Target strikes cultural bull's-eye
Against a backdrop of continued economic uncertainty, in which a retailer’s ability to deliver value for money to customers is increasingly important, the diverging stories of Target and Walmart illustrate how a company’s ability to be culturally relevant can help drive success.
Target has emerged as a brand whose cultural vibrancy is on a steep upward trajectory, while Walmart’s is only marginally climbing. The companies’ business results appear to back this up, as late in 2012 Target said it expected its fourth quarter results to exceed expectations, while on the same day, Walmart gave fourth quarter guidance that was lower than Wall Street estimates.
What’s driving the challenges for Walmart, and the surging Cultural Traction™ for Target? An initial look suggests that customers of Walmart, who have a lower household income than those of Target, may simply be more impacted by the economic environment. Walmart’s CFO Charles Holley noted in mid-November that “macroeconomic conditions continue to pressure our customers,” who are concerned about high costs for gas and unemployment, as well as potential tax increases.
Walmart’s strategy has always been about Everyday Low Prices – it wants to “Save People money so they can live better.” As a business, Walmart thrives by driving efficiencies of scale and process management. Its communications are about Low Prices and its products are a mix of groceries, household goods, and basics. Target’s strategy, while also rooted in delivering value for money (“Expect More. Pay Less”) is heavily focused on creating a comprehensive shopping experience bringing ‘curated’ products to customers in an engaging environment. In tough times, Target delivers more escape, surprise and delight to the shopping experience.
The latest Cultural Traction™ data shows Target is forging a particularly strong connection with women and younger shoppers (16-34), but it is growing among men and older consumers this year, too. And, though Target’s VIBE was less than Walmart’s among multicultural shoppers in 2010, it is considerably higher today.
For many years, Target has served up sizzle by collaborating with high-end designers (Alexander McQueen) and sector celebs (Michael Graves for household design; Umberto of Beverly Hills for haircare products). Recent partnerships include design collaborations with Missoni – which had such overwhelming demand when it was launched that it crashed Target’s website – as well as Gwen Stefani, Jason Wu and premium lux retailer Neiman Marcus. Target also brought high fashion and design sensibilities to consumer packaged goods with “The Everyday Collection.” Expanding its reach while capitalizing on fast-changing sentiment supporting a more liberal view of equal rights for all, the company also brought to market a Gay Pride t-shirt line and LBGT greeting cards. And, further bolstering its urbanization creds, Target launched small format “CityTarget” stores in LA, Seattle, Chicago and San Francisco, with more on the way.
On the marketing front, Target brought in a new CMO, Jeff Jones, who is focused on ‘modernizing marketing,’ like innovating content through a shoppable video mini-series, and partnering with ABC’s “Revenge” on brand integration in what was described as “designed media.”
In 2012 it also tapped into two trends (see below), linked tightly to its Creator/Jester personality spikes: 1) ‘Creative Curation,’ in which people are increasingly expecting brands to be tastemakers and custodians of the new and interesting, and 2) ‘Flights of Fancy,’ where, amidst a move towards seriousness, people crave brief moments of creative indulgence – of joy, excitement, surrealism and fantasy. Wieden+Kennedy, captured it perfectly in 2012’s Emmy-nominated delight, “Color Changes Everything” and it’s vividly brought to life in-store with “The Shops at Target,” a new series of boutiques that includes the Polka Dog Bakery, The Candy Store and Cos Bar, as well as whimsical Truffula Tree cupcakes, honoring Dr. Seuss’ 109th birthday.
All of this has led to an appreciable jump in perceptions of Target as Exciting and Inspiring, while staying true to its vision of delivering on consumer’s high expectations at value prices.
Walmart isn’t taking all this lying down. It, too, is building smaller units and launching ‘convenience’ stores. Walmart is also spending more time with customers in their homes, and delivering shopping innovations like “social gifting” tools and an improved mobile app through WalmartLabs, an in-house skunkworks. These innovations may partially explain why Americans now give Walmart credit as Exciting (i.e., shaking things up, saying and doing new things, gaining momentum), taking a big jump from years prior – though still at a disadvantage to Target.
The biggest disparity between the two retail behemoths is in being seen as Inspiring and Bold. Worth noting, there remains significant negative sentiment in the market about Walmart, with scores of organizations dedicated to opposing what they see as growth at the expense of local merchants. Its VIBE is stagnating among Gens X & Y, and is slumping among multicultural. Walmart’s CMO Tony Rogers made news in October at the Multicultural ANA conference when he announced that “100% of all Walmart’s growth will come from Multicultural.” Indeed, they are on it, albeit with a brand that is not as aspirational.
In the end, the story is about more than the ability of a retailer to connect with a particular customer demographic. It’s about the brand’s ability to leverage shifts in culture in ways that are true to its roots and character.
Target clearly gets this.