As reported by Reuters, Target Stores sales will reportedly exceed expectations when the report comes out Wedneday, while Walmart’s sales are struggling to remain flat, suggesting the target market for Walmart is still struggling while the Target customer is feeling a bit lighter about their own economic condition.
Interestingly, the article points to Target’s upcoming promotional efforts focusing on discretionary items like apparel while Walmart continues to promote further slashes in prices of thousands of items. This highlights a potential weakness of being a low-cost provider. When you do so, you typically attract lower to medium income customers (I realize there are exceptions to every rule). And these customers may not have the same confidence in their employment and income status as do customers of medium to higher end products.
In a B2B setting this translates to companies that are niched or focusing on high end services or products, their customers may be doing the same allowing both better profit margins at this time. While low-cost provider is a valid strategy, we can see by this illustration that it could come with drawbacks and companies whose grand marketing strategy is low-cost supply should have contingency plans for recessions.
Read the full story at Reuters.
