If loving Target is wrong, then Laura and Carrie don’t want to be right. Today we tackle a topic very near and dear to many a millennial woman’s heart: shopping at Target. We talk about why they continue to be able to compete with Amazon, how building sub brands has been crucial to their success and tips you can bring to your own business from the famous bullseye.
You’ll learn:
(With your host Andrew Youderian and Laura Serino of eCommerceFuel.com, and Carrie McAleer of D.a. Davidson & Company)
Andrew: Welcome to “The eCommerceFuel Podcast,” the show dedicated to helping high six and seven-figure entrepreneurs build amazing online companies and incredible lives. I’m your host and fellow eCommerce entrepreneur, Andrew Youderian.
Hey, guys, it’s Andrew here. And welcome to “The eCommerceFuel Podcast.” Thanks so much for joining me on the show today. And today, I wanna talk about Target versus Wal-Mart, and how two retailers that both are in massive boxes, both are in, you know, cities across the United States, North America and the world, can be perceived so differently.
It’s a little more macro than topics I tend not to use for this podcast focused on seven-figure plus store owners, but I think there are some lessons that we can potentially take away from the comparison.
So, I mean if you look at Wal-Mart and Target, they’re both fighting Amazon. Both of them are kind of stalled out in terms of sales and growth, and Wal-Mart is much, much bigger. They’re about six times as big. And yet Target is the more profitable of the two. If you look at Target, they have a four percent net margin, which is improved from 2.8% in 2013.
And that’s a pretty impressive time to improve your net profit margin, you know, up more than, you know, 33% in one of the hardest, if not the hardest five years in retail ever. Wal-Mart has about two percent net margin, so Target’s twice as profitable. What are they doing right? How are they able to do that with less scale?
So, joining me to talk about that is Carrie McAleer, who is a certified wealth strategist at DA Davidson and Company here in Bozeman, Montana, and also happens to be my sister. So, really fun to have her on the show today, and she was kind enough to put all of the terrible things I did as an older brother, a teenager older brother growing up, behind us for this episode and still agreed to come on, so, thank you, Carrie.
And then Laura Serino, copy writer extraordinaire, and of course many of you will recognize as the community and content manager for eCommerceFuel.
But before we dive into that discussion, I wanna thank our two amazing sponsors first, Liquid Web, who offers the absolute best environment to host your WooCommerce store online. If you’re on Woo or you’re thinking about getting on to WooCommerce, it’s a rock solid scalable platform, engineered from the ground up for WooCommerce, and has like a lot of cool features, one for example, they have 25 built-in cart tests to stress test your store.
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All right, so let’s learn how Target can help us build more profitable, better ecommerce stores. So, Carrie and Laura, how often do you guys shop at Target? Carrie, maybe we can start with you and then go to Laura.
Carrie: Sure, I probably shop at Target on average, every two to three weeks, I would say.
Laura: I have a monthly pilgrimage to Target, but I am probably constantly like cyber window shopping on Target on their app and stuff, so I feel like I’m constantly adding to cart, but my in-store is every month.
Andrew: So, how often do you shop online on Target, you said?
Laura: I mean, I’m not purchasing all the time, but I’m almost using it as my new Google now. So, like, anything I need, I’m on Target now and I’m adding to my cart. I’ve got my app, saving it to my Target list. So I don’t know, it’s not necessarily shopping all the time on Target, but I’m just on the website, creating my list every day.
Andrew: With this list, do you create and then you go, you’ll place a pick-up order and then you go and you’ll, when you go to Target in your monthly pilgrimage you’ll buy it, or you use it as like stuff to check out when you’re in the store?
Laura: Yeah, so they have like a “My-list” section on their app, so I’ll like be on their website, or on their mobile app, and I’ll just click, “Add to my shopping list,” and then I when I’m in store, I’ve actually got kind of like a list of things that I’m either meaning to pick up or to check out, and it’s kind of my own curated list that’s very handily on my Target app that I’m shopping with when I go in.
Andrew: Wow, do you do this too, Carrie?
Carrie: I don’t do that.
Laura: You aren’t hard core.
Carrie: You are hard core.
Andrew: You guys hear so much about, like oh, multi-device and, you know, omni-channeling all this stuff and they use there, right it off, and I’m like, “Yeah, right how much do it happen?” but it is actually happening with the way you do it, which is just cool.
Laura: I’m very multichannel, yeah, for sure.
Andrew: So, I’m gonna throw this out there, kind of just to give you guys a softball for your love for Target, but why do you shop there versus other stores? Carrie, I mean, we can start with you.
