December 7, 2007
Target and Wal-Mart Take Different Paths to Online Success
Target.com and Walmart.com are both doing very well this holiday season and, for all intents and purposes, that’s where the similarities between the two e-tail operations end.
A (Minneapolis) Star Tribune report points out that the two retailers have taken different approaches to their web operations.
Target is sticking to a marketing strategy that mirrors what’s going on in its stores. Wal-Mart, on the other hand, has looked to promote its price image with special “web only” deals.
Dale Nitschke, president of Target.com, told the Star Tribune, “Everything we’re doing is to support the bricks-and-mortar store. We’re trying to create the same lean, fast-moving environment that you find in the Target store.”
While Walmart.com has been out-in-front announcing deals on Thanksgiving when stores were closed, the business is also looking for synergies with deals such as free shipping for customers who pick up their purchases in stores. Target has no plans to offer a similar program.
As previously reported by Reuters, Walmart.com is also seeing a lot of traffic to its “find in store” feature that lets consumers know if a product can be found at their local Wal-Mart. Target has a similar feature on its site.
According to the Star Tribune, Target remains current with updates posted every 15-minutes. This is important for the season’s hottest sellers such as the Wii gaming system.
Target uses demand on its website to adjust store stock levels. According to the report, stores will increase a given product’s inventory when a spike in the item’s sales online takes place.
Both Target and Wal-Mart expect big things from their respective online operations.
WalMart.com is looking for a sales increase up to 60 percent over last year’s number.
Target.com’s Nitschke said, “Our business is in its adolescence. We’re not a mature business yet or a mature element of Target’s strategy, but we’re showing the potential of a teenager.”
Discussion Questions: Do you see much difference between how Target and Wal-Mart go about their business online? Which marketing approaches or features do you think offer the greatest opportunity for the respective websites?
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Target seems to be more careful about its online profitability. Wal-Mart seems to be more aggressive saleswise. As time goes on, both companies will copy each other’s successes, just as they copy other retailers’ successes. Best example: Target won’t ship to a store for customer pick-up, while Wal-Mart will. Wal-Mart is betting that pick-up customers will buy other merchandise while in the store. Target is keeping its logistics simple.
I really like the Wal-Mart.com strategy–in addition to exceptional pricing, they have significantly expanded merchandise offerings beyond their in-store positions. They have more GPS units than REI and as many Printers as Staples or Best Buy. And with free Ship to Store–this will ultimately bring a wider range of consumers to Wal-Mart stores, including the ‘designated Target shoppers….’
Both are coordinating stores and web sites–that’s the main thing–finding what works and what doesn’t. It’s a big step away from “silos”–separate operations, merchandise. As for pricing, that is so fluid now I think even consumers understand (but they will expect one channel to match the other when confronted–I mean, requested).
The quoted executive is right: we are still early in the game; there is much to learn through experimentation.
The cost of shipping is for me–and I suspect for many consumers–a deal breaker. I’ve abandoned shopping baskets worth $100 when shipping costs equal to 25% or more are added. So Wal-Mart’s free ship-to-store feature, similar to that of Ace Hardware (which I use frequently), is a very attractive differentiating point.
Another deal breaker is an item that cannot be returned to a bricks-and-mortar store. I don’t understand why ubiquitous chains like Target and Home Depot do not allow this. I would–and again, I believe many others would too–do far more shopping online if the items available only online could also be returned to the nearest store. Reading online reviews you will find many comments along the lines of “not what I expected from the picture,” and these comments certainly dissuade me from going through with a purchase.
Wal-Mart clearly has the superior model here. The online audience is different than the brick and mortar audience, and its’ needs are unique. This requires market differentiation in order to properly segment these markets to maximize the reach that each retailer offers. Wal-Mart is the leader here with it’s online model. Until Target recognizes that the online consumer requires “special” handling, and that the purchase is often just a click away (unlike the brick and mortar environment), they will continue to lag in this category. We will probably see that after this holiday season, that Wal-Mart’s success outweighs that of Target’s because of this market differentiation.
