Customers expect more, and get it. But are they paying less?

DSN Retailing Today, April 11, 2005

Target stores get credit for carrying the most trend-right assortments among broadline mass merchants, and they deserve it. Items are meticulously chosen and arranged in a way that could easily be mistaken for department store merchandising. But when you peel away the veneer and start analyzing the value of the branded products throughout the store, the pricing and availability is unmistakably discount.

In fact, on an item-by-item pricing comparison, there is little variance between Target and its closest broadline competitors Wal-Mart and Kmart. To demonstrate the similarities--as well as a few of Target's well-known "expect more" moments--we shopped one store of each of the Big Three discounters in three major retail markets: New York, Chicago and Los Angeles. What we found most often is that although Target, Wal-Mart and Kmart carry many of the same brands for everyday items such as laundry detergent and diapers, they vary greatly in the size and value-proposition of each offering. For instance, when looking for a large refill bottle of Soft Soap, we found four different size offerings as well as four different price points.

When it comes to absolute value, however, Target may have been the most consistent in its pricing, but Wal-Mart consistently had the most aggressive pricing. For instance, for 740-mL of Dawn dish liquid, Wal-Mart went as low as $1.88 in Chicago, whereas Target was firm at $2.99 in all three markets. Similarly, for the new DVD release of "The Incredibles," Wal-Mart went as low as $14.87, also in Chicago (versus $19.99 at Target and Kmart), and had a promotional sign that read, "We shop our competition."

Where Target truly stands out, however, is in its unparalleled knack for creating in-store excitement, whether through its incredibly strong program in private-label products or its ability to offer the type of well-known branded product not easily found elsewhere--even if it means creating price points not typically found at mass. Take Target's floor care department, where the hottest vacuum in a decade, the yellow Dyson DC07, sells for $399.99. How many will Target sell? Who knows. But one thing is certain: Every consumer who sees that Dyson will invariably give Target credit, whether consciously or subconsciously, for carrying the type of high-quality product not found anywhere else at mass. And that just may be the most valuable basket item of them all.