Carrie: I think I shop at Target versus other stores for a couple of reasons. I think first of all, they have a bright, clean environment. And it’s a little hard to put into words, but when you enter a Target, it’s bright, it’s cheerful, you have things that are relevant to the seasons, that are very in-style.
I know they work with designers to have certain fashion lines come into Target that are maybe an offshoot and a less expensive line than they would have maybe at the mall, or Macy’s, or Nordstrom.
I know it sounds silly, but I just get kind of excited and giddy when I walk into Target, and it’s bright and, you know, the employees are, you know, they tend to be, in my observation, they tend to be younger than Wal-Mart or other competitors. So, I feel like their employees are happier to be at work, this may not be a career job for them but they’re cheerful. And I think that translates a little bit into my experience when I enter the door.
Laura: I completely feel the same way, and I almost enter like a blissed-out state. It’s like white and shiny, and clean, and my…
Andrew: Sorry to interrupt, Laura, are you sure they’re not…are they’re handing out pills at the front door that you guys take as you walk in?
Laura: They do have a Starbucks counter, which I think is a real thing. You can get your latte, you can grab your cart. There’s, you know, at least at our Target, there’s a Starbucks right when you walk in.
Carrie: Yes.
Laura: A hundred percent. That is my routine.
Carrie: Your cart has a little cup holder, so that if you are, you know, shopping and you need to put down your cup, you have some more convenience. It’s just, I feel like they get me.
Laura: They completely get me. Carrie, I 100% agree. I do that, that’s my first stop. I go to the Starbucks, I get my fancy Starbucks, a little treat for myself, and then I start my walk, my Target walk.
And yeah, Andrew, I mean, for me, it’s all about like the Target brands that are only available at Target, they’ve done such a good job at curating their brand, so like even their, just their Target, kind of like the generic Target brand, which is the up-and-up brand, you know, there’s like, it feels just better than a generic brand you’d pick up in a grocery store or at another big box store. I don’t know why. It’s like the packaging or the branding, whatever it is about it.
So, even at like their base brand level, they do a good job. And then they have all these great sub-brands that I like to shop. Like Carrie mentioned, they do really great kind of like fashion pieces for women that are actually affordable, they do great kids’ clothes, they do great, they’ve got great, like their beauty products are great. I mean…
Carrie: Their shoes are awesome.
Laura: Their shoes are so good too. I mean, they just…I think they just…
Carrie: They have it dialed.
Laura: They’ve got it dialed, totally.
Andrew: So, you guys, it sounds like you have a very visual, emotional reaction when you walk in the door, is that fair?
Carrie: Yes.
Laura: Yes.
Andrew: How do you compare Target to Amazon? Like, how much do you shop at Target versus Amazon? And do you guys have a preference between the two? Like, if there’s something you can get both places, would you prefer to go and get at Target, or do you kinda agnostic, or do you like…where does it fall in the Amazon spectrum of convenience and enjoyment, and just wanting to shop there versus Target?
Carrie: I think I prefer Amazon for the big ticket items that there’s gonna be a larger price difference. But in terms of smaller items, toiletries, clothes, small grocery items, small home goods, Target absolutely, as long as I have the time.
I think Amazon comes into play for me when either I’m incredibly short on time, the item isn’t needed immediately, like I’m not out of my face wash that day, or, you know, if it’s not an immediate need and I can wait two days.
But the bigger ticket items, I am more prone to check Amazon first and go with Amazon if the price difference is larger.
Laura: Yeah, I would agree with Amazon is kind of like a price check place for me now, but in terms of shopping from Amazon now, I’ve almost completely cut it out. And that’s saying a lot for me because I live on an island, so convenience is super key. But, you know, for Target for example, I have the Target red card, okay?
So, if you’ve got a red card I use it as like a debit card, and you always get free shipping on anything, so that’s, you know, okay, so that gets rid of my need for prime.
And two-days shipping doesn’t really work for me anyways, because I live on an island. So, the whole prime thing never really worked that great for me anyways, so I’ve just kind of completely cut Amazon off at this point. I’ve had a bunch of bad experiences with not getting what I really ordered, dealing with like maybe a third party seller someone that has been really hard to deal with getting a refund. I’ve had a lot of bad Amazon incidents lately that have caused me to kind of decide to really cut the Amazon cord completely.
Andrew: Laura, we were talking about this the other day, and you mentioned that Target does a really good job of getting you to buy more than you planned on when you came in, and I was joking that like I’m very “Search and Destroy,” like when I go shopping, I go in, I get it, and I come out.
