- Walmart stresses “Always” low prices
- Target switches to Hi/Low pricing
- Now there are markdowns galore
Christmas 2016 is over. While many stores are now clearing their shelves with markdowns, lamenting a very tough season. Even Super Saturday (a.k.a. December 17, 2016) was negatively impacted by a snowstorm. But, when the books are closed on the 2016 Christmas season, I suspect that total sales, including internet revenues will be satisfactory – I am still sticking to my forecast for a 3% increase. However, I think a sizable portion of the sales gains were achieved with markdowns – many of them unplanned and negatively impacting gross margin.
Walmart continues to advertise and promote in the tradition of founder Sam Walton’s guiding business principle of low prices. Prices are kept low and any reduction in price a buyer can negotiate on an item is passed on to the consumer. Well, maybe something is kept back to improve margins, but customers feel they are getting an honest deal. Sometimes the company has “rollback” promotions, a disguise for lower price events. In the end the philosophy that the founder strongly believed in, namely lowest prices on everything, is still the North Star for the company.
In contrast Target, has switched to a “High/Low” pricing practice that leaves customers wondering what the lowest price may be. Professor Mark Cohen, Director of Retail Studies at Columbia University Graduate School of Business, points out that Walmart and Target in the past were both “Every Day Low Price” (EDLP) retailers. Walmart did play the “Price Rollback” card, which was really their way to promote and clear slow selling merchandise. Target on the other hand used the word “Sale”, without “save” stories or overt comparative prices, on some of their assortment to stimulate demand. While Walmart is still using “Roll Back” to disguise its promotional effort, Target has dropped the veil and is now all in as a High/Low pricing driven retailer. Much of Target’s assortment is now promoted non-stop.
Target has joined retailers like Macy’s, Kohl’s and J.C.Penney who promote constantly with sales and super sales. While customers still believe in the Walmart EDLP approach, many are turned off by the High/Low drumbeat that has little credibility. Whether it is consumables or computers, Target’s approach is dangerous for the company’s future. There was a time when Target insisted on knowing the trend of fashion with signage reading “Fashion Is…”. Displays showed the latest trends and customers viewed Target as a very special store for fashion and value. Those days are gone, as are my hopes for a revival of Target as a fashion leader.
2017 is a new year with its own calendar nuances. After clearing the shelves, many retailers will be restrained in re-stocking stores as winter winds down. A late Easter on April 16 gives retailers plenty of time between holidays to fill their shelves with Spring and Summer finery. A late Easter is good for the fashion industry promising many colorful selections that feel optimistic encouraging the consumer to spend. I am optimistic that 2017 will be a better year for retailers.