Pass or Fail?

At a Discount

In recent years, Target Corp. has been something of a Wunderkind among budget retailers, consistently winning praise for catering to a slightly more upscale clientele than the equally well-performing Wal-Mart or consistent laggards like Kmart.

"[Target is] a discount store, but a step above other discount stores," says Kurt Barnard, president of Barnard's Retail Consulting Group in Upper Montclair, New Jersey. "The interior is a little more what you'd expect to see in a department store. No wonder it's called chez Target."

In part, credit Target's success to stability, says Eric Beder, retailing analyst at New York City brokerage Ladenburg Thalmann & Co. "Target has significant continuity in their management," he says. "Every five years or so a new person comes in to try to change Kmart." Although he's impressed by Kmart's new CEO, Chuck Conaway, Beder feels it's too soon to call his efforts a turnaround, though they mimic Target's success by improving the shopping experience and focusing on brand names.

"An overdue recession should start sometime in 2001, possibly during the second quarter. This will be the death knell for various dotcoms that have been burning through cash on hand with no earnings in sight."
-Ken and Daria Dolan, hosts of nationally syndicated radio show The Dolans, Entrepreneur, December 2000

Target has succeeded by differentiating itself in marketing and buying-a lesson applicable to any entrepreneur. Buying the right products allows Target to present them in an attractive light, justifying slightly higher prices. By making purchasing its focus, Target has a jump on its competitors in knowing what those right products are.

So why, experts are wondering, with all its successes, did Target sue Kmart over the latter's in-store "Dare to Compare" price comparisons? "Target over-reacted," says Beder, noting that the main competitor Kmart was comparing itself to was Wal-Mart. Consider it a major slip-up by an otherwise top-notch competitor. Target's flub helped shine light on Conaway's efforts to turn around Kmart. Keep that in mind next time you feel like rapping a competitor in the courts.

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This article was originally published in the December 2001 print edition of Entrepreneur with the headline: Pass or Fail?.

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