Friday, February 15, 2008

The Battle of the Titans—Wal-Mart vs. Target

It’s almost embarrassing for a man to develop the reputation as a consummate shopper. Men are supposed to hate shopping, an activity that is accepted as being dominated by the female gender. Scientists are still attempting to discover the existence of the elusive shopping gene that is rumored to be embedded somewhere in the female psyche, a finding that will go far to substantiate the theory of evolution. On that basis I should be enrolled in the scientific search as an anomaly, the rare male who apparently has somehow inherited that very same gene that drives women to enjoy shopping more so than, well, you know what. (Well, maybe I wouldn’t go that far). Nevertheless, as an indication of what is really an addiction to shopping, like the true devotee, I enjoy the hunt even more so than the find.

As a result of my obsession, I have been savoring the thought of what, to any real shopper, might be considered an embarrassment of riches. The two giants in the business of “super stores,” Wal-Mart and Target, have each been building a new store located within about a five-minute drive from each other, and only a ten-minute drive to each from Boca Pointe. A direct comparison of the two new establishments is not yet possible since the Target store will not be completed for a few months. However, Wal-Mart opened just two days before this article was submitted for publication, and as a faithful disciple, I donned my new store shopping outfit, my trusty shopping shoes, camera, notebook and pen, and proceeded to investigate whatever magic might exist.

Magic might be a most appropriate word to describe Wal-Mart’s accomplishments over the years. There are perhaps more outspoken critics of Wal-Mart than there are defenders, yet, in the broadest sense, the magic is in the numbers, some of which are astounding. Wal-Mart is the largest private employer in the world and the fourth largest utility or commercial employer, trailing the Peoples’ liberation army of China, the National Health Service of the United Kingdom and the Indian Railway.

In an article in the Washington Post, a year and a half ago by George Will, wrote, “The median household income of Wal-Mart shoppers is under $40,000. Wal-Mart, the most prodigious job creator in the history of the private sector in this galaxy, has about as many [more now] employees [1.9 million as of 2007] as uniformed personnel. A McKinsey company study concluded that Wal-Mart accounted for 13 percent of the nation’s productivity gains in the second half of the 1990’s which probably made Wal-Mart about as important as the Federal Reserve in holding down inflation.”

George Will is a Conservative, and from his perspective points out that “By lowering consumer prices, Wal-Mart costs about 50 retail jobs among competitors for every 100 jobs Wal-Mart creates. Will continues, “Wal-Mart and its effects save shoppers more than $200 billion a year, dwarfing such government programs as food stamps and the earned income tax credits.” Wal-Mart is the nation’s largest grocery retailer with an estimated 20 percent of the business, as well as the world’s largest toy retailer.

Despite quite controversial labor practices involving its anti-union stance, low wages, and inadequate health coverage, apparently Wal-Mart has few problems attracting new employees. However, its ability to hold onto employees in dismal—70 percent of employees leave within a year. The public seems to overlook these shortcomings, choosing to look out for its own pocketbook, since each week, a staggering 100 million customers, nearly one third of the population of the United States visit Wal-Mart stores, with prices as the primary attraction. For example, in groceries it saves the consumer from 11 percent to 17 percent depending on which numbers you choose to believe.

Wal-Mart Stores division, its largest business subsidiary consists of four retail formats in the United States: Discount Stores, Supercenters, Sam’s Club, and Neighborhood Markets. The latter are similar to the traditional food supermarket averaging about 42,000 square feet, comprising the smallest size stores and the fewest number (about 100).

There are about 590 Sam’s Clubs a chain of warehouse clubs similar to Costco. However, that is where the similarity ends, since Costco is significantly more popular and more successful. (Are you aware that a number of years ago a Sam’s Club opened on Copans road east of Powerline Road next to an existing Wal-Mart? It ultimately closed because it could not compete with Costco.)

The Discount Stores units average 100,000 square feet and are typified by the one that just closed on Palmetto Park Road. The first of these was opened in 1962 by the now legendary Sam Walton, who, if he still lived, would be the richest man in the world. There are close to 1,000 U.S. stores in this category.

The most explosive growth however, has come from the Supercenters, a concept originated as “hyperstores” by the European retail giant Carrefour. These monster stores average abut 197,000 square feet stocking everything a discount Store carries but also includes a full-service supermarket. The first Wal-Mart Supercenter opened in 1988, and now, 20 years later, number about 2,500 in the U.S. That number has increased by one with the opening a month ago of a new Supercenter located in Coconut Creek at the northeast corner of Hillsborough Boulevard and U.S. 441.

With only a one-day window of opportunity to shop and review the new store before the deadline of this article, my visit was rather disappointing. If you mentally divide the store, with about two thirds consisting of a Discount Store and the balance as a supermarket you have, with minor exceptions, a traditional Wal-Mart and an equally traditional supermarket—basically, the same old. The only major difference is the existence of a Nail Salon as well as that of a Subway franchise (that I never even noticed).

Although the exterior landscaping of the store is attractive, from a design, color, and layout standpoint, both the exterior and interior are uninspiring to say the least. The Discount Store section is little different from the 1993 built store it replaced. The Supercenter environment is equally unexciting. Typical of Wal-Mart, the entire store is practically colorless with traditional (cheap looking) fixtures and displays. The focus of the store is the electronics section with a large display of flat screen TV sets. Perhaps, this lackluster design policy helps keep prices low, yet I suspect that the new Target store will take a totally different approach, since that company prides itself in its innovative approach to design.

I must admit that a walk thru of the grocery section did seem to justify the claim that prices were somewhat lower than, say a Publix. In addition, some sections of Wal-Mart (cheeses and some bakery items) provided a broader assortment than Publix. On the other hand, there was a paucity of prepared foods. While Publix has a good assortment (and very good quality) of early fruit like peaches and nectarines, Wal-Mart had only a few boxes of very hard (probably frozen) peaches.

Wal-Mart prides itself as always providing low prices. Don’t count on it. I brought with me a prescription for a generic drug, one that I had called Costco beforehand for price. The Wal-Mart clerk checked and said that they were out of stock, but the price was about $21. I’ll end up filling that prescription at Costco for $8.42.

What I term the Battle of the Titans between Wal-Mart and Target is probably more similar to the battle between Goliath and David since Wal-mart is so much larger. When Target opens in a few months, the battle will commence, and I’ll report on my observations then. However, I strongly suspect that for Boca Pointers, the winner will be Target.


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