Food Fight

Everybody loves Target. Shoppers love Target's mix of discounted and fashionable merchandise, what some have called “the democratization of design.”

Wall Street loves Target, whose earnings rose 36 percent and revenue gained 15 percent in the most recent quarter.

Shareholders love Target, watching its stock price rise 27 percent last year and recently cashing the company's 138th consecutive quarterly dividend check.

Madison Avenue loves Target, with its zippy, colorful, $924 million ad campaign.

Store-development suppliers love Target, which opened 76 new Target stores this past year, 62 of which were superstores.

You love Target. Last year, you voted it the recipient of the first annual Peter Glen Award, presented at VM SD's International Retail Design Conference to the retailer that embodies all the things – design, service, imagination, attention to detail – that Peter admired.

Well, everybody doesn't love Target. Wal-Mart doesn't love Target. After dispensing with Kmart earlier this year following a 40-year head-to-head battle, the world's largest company is now gearing up for what probably will be a tougher battle. Target won't be as easy to shrug off. As The New York Times pointed out in a recent article, Target has been savvy, whereas Kmart frequently appeared to be bumbling. Target stores are nicer and cleaner, whereas Kmart's were dimmer, more-cluttered versions of Wal-Mart's.

In a location-is-everything business, Kmart was hard-pressed to expand at Wal-Mart's pace. But Target, with an 8.4 percent profit margin so far this year (to Wal-Mart's 7.2 percent), has the efficiencies – if not the mass – to contend.

A Wal-Mart executive acknowledged to The Times that “we respect Target and view them as a good competitor.” Wal-Mart executives throw words around in public as if they were free plane tickets to Bentonville – in other words, rarely, if ever – but it would be hard to imagine anyone at Wal-Mart ever saying for print that it respected Kmart.

Target knows who it is – and who it isn't. In its last desperate gasp before Chapter 11, Kmart tried to compete with Wal-Mart primarily on price. Target doesn't do that. It prefers to promote itself as “contemporary fashion at low prices,” and admitted to The Times that it expects most former Kmart customers to take their business to Wal-Mart.

Now the battleground is shifting, from linens and towels to apples and oranges. Both giants view grocery shopping as the next great frontier. But, predictably, they take different approaches.

Wal-Mart seems to want to become everyone's primary food-shopping option. It seeks to increase both the number of shoppers in its SuperCenters and the size of their shopping baskets. Target told The Times it wants, at least for now, to get its regular customers to buy groceries – increasing both the average purchase-per-visit and the number of visits. But it said it is not counting on luring shoppers from other supermarkets.

One assumes Target will bring the same close attention to food that it brought to toasters and teapots. Layouts will be efficient, service will be a priority and you'll be able to eat off the floors. But what about its now-legendary designer approach to ordinary household products?

The merchandise here is a commodity, and that could cost Target the differentiation it now depends on. Or, as one retail observer said, “you can't have Michael Graves design an orange.”