And you had said that like when you went to Target, there’s a…and even just online, there’s a bunch of meme of people going in to buy, you know, like a stick of deodorant and coming out with like a lot more, and then TV, and of $200 worth of other stuff. How do you feel like Target gets you to buy more stuff than you were planning on, on such a big scale?
Laura: Well, you know, they definitely are good at tapping into consumerism a little bit. I mean, a lot of the things that I do end up buying I think are those impulse buys, you know. They just do a really good job at, you know, that everyone knows when they walk on the interior rows at Target, those end caps are all of the little clearance items. And they know exactly where to put those things and you end up getting suckered into, you know, a three dollar…
Andrew: Carrie is vigorously shaking her head over here.
Laura: Yeah. You know, they do this great job. They have the big red signs that say “Clearance,” or like bright orange tags it’s like, “Clearance Tags”. And if you’re a regular Target shopper, you’re like…you kind it can’t help but be drawn to things like that, you know.
Because I think the Target shopper is someone that looks for deals anyways, and then I just like their brand, so I inevitably don’t really need something for Austin, my son, but then I kind of start looking at the clothes and I’m like, “All right, he can get these five-dollar baby leggings,” because they’re five dollars, and why not add another five dollars to this cart. So, they’re good at it.
Andrew: You have both touched on kind of the private brands and the quality, but how much do you think Target has just done a good job of building what appears to be perceived quality, based on the fact that it’s clean, they appeal to like nice colors, there’s like an emotional aspect?
How much do you think is actually better products versus just the fact that you feel good when you go into the store, the store looks nice and so you assume? Like, you actually think you’re getting better quality stuff than you would at another store, Carrie?
Carrie: I think that’s an interesting point. I think it’s probably a little bit of both. I think part of it is the feeling that we touched on earlier about how Target makes you feel when you enter those doors. I think another big thing that Target does to help enhance that is the lighting. I think the lighting is very different in Target and Wal-Mart.
I think the colors, the time they put into the displays, even if the quality of the item within those displays is not significantly different, I think a lot of it they really tap into the visual cues and what motivates consumers visually.
Laura: Yeah, I mean, I know that the five-dollar baby leggings are not $30 baby legging quality, you know? Like, I know that I’m shopping for things that I really like to look up. I like the designs, I like the styles, but I know that these are not…I know that when I buy clothes from Target, these are not going to be hand-me-down heirloom pieces. They’re very much seasonal, you know, a little bit more disposable, which is not always the best saying.
So, for me, it’s not the same as buying from maybe a small business or a brand that really pays attention to quality. But I’m not really going into Target looking for that. I’m going into Target to look for like the things I really need for my house, and then I’m checking out these kind of more impulse things with their sub-brands. So, I think I’m aware that the quality isn’t superior, but maybe it doesn’t really matter as much to me with Target.
Carrie: Especially because the price point we’re shopping at.
Laura: Exactly.
Carrie: We’re buying these flats or these sandals to last one summer, or to match that dress that we have for a wedding, right? So…
Andrew: I mean, you can’t talk about Target in retail and not compare them to Wal-Mart, and they have obviously, slightly different strategies and approaches, but why don’t you, and this conversation is for the both of you guys. You guys did not like shopping at Wal-Mart, almost the point where, you know, Laura, I think you said once…well, we’ll get to this in the last round, but you’ll go out of your way, you know, very much to inconvenience yourself not to shop at Wal-Mart and to shop at Target.
Why? Like, what is about Wal-Mart that makes you so hesitant to go shop there?
Laura: They don’t have anything I really want. And it’s funny, I was thinking about brands and like the brands of Target that I like are very of the moment. I think they’re hip. I think they’re cute, and I think the only two brands I could think of for Wal-Mart were “Better Homes and Gardens,” you know, like the garden magazine, and I think “The Pioneer Woman,” has a brand there, or something.
Carrie: They do.
Laura: Yeah, so I actually…right there, those two brands, I think of someone much older than me and maybe a little more old fashioned, like doesn’t necessarily…like the Better Homes and Garden thing, maybe she’s buying like big floral cushions for her work or furniture, that shopper, whereas I might be trying to get like a cooler striped cushion for my wooden outdoor furniture. It’s almost like a different kind of, you know, it’s like a different style, almost.
Like, someone that would maybe buy clothes from Old Navy wouldn’t buy clothes from Zara, or whatever the kind of comparison you wanna make.
