Target Enters Price War With Amazon and Walmart
Earlier this year, Target (NYSE:TGT) announced to investors that it planned to lower prices to better compete with Walmart and Amazon. That plan is now in effect. In its blog post, Target said it has “lowered our prices on thousands of items, from cereal and paper towels to baby formula, razors, bath tissue and more.” The announcement did not specify the size of the price cuts or detail which specific products would be discounted.
The price wars among the biggest U.S. retailers are becoming more intense. Amazon.com’s and Walmart’s aggressive pricing has put enormous pressure on Target. Target has to remain price competitive in its position as a discount retailer. Walmart has made it clear it will fight hard on price.
Target said that the changes will make it simpler for customers to figure out deals. Many retailers have been trying to simplify pricing to reduce customer frustration with the old mark-up mark-down approach to sales. Target wants to become less promotional overall. On the company’s second quarter earnings call, Target CEO Brian Cornell said they “saw a meaningful increase in the percent of our business done at regular price and a meaningful decline in the percent on promotion.”
The retailer says it eliminated over two-thirds of its sale announcements in ads and in stores. The blog post says that Target will now offer “only our best, most compelling sales — when it makes the most sense for our guests.” The company has also increased its marketing of its low prices.
Target emphasized its lower prices as a new normal on its blog. The changes are part of a store-wide evaluation on prices and value. The changes are coming at an optimal time for consumers, just ahead of the holiday season. In prepared remarks, Mark Tritton, Target’s chief merchandising officer, said, “We want our guests to feel a sense of satisfaction every time they shop at Target.”
Target has faltered as customers shop more online and less in big-box stores. The company announced earlier this year that it would spend $7 billion on remodeling hundreds of stores in the coming years. It has also been refreshing some store brands and creating new ones. Last quarter, the company’s comparable sales finally broke a streak of declines. The company reported a 1.3 percent rise in comparable sales for the quarter.
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