I’m really surprised and a bit disappointed with Target’s web presence this year in that it has limited integration with their brick and mortar channels–in terms of driving people from the web to their stores.
Wal-Mart’s “site to store” program has been very successful from everything I’ve heard and also provides a convenient cross-channel shopping feature that shoppers have been demanding. Wal-Mart has also been pretty creative since Black Friday in mixing up “store only” specials that are promoted on their site as well as online exclusives.
While I give Dale Nitschke credit for admitting that of Target.com’s business is in its “adolescence,” I would think they are going to have some catching up to do in terms of their cross channel strategy.
Most of the other major retailers clearly made it a priority to integrate their cross-channel strategy for this critical holiday season. I was especially impressed with the TV advertising Circuit City has been running, which presents equally the chain’s online offering as well as its stores and the convenient options for consumers to utilize both.
Some good points above. A couple of additional things to consider:
1. Offering products online not handled in every store, is a play on the long-tail distribution model pioneered originally by NetGrocer and more recently by Amazon. It allows the retailer to do a number of things amongst which are:
a. offer products that might not sell in mass quantities, thus not justifying valuable shelf space in each store.
b. offer products suspected of attracting high levels of shrink if they were available widely in store.
2. Delivering to homes carries with it higher mis-ship rates and late deliveries since FedEx and UPS have better, more predictable networks delivering to commercial addresses.
To some degree the Wal-Mart approach of delivering to store with customer pick-up seems to be working. According to published stats, 50% of the folks using this service were NOT Wal-Mart.com customers in the past!
Integrating the online and in-store strategies (whether the same or different) has been the key to success for most companies. Running the in-store and online strategies as separate businesses has not been successful for companies because consumers consider them to be the same store. So, consumer purchases, orders, and inventory need to be transparent between stores and the Internet parts of the business.
Again, I think Mark has nailed this. The right strategy is to be consistent in your marketing face to the consumer and flawless in your execution. Not sure I agree that there’s that much of a difference in approach. Target is “mirroring” its physical store strategy while Wal-Mart is offering discounts which would…er…mirror its physical store strategy.
While Target in general has higher quality items available for online shoppers, it’s “free shipping” offers are few and far between, or targeted to specific departments. For many shoppers on tighter incomes, the difference of what many retailers charge for shipping is the difference of an additional gift under the tree this holiday season. Target has picked up the ball this week and has expanded its free ship offers to some key departments like toys, bed/bath, and kitchen.
Wal-Mart does a better job with its $.97 shipping offers and free to the store shipping. It’s more appealing to those who might have been willing to go to the store anyway, but like the convenience of doing the shopping online.
I will say, Target is more communicative and deliberate about letting the consumer know things like inventory outages and tracking the order’s status. Wal-Mart doesn’t do near the job keeping the customer in the loop.
Based on our own personal affiliate data with each, our forum members shop both sites, with about 65% more shopping at Wal-Mart.com over Target.com.
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Target seems to be more careful about its online profitability. Wal-Mart seems to be more aggressive saleswise. As time goes on, both companies will copy each other’s successes, just as they copy other retailers’ successes. Best example: Target won’t ship to a store for customer pick-up, while Wal-Mart will. Wal-Mart is betting that pick-up customers will buy other merchandise while in the store. Target is keeping its logistics simple.
I really like the Wal-Mart.com strategy–in addition to exceptional pricing, they have significantly expanded merchandise offerings beyond their in-store positions. They have more GPS units than REI and as many Printers as Staples or Best Buy. And with free Ship to Store–this will ultimately bring a wider range of consumers to Wal-Mart stores, including the ‘designated Target shoppers….’
Both are coordinating stores and web sites–that’s the main thing–finding what works and what doesn’t. It’s a big step away from “silos”–separate operations, merchandise. As for pricing, that is so fluid now I think even consumers understand (but they will expect one channel to match the other when confronted–I mean, requested).
The quoted executive is right: we are still early in the game; there is much to learn through experimentation.