And then it’s just, yeah, it feels like a gross kind of industrial building. It’s very gray. Every Wal-Mart I’ve gone to feels like dark, there’s no like bright lights. And I’m just kinda like, I wanna get in and get out if I ever get forced into going there.
Carrie: I think also, and maybe this is just due to our Wal-Mart, but I feel like cleanliness. I feel like, you know, when I have gone into WalMart, I feel like I need to take a Clorox wipe and like wipe down my cart, you know, it’s just your cart, but it’s a stark contrast to the Target cart, which is, you know, a little more reinforced and has my cup holder.
Andrew: And these cup holders are a big deal.
Laura: They’re very important when we shop.
Carrie: They are very important. And I also think, you know, when you look at the Wal-Mart shelving, it’s either completely disorganized, a lot of times there are stuff everywhere. And I think Wal-Mart has more of that warehouse feel where they’re trying to fit more goods into Wal-Mart, and I think that open the more open space and less clutter is also an advantage of Target.
Andrew: I mean, the other two that I noticed was Carrie, you mentioned, just like the attitude of the sales associates and people working there, you know, thinking through just the importance of upbeat quality customer service. We’ve all had, you know, you call places and you get someone on the phone who you know is at the end of their shift and not happy to be there, right, versus someone who is like, “Hey, how is it going?” Just even the tone in your voice, or thinking through that it’s little bit, it makes a big difference.
And then finally, the up-sales and the discounts on the Target’s side, those kind of, you know, the things at the end the aisles that you mention, versus, you know, if you’re an online store owner, being able to maybe highlight some of those things in a way that you’re not always discounting and totally killing your margin, but on a regular basis, maybe giving opportunities for people to buy stuff on the cheap that doesn’t, not cross your whole catalog, but select items that can keep people engaged.
So, any other thoughts you guys have on lessons that sellers could take from Target on to their own seven-figure businesses?
Carrie: I think the one thing that you had said about that, the up-sales and discounts is, I don’t necessarily think it has to be a large discount. I think most of the clearance Target things I buy are 10% or 15% off. But I think there is something that hits you when you see that red sticker, you know, “I’m getting a good deal.”
So the fact that I’m getting a good deal is, you know, if I’m on the edge about a product, that kind of justifies it. Even if it’s really not that much more on sale, it’s a justification that I am happy to use, so I think that’s powerful.
Laura: Yeah, and it’s funny actually, as I’m thinking about the associates at Wal-Mart versus Target. I’m thinking about how the checkout process is so much better at Target. Wal-Mart has people greeting you as soon as you walk in, which for me is kind of annoying. Not that like I dislike it, but it’s kind of like, “Okay, yes, hello, hello.” But you can never get…I’ve never had a good checkout experience at Wal-Mart.
Target always has associates waiting to direct you to the fastest line so that you can check out quickly, and, you know, how important is that to someone, to not get bogged down during checkout?
And so I think that obviously, easily can be incorporated into, you know, eCommerce as well, like just making sure that that process is as easy as possible for customers and really taking the time to see like are there any roadblocks when I have people on my site to get to that checkout point, and how much easier can I make it? I think that’s pretty important.
Andrew: Yeah, that’s a great takeaway on the ecommerce online world. I wanna do one thing before we wrap this up. Normally, we have a traditional lightning round I do, but given that kind of unique topic, I thought I’d customize it for the Target versus Wal-Mart discussion that we’re having. So, if you guys are up for it, I’ll just do this lighting around super-fast answers, and we’ll see what you think.
All right, so the first question is how many miles would you drive out of your way to shop at Target versus Wal-Mart, if you needed something and Wal-Mart was the closer? So, the options are five, 10, 25 miles, 100 miles, 250 miles, 500 miles or more?
Laura: I have an actual answer to this. I go 50 miles out of my way to go to Target. I have a Wal-Mart two miles away from me and a Target 50 miles away, and I go to Target every time.
Andrew: That’s great. What if the Target was 100 miles away, would you still go?
Laura: If the prices of gas are good, yes.
Carrie: I’m not sure I’m quite that extreme, I think 25 would be my cap. I think if it was 50 miles like you, Laura, I might just have to consolidate my trips down to once a month.
Andrew: Okay, so assume there’s a lawn chair that was $25 at Wal-Mart and a similar lawn chair was at Target, how much would you spend for the same or similar lawn chair at Target versus Walmart? Would you spend $30 for the $25 lawn chair, $40, $50, $100, or $150?
