New York – Walmart has overtaken Target in their long-standing rivalry. The main reason lies in the fact that as life becomes more expensive for the average American, shoppers are becoming more selective in their spending, actively seeking the best deals. Many of these consumers are convinced that Walmart can meet their needs for groceries, home goods, clothing, and electronics without excessive cost. Target, traditionally geared toward a slightly more affluent audience, has suffered significantly due to its “too sophisticated” appeal. “Value is important to everyone,” noted Walmart CEO Doug McMillon, who recently announced his upcoming retirement after 11 years in the role, during the quarterly earnings report presented on Thursday. Last quarter, Walmart’s U.S. sales grew by 4.5%, while Target saw a decrease of 2.7%, continuing a multi-year trend of divergence in sales figures and stock performance for both corporations. Today, the significance of a good price (“value”) to shoppers is higher than ever. Consumer sentiment is pessimistic, employment growth has slowed, and the recent federal government shutdown forced low-income shoppers to cut back due to the suspension of Supplemental Nutrition Assistance Program (SNAP) benefits. A Fox News poll released this week showed that 76% of Americans view the economic situation negatively, up from 67% in July. However, the concept of “value” is complex, and it doesn’t always just come down to which store has the lowest price. Consumers often rank Costco highest for best value for money, but Costco’s logistics are not cheap. Meanwhile, dollar store chains are struggling despite having some of the lowest retail prices. A clear example of this pricing dilemma was Apple’s failure this year with the $1,000 iPhone Air model. Consumers want a more expensive iPhone 17 Pro Max. Consumers want a more expensive iPhone 17 Pro Max. Michael M. Santiago/Getty Images Apple had counted on customers being willing to buy a sleeker device priced slightly above the standard model, even if it had fewer features. Instead, they showed a preference for the expensive iPhone 17 Pro Max, which costs a hefty $2,000. Apple’s main competitor, Samsung, is observing a similar trend. “Consumers want more bang for their buck, but what constitutes that bang may not be obvious,” noted Deloitte analysts in a recent report on consumers. “Up to 40% of consumer perceptions of brand value are shaped by factors not directly related to price.” Walmart has always been associated with low prices. The retailer adheres to a strategy known as “Everyday Low Prices” (EDLP), which involves consistently offering low prices instead of frequent sales or promotions. But, according to analysts, Walmart has also taken strategic steps over the last decade to improve its brand reputation and increase quality. Walmart has raised employee wages, which has helped reduce criticism about low pay and benefits. They have updated and tidied up their stores; improved the quality of fresh produce—the first thing shoppers see upon entry; strengthened their apparel selection; and added premium brands to their website that were previously reluctant to work with Walmart. “Walmart has made a commitment to improve store conditions,” commented Scott Mushkin, a retail analyst at R5 Capital. “They have kept prices low and improved quality significantly, not marginally.” These investments have solidified Walmart’s position among low- and middle-income shoppers, while helping the company attract new, wealthier consumers who are looking to save. Walmart is now taking market share from competitors across all income groups and in numerous product categories. “Walmart is better insulated than perhaps anyone else,” said Walmart CFO John David Rainey on Thursday. “We like the value proposition we offer our customers, and you are seeing that reflected in our market share gain.” Tar-zhay’s Loss of Ground For years, Target built a reputation as a provider of fashionable yet affordable home goods, clothing, and other non-essentials. However, deteriorating store appearances combined with rising prices have negatively impacted the retailer’s perception. Prices at Target have risen relative to Walmart and are now comparable to prices at Kohl’s, noted Mushkin. “Issues like out-of-stocks, store clutter, long checkout lines, and locked-up merchandise are driving shoppers away from Target in favor of competitors,” stated Neil Saunders, an analyst at GlobalData Retail, in a memo to clients on Wednesday. Target has faced difficulties in recent years. Target has faced difficulties in recent years. Michael Nagle/Xinhua/Getty Images Target’s turnaround plan centers on winning back shoppers looking for deals. Like Walmart, the company is also expecting a CEO change next year. Target plans to increase capital expenditures by 25% to $5 billion next year to improve its stores, assortments, and digital platforms. Ahead of the holiday season, Target is also cutting prices on 3,000 everyday and grocery items and intends to double the number of new items in its holiday assortment compared to last year. “If you are disappointed with our recent results, know that we are too, and our entire team is working incredibly hard to return to growth and realize our full potential,” said incoming Target CEO Michael Fiddler during the earnings call on Wednesday.
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