Target Vs. Wal-Mart in Canada

The Showdown in the Great White North.
Target Versus Wal-Mart in Canada!
 By Sheldon Barry Cwinn.




Well it has finally happened....

Target has officially opened their first three stores in Canada, an event eagerly anticipated and planned for not so much by Target but by Wal-Mart! In one of the greatest turf wars in Canadian retail history, Wal-Mart has positioned itself in a very advantageous  position to win the battle of the discount retailers.  In fact, Wal-Mart hasn't gone on the defensive, but rather Wal-Mart's strategy was to create a new offensive.

Let's see how Wal-Mart plans to use the arrival of Target in Canada as a means to greatly increase its own sales, and why Wal-Mart will win the ensuing battle of the discount retailers.

Strategy # 1 - Big box versus Small Box
In order to beat Target, Wal-Mart needed to expand quickly. Furthermore, Target's strategy was to purchase Zeller's locations with locations mostly in shopping centers, and not stand-alone stores. This was exactly contrary to Wal-Mart's philosophy. Wal-Mart traditionally opens large Super Centers and in the United States has turned many of its Base Stores into Super Centers. Wisely, Wal-Mart recognized that this just wouldn't work against Target.

So what did Wal-Mart do? They created a new type of store which can be dubbed " the mini store". A regular Wal-Mart store (Base Store) has between 90,000 and 150,000 square feet. They usually required construction of self-contained buildings requiring the purchase of real estate and complicated construction. In fact, you will rarely find a Wal-Mart store in a shopping mall.

Mini Stores are stores that are well-suited to shopping centers. They are typically between 60,000 - 75,000 square feet. Mini Stores were fast to setup, with less risk and less investment. They could be implemented quickly and they could easily fit into failing strip malls that had plenty of cheap retail space, and secondary shopping malls that were in decline. Best of all, they could not only be set up in a manner that would increase Wal-Mart's retail footprint, but they could also easily be set up in the general proximity of a Target store. And, that is exactly what is happening. Almost everywhere there is a new Target store opening, there is a spanking new Wal-Mart store in close proximity.

Strategy #2 - Purchase the Zeller's Stores Target didn't want!
If target didn't want certain Zeller's stores why would Wal-Mart want them??

Target selected its Zeller's lease holdings very carefully. But their selection was more based on the store's location. Target is in startup mode. So it needed stores in most major cities, and then a store in the east, west, north, and south of the city. Their strategy is not to saturate the retail landscape in any given geographic area, but rather to plant their feet there.

On the other hand, Wal-Mart is using a strategy of saturation. The Zeller's stores that it occupied all had established shopping patterns that Wal-Mart could take advantage of. Better still Zeller's stores were typically around 75,000 square feet, which is perfect for the Mini Store concept. Even better Wal-Mart could occupy the Zeller's locations and convert them into Wal-Marts very quickly. And that is just what has happened! Wal-Mart has expanded its retail locations by about 33% before Target ever got out of the gate!

Strategy #3 - The battle of the Private Lable
A decision that Target made in its entry to Canada was to import its private label merchandise from the United States. And why not? Target has a reputation for quality. It uses a higher price point than Wal-Mart to offer what some consider superior quality.  To the consumer its a value equation of  price versus quality. In the United States Target often will win that value equation. In Canada however this will translate into merchandise that is imported from the United States. The costs to the consumer will be much higher than they would be State-side. No doubt Target will not win the value equation as often.

Now look at the new Wal-Mart stores. They all have "George" signage in  the front of the building alongside the Wal-Mart sign. Wal-Mart has invested lots of money developing George as a Canadian brand and it is time for Wal-Mart to cash in on this brand equity. Also, Wal-Mart has greatly improved the quality throughout the George product line without a major increase in prices. In fact, this can be attributed to the growth in the number of stores - you get more economies of scale from having close to 400 stores in 2013 than having 350 in 2012!

Conclusion
With the arrival of Target in Canada, Wal-Mart has proven why it is the world's largest company. It has shown excellent agility and used the impetus of Target's opening in this country as an incentive to grow its own business dramatically.  In fact it has reinvented itself to not only combat its arch rival but to prosper by it.

Wisdom Analytics

Wal-Mart Feeling The Pinch of Delayed Tax Refunds

 

Wal-Mart CFO Charles Holley:

Americans Still Feeling The Pinch of Delayed Tax Refunds

 

 

(Reuters) - Wal-Mart Stores Inc's U.S. customers are still contending with delays in getting their tax refunds this year, with volume running about a third lower than normal, the discount chain's finance chief said on Tuesday.

Wal-Mart has cashed some $2.7 billion in tax refund checks at its U.S. stores so far this year, Chief Financial Officer Charles Holley said at an investor conference that was broadcast over the internet. At this point last year, that amount was about $4 billion.
Holley said that he expected tax refunds volumes, which help drive sales at the retailer, to catch up during the quarter.

As of February 21, when Wal-Mart announced quarterly results, it had cashed $1.7 billion in tax refund checks, compared to $3 billion a year earlier.
Federal tax refunds are arriving later than expected this year for some lower-income Americans due in part to closer scrutiny by the U.S. Internal Revenue Service of earned income tax credit claims, the IRS said last month.

The delays are largely responsible for a slow start to the current quarter, which began in February, the company said last month. Tax refund checks are a key source of revenue for retailers like Wal-Mart, as shoppers who held off on big purchases at the holidays get caught up.
The company expects sales at its U.S. stores open at least a year, or same-store sales, to be about flat during the current quarter. A year earlier, such sales rose 2.6 percent.

