that they will soon hire teams of employees to be trained specifically within the grocery department. These teams will consist of approximately 10-60 employees who will handle inventory and work to interact with the grocery shoppers. According to the New York Times, teams like these are already in place in 450 Target stores, and 150 teams are expected to appear in stores in October.
Target CEO Brian Cornell is creating a new design for the grocery department, so that the food area feels separate from the rest of the store, giving customers the well defined grocery shopping experience they are looking for. They are also planning to offer free samples throughout the grocery department in order to have more of a grocery store feel, and will offer more organic, natural, and gluten-free products. While Target is not planning to expand to be a full grocery store complete with a deli and sushi chefs, they are hoping that the updated and unique appearance will attract more shoppers. Their goal is to improve their performance.
I personally think that the new design in the grocery section will benefit the company and raise sales. By the looks of the photo above that features the new design in LA, the grocery section looks like an actual full functioning grocery store. Brian Cornell said that the grocery section at the new concept stores are 2 to 3% higher than the regular Target locations. Target’s prices still remain high and they are in competition with Walmart for prices, but by creating teams of grocery workers and enhancing the design to be separate from the rest of the store, I think that Target will benefit from the new concept stores. As a customer, I look for great customer service in addition to great products. If Target continues their value strategy of best product and now offers an experienced team of workers to assist customers, then they will do very well from the improvements within the grocery department. Hopefully these improvements will lead to an increase in sales and store traffic, to help them remain in the department store oligarchy.
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