Laura: I’m gonna say $40.
Carrie: I’m gonna say $30.
Andrew: Thirty dollars? Okay, so anywhere from like a 20%, what was that, five, 125, so 60% premium.
Carrie: The hard thing is Wal-Mart is such a process to go in and out of, especially if I had other items that I was gonna get at Target, I don’t know. I think there is definitely a premium, but it’s worth its band.
Andrew: Let’s do the same thing for a TV that was $400 at Wal-Mart, and this assumes that you have to go in Wal-Mart and buy it. So, $400 TV at Wal-Mart, same TV at Target, how much would you spend to buy it from Target versus Wal-Mart, $425, $455, $500, $600, $750? I feel like I’m on the prices right here, $750, or more? What would you spend up to, to buy at Target versus Wal-Mart?
Carrie: TV, we’re talking like $400 price range, I wouldn’t pay more. I’d go to Wal-Mart.
Laura: That’s hard.
Andrew: We broke you, Laura.
Laura: You broke me.
Andrew: I thought your love had no bounds.
Laura: You know what? If it’s a TV, I have a feeling that my husband, Alex, is gonna go in, so I still don’t have to go in to Wal-Mart.
Andrew: I think that’s cheating. You have to be the one that goes in.
Laura: Okay, no. I’m gonna stick at the $425.
Andrew: Four twenty five, okay. What’s the last thing you bought at Target?
Carrie: Night cream.
Andrew: Night cream?
Carrie: Night facial cream.
Andrew: Okay.
Laura: Cleaning products, Mrs. Myers cleaning products.
Andrew: And last question, what’s the last thing you bought at Wal-Mart?
Carrie: My parents use their pharmacy and they don’t live in town, so when they come to town I have to go in and pick up all their prescriptions, so probably two months ago the last time they were here I had to go in and stand in the prescription line.
Laura: I think mine was half-priced Easter candy, and only because my husband had to buy something and I was waiting by the checkout, and bought candy.
Andrew: Is this the candy that falls on the floor and then they pick it up and they’re sold at half price? Is that the stuff?
Laura: I think it was like a few days after Easter, so it was all discounted so I stuck it out.
Andrew: Laura, Carrie thanks for coming on. This has been fun to do. And just for someone who don’t have quite the perspective you guys do, so it’s really interesting to hear how Target does so well but also just the emotional connections they make, and how they’re more profit because they provide obviously a way better experience for people. So, that has been fun. Thanks everyone for sharing and coming on to talk.
Carrie: Thanks for having us.
Laura: Thanks for letting us talk about how much we love Target.
Andrew: Yeah, and we need to get this. Target PR, if you’re listening, it’s be a good idea to me, I don’t know, do you guys wanna list your home addresses for us where they can send some free swag.
Laura: I’m willing to be a brand a messenger for Target, yes.
Andrew: That’s gonna do it for this week’s episode, but if you enjoyed what you heard and are interested in getting plugged into a dynamic community of experienced store owners, check us out at ecommercefuel.com. eCommerceFuel is the private vetted community for eCommerce entrepreneurs, and what makes us different is that we really heavily vet everyone that is a member to make sure that there are great fit, that they can add value to a broader community.
Everyone that joins has to be doing at least a quarter million dollars in sales via their store, and our average member does over seven figures in sales annually.
So, if you’d like to learn more, if that sounds interesting, you can learn more and apply for membership at ecommercefuel.com.
And also, I have to thank our two sponsors that make this show possible, Liquid Web, if you are on WooCommerce or you’re thinking about getting on to WooCommerce, Liquid Web is who you should have host your store, particularly with their managed WooCommerce hosting. It’s highly elastic and scalable, it’s got built-in tools to performance test your store so you can be confident it’s gonna work well, and it’s built from the ground up for WooCommerce.
And you can learn more about their offering at ecommercefuel.com/liquidweb.
And finally, Klaviyo for email marketing. They make email segmentation easy and powerful. They integrate with just about every cart out there, and help you build incredibly automated powerful segments that make you money on auto pilot. You can check them out and get started for free at klaviyo.com. Thanks so much for listening, and looking forward to seeing you again next Friday.
Want to connect with and learn from other proven e-commerce entrepreneurs? Join us in the eCommerceFuel private community. It’s our tight-knit, vetted group for store owners with at least a quarter million dollars in annual sales. You can learn more and apply for membership at ecommercefuel.com. Thanks so much for listening, and I’m looking forward to seeing you again next time.
Flickr: Better Business Bureau of MN&ND