Wisdom Analytics

Slow February Sales at Wal-Mart

Slow February Sales At Wal-Mart - What does that mean??

Wal-Mart Stores Inc. had the worst sales start to a month in seven years as payroll-tax increases hit shoppers already battling a slow economy, according to internal e-mails obtained by Bloomberg News.

“In case you haven’t seen a sales report these days, February MTD sales are a total disaster,” Jerry Murray, Wal-Mart’s vice president of finance and logistics, said in a Feb. 12 e-mail to other executives, referring to month-to-date sales.“The worst start to a month I have seen in my ~7 years with the company.”

Andrew Harrer/Bloomberg

Wal-Mart Stores Inc.'s shares rose 14 percent in the 12 months through yesterday, compared with an 8.5 percent gain for the Dow Jones Industrial Average.

Wal-Mart Stores Inc.'s shares rose 14 percent in the 12 months through yesterday, compared with an 8.5 percent gain for the Dow Jones Industrial Average. Photographer: Andrew Harrer/Bloomberg

 

Feb. 15 (Bloomberg) -- Gigi Stone reports on today's top stories. She speaks on Bloomberg Television's "Taking Stock." (Source: Bloomberg

Wal-Mart and discounters such as Family Dollar Stores Inc. are bracing for a rise in the payroll tax to take a bigger bite from the paychecks of shoppers already dealing with elevated unemployment. The world’s largest retailer’s struggles come after executives expected a strong start to February because of the Super Bowl, milder weather and paycheck cycles, according to the minutes of a Feb. 1 officers meeting Bloomberg obtained.

Murray’s comments about February sales follow disappointing results from January, a month that Cameron Geiger, senior vice president of Wal-Mart U.S. Replenishment, said he was relieved to see end, according to a separate internal e-mail obtained by Bloomberg News.
“Have you ever had one of those weeks where your best-prepared plans weren’t good enough to accomplish everything you set out to do?” Geiger asked in a Feb. 1 e-mail to executives.“Well, we just had one of those weeks here at Walmart U.S. Where are all the customers? And where’s their money?”

Shares Fall

Wal-Mart fell 2.2 percent to $69.30 yesterday at the close in New York for the biggest decline since Dec. 12. The sharesrose 12 percent in the 12 months through yesterday, compared with a 9.4 percent gain for the Dow Jones Industrial Average.
“As with any organization, we often see internal communications that are not entirely accurate, that lack the proper context and represent individual opinions,” David Tovar, a Wal-Mart spokesman, said in an interview, adding that the company will report fourth-quarter earnings on Feb. 21. Wal-Mart’s fourth quarter ends in January.
Murray declined to comment and Geiger didn’t return telephone and e-mail messages seeking comment.
Both executives attributed the performance to increased payroll taxes and delayed tax returns, which Geiger called “a potent one-two punch,” according to the e-mails.

Tax Refunds

About $19.7 billion more in tax refunds had been delivered to shoppers by this time last year, according to an analysis prepared by Wal-Mart’s Global Customer Insights & Analytics division that was attached to Murray’s e-mail on Feb. 12. The retailer expected returns to be delayed by three to four weeks because of the late release of tax forms and additional, federally mandated tax-fraud scrutiny.
When a payroll-tax break expired Dec. 31, Americans began paying 2 percentage points more in Social Security taxes on their first $113,700 in wages. For a person making $40,000 a year, that is about $15 a week.
The extra tax bite is about equal to a year of car insurance for a family making $30,000 or a basket of groceries per month for a family making $50,000, according to Wal-Mart’s analysis.
Other retailers who court low-income Americans also are bracing for the rising taxes.

Customers’ Wallet

Higher payroll taxes “go against our customers’ wallet,”Family Dollar Chief Executive Officer Howard Levine said on a Jan. 3 conference call. “Clearly, they do not have as much for discretionary purchases than they did.”
Wal-Mart’s Geiger in his e-mail urged employees to improve business by “fixing something that could really make a difference to our performance.” He quoted Tim Yatsko, the company’s executive vice president of global sourcing, saying:“We need to ‘stop the stupid.’”
Wal-Mart U.S. CEO Bill Simon said during a Feb. 1 officers meeting, the minutes of which were attached to Geiger’s e-mail, that the troubled economy leaves little room for internal errors.
“In an environment like this, we can’t afford to hurt ourselves,” Simon said, according to the minutes. “Self-inflicted wounds are our biggest risk and our toughest enemy.”

Company Challenges

Simon cited negative economic growth, declining consumer confidence and rising unemployment as challenges facing the company. The U.S. economy shrank at a 0.1 percent annual rate in the fourth quarter, and the unemployment rate rose 0.1 percentage point to 7.9 percent in January. The Conference Board’s measure of consumer confidence declined last month to the lowest since November 2011.
Even with a slow January, Wal-Mart is gaining market share steadily, Simon said.
“That points to our competitive landscape, which means everyone is suffering and probably worse than we are,” Simon said, according to the minutes.
The company must focus on process and execution, he said.
“We have to fight against the tougher economic environment to earn a bigger share of a smaller consumer spending pie,”Simon said, according to the minutes.
To contact the reporter on this story: Renee Dudley in New York at rdudley6@bloomberg.net
To contact the editor responsible for this story: Robin Ajello at rajello@bloomberg.net

Wisdom Analytics