The cost of shipping is for me–and I suspect for many consumers–a deal breaker. I’ve abandoned shopping baskets worth $100 when shipping costs equal to 25% or more are added. So Wal-Mart’s free ship-to-store feature, similar to that of Ace Hardware (which I use frequently), is a very attractive differentiating point.
Another deal breaker is an item that cannot be returned to a bricks-and-mortar store. I don’t understand why ubiquitous chains like Target and Home Depot do not allow this. I would–and again, I believe many others would too–do far more shopping online if the items available only online could also be returned to the nearest store. Reading online reviews you will find many comments along the lines of “not what I expected from the picture,” and these comments certainly dissuade me from going through with a purchase.
Wal-Mart clearly has the superior model here. The online audience is different than the brick and mortar audience, and its’ needs are unique. This requires market differentiation in order to properly segment these markets to maximize the reach that each retailer offers. Wal-Mart is the leader here with it’s online model. Until Target recognizes that the online consumer requires “special” handling, and that the purchase is often just a click away (unlike the brick and mortar environment), they will continue to lag in this category. We will probably see that after this holiday season, that Wal-Mart’s success outweighs that of Target’s because of this market differentiation.
I’m really surprised and a bit disappointed with Target’s web presence this year in that it has limited integration with their brick and mortar channels–in terms of driving people from the web to their stores.
Wal-Mart’s “site to store” program has been very successful from everything I’ve heard and also provides a convenient cross-channel shopping feature that shoppers have been demanding. Wal-Mart has also been pretty creative since Black Friday in mixing up “store only” specials that are promoted on their site as well as online exclusives.
While I give Dale Nitschke credit for admitting that of Target.com’s business is in its “adolescence,” I would think they are going to have some catching up to do in terms of their cross channel strategy.
Most of the other major retailers clearly made it a priority to integrate their cross-channel strategy for this critical holiday season. I was especially impressed with the TV advertising Circuit City has been running, which presents equally the chain’s online offering as well as its stores and the convenient options for consumers to utilize both.
Some good points above. A couple of additional things to consider:
1. Offering products online not handled in every store, is a play on the long-tail distribution model pioneered originally by NetGrocer and more recently by Amazon. It allows the retailer to do a number of things amongst which are:
a. offer products that might not sell in mass quantities, thus not justifying valuable shelf space in each store.
b. offer products suspected of attracting high levels of shrink if they were available widely in store.
2. Delivering to homes carries with it higher mis-ship rates and late deliveries since FedEx and UPS have better, more predictable networks delivering to commercial addresses.
To some degree the Wal-Mart approach of delivering to store with customer pick-up seems to be working. According to published stats, 50% of the folks using this service were NOT Wal-Mart.com customers in the past!
Integrating the online and in-store strategies (whether the same or different) has been the key to success for most companies. Running the in-store and online strategies as separate businesses has not been successful for companies because consumers consider them to be the same store. So, consumer purchases, orders, and inventory need to be transparent between stores and the Internet parts of the business.
Again, I think Mark has nailed this. The right strategy is to be consistent in your marketing face to the consumer and flawless in your execution. Not sure I agree that there’s that much of a difference in approach. Target is “mirroring” its physical store strategy while Wal-Mart is offering discounts which would…er…mirror its physical store strategy.
While Target in general has higher quality items available for online shoppers, it’s “free shipping” offers are few and far between, or targeted to specific departments. For many shoppers on tighter incomes, the difference of what many retailers charge for shipping is the difference of an additional gift under the tree this holiday season. Target has picked up the ball this week and has expanded its free ship offers to some key departments like toys, bed/bath, and kitchen.
Wal-Mart does a better job with its $.97 shipping offers and free to the store shipping. It’s more appealing to those who might have been willing to go to the store anyway, but like the convenience of doing the shopping online.
I will say, Target is more communicative and deliberate about letting the consumer know things like inventory outages and tracking the order’s status. Wal-Mart doesn’t do near the job keeping the customer in the loop.
Based on our own personal affiliate data with each, our forum members shop both sites, with about 65% more shopping at Wal-Mart.com over Target.com.