 Planned purchases vs. Impulse buys |
Source |
American Shipper |
Post Date |
11/29/2022 |
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Target has turned its stores into mini malls offering a range of “cheap chic” items.
It has launched exclusive private brands like All in Motion, a try, but lower-priced activewear brand and Hearth & Hand, a home decor line d with celebrity home renovation duo Chip and Joanna Gaines.
It also has shops for popular national brands, including Disney, Ulta Beauty and Apple. And it has a Starbucks where shoppers can grab a latte to sip as they browse.
The assortment has led to jokes about “Target runs,” where shoppers stop by for toothpaste but up leaving with a lot more.
About 21% of sales at Target come from unplanned purchases, according to GlobalData research from before the pandemic. At Walmart, the figure is about 12%.
In an inflationary environment, those shopping sprees – and impulse buys – become a tougher sell.
“People are starting to say ‘Do I actually need this?’” Saunders of GlobalData said. “When people do that, that affects Target more so than Walmart.”
Shopper sping power
Both retailers draw shoppers from across incomes, but Target’s customers t to be wealthier.
The average household income for Target shoppers is about $79,000, versus Walmart’s average household income of about $62,000, according to GlobalData.
During the pandemic, Target benefited from its middle-income customers, who suddenly felt flush with cash from stimulus checks and the money they weren’t sping on dining out, travel or sing kids to summer camp.
Those shoppers helped Target’s sales grow dramatically during the pandemic. Its annual revenue rose about 36% to $106 billion in 2021, the most recent full fiscal year, from 2019.
And even in a third quarter that disappointed Wall Street, its sales climbed 3% to $26.52 billion from a year earlier.
The growth is being fueled in part by investments Target made before the pandemic — such as renovating stores, adding curbside pickup and turning stores in fulfillment centers for online orders.
But now as people go back to traveling, dining out and commuting into the office, Target is competing with more sping priorities. It has also gotten tougher for the company to keep topping its own growth.
“It’s picked a lot of that low handing fruit,” Saunders said. “Now even if there wasn’t this consumer crunch, it would have been much more difficult to eke out gains.”
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