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America's two favorite retail stores, Walmart and Target, are back in the spotlight after their Q3 2024 results—and the contrast couldn’t be more striking. Walmart is riding a wave of year-over-year growth, while Target is facing tough challenges. In this issue, we’ll break down the numbers and explore the strategies, pricing decisions, and operational moves that are driving these very different outcomes.

The Curious Case of Two Retailers 🛒

1962 was a defining year for the United States. The world came dangerously close to another war during the Cuban Missile Crisis, a tense standoff between the U.S. and the Soviet Union that nearly led to nuclear conflict. It was also the year President John F. Kennedy committed to putting a man on the moon, setting in motion the Apollo program. 

When the nation was immersed in a space race and cold wars, two retail stores quietly began their operations — one in Arkansas and one in Minnesota. These stores, Walmart and Target, would go on to reshape how Americans shop and forever change the retail landscape. 

Sixty-two years since their inception, both Walmart and Target have been on their unique path, growing into retail superpowers in the US.

Now, both retail giants are back in the spotlight after their recent Q3 2024 results, with very different stories. Target reported a total revenue of $25.7 billion for the quarter—just a 1.1% increase from last year. And its net income dropped 12% to $854 million. Meanwhile, Walmart delivered strong growth, with $169.6 billion in revenue for the quarter, a solid 5.46% year-over-year rise.

The disparity between both retailers is now clear. While Walmart continues to expand steadily, bagging win after win. Target is struggling to keep up. 

But what led to such contrasting outcomes for these retail giants? To understand what worked for Walmart and what went wrong for Target, we need to delve deeper into their strategies, pricing models, and operational choices. Let’s first explore their origin stories to uncover the roots of their current trajectories.

Backstory

Walmart was started in 1962 in Arkansas with a single mission: to provide quality products at the lowest possible prices.

As Sam Walton wrote in his book Made in America, “We exist to provide value to our customers. That means, beyond quality and service, we have to save them money. Every time Wal-Mart spends a dollar foolishly, it comes out of our customers’ pockets. Every time we save them a dollar, we get one step ahead of the competition.”

This straightforward philosophy shaped Walmart’s culture from the very beginning. By focusing on saving customers’ money, Walton built more than a store—he built trust. That vision turned Walmart into America’s largest retailer and one of the most successful companies in the world. 

Today, the retail giant operates over 4,600 stores across the U.S., drawing in nearly 255 million customer visits every week and making a staggering $648 billion in revenue. 

On the other hand, Target, founded by George Draper Dayton, focused more on delivering high-quality, stylish goods at affordable prices since its inception. By offering stellar in-shopping experiences and a wide range of stylish products, Target sets itself apart from traditional discount retailers. 

Currently, Target operates nearly 2,000 stores across the United States, and annual revenues exceed $100 billion. The brand’s focus on style, innovation, and customer experience has cultivated a loyal following, often referred to as “Tar-zhay” by its most devoted fans. 

Target and Walmart were built on distinct philosophies, but their differences extend far beyond their founding principles. Let’s explore what truly sets these two retail giants apart.

Differentiators

Without a doubt, Walmart and Target stand as titans in the retail industry, yet their approaches couldn’t be more different. While both giants dominate in their own right, the secret to their success and longevity lies in how they cater to vastly different audiences with distinct strategies and shopping experiences.

For Walmart, the formula is straightforward: practicality and affordability. Around 65% of its shoppers earn less than $60,000 a year, with a significant portion in the $25,000 to $49,900 income bracket. These families, often living in rural or suburban areas, prioritize value over style, making Walmart their go-to destination. 

The typical Walmart shopper, as per Kantar Retail’s ShopperScape survey, is between 40 and 46 years old and heads to the store with a plan—stocking up on essentials like groceries, toiletries, and household goods. On average, a Walmart trip costs $50.95 for about 11 items, emphasizing utility and function above all else.

Target, however, tells a different story. It has built its reputation around being a shopping destination that blends affordability with style, appealing to a younger and more affluent audience. 

The experience of shopping at these retailers is also very different. Walmart shoppers are efficiency-driven, navigating stores optimized for inventory capacity rather than aesthetics. They’re there to get what they need. 

On the other hand, Target shoppers view their visits as an opportunity to browse and discover. Target’s stores are carefully curated with clean layouts, stylish displays, and an inviting atmosphere that encourages exploration. It’s the kind of place where you might go in for toothpaste and leave with a throw pillow, a scented candle, and a trendy sweater you didn’t even know you needed. In short, it is the perfect destination for impulse buying. 

While these differences have long defined the two giants, recent shifts in consumer behavior are rewriting the narrative, particularly for Target.

Falling out of love

The Millennials, Gen Z, and affluent shoppers who have long formed the backbone of Target’s customer base are beginning to drift away from the brand. This isn’t happening in isolation; a mix of interlinked factors is driving this shift, exposing both operational flaws and a growing disconnect with customer needs.

One major frustration for Target’s loyal shoppers has been its response to rising theft and shoplifting. In 2023, Target closed nine stores across four states due to ongoing issues with theft and organized retail crime.

During a 2023 earnings call, CEO Brian Cornell revealed that Target stores experienced a 120% increase in theft incidents within the first five months of the year. In an effort to curb these issues, the retailer has locked popular items like skincare products behind glass. 

While this may seem like a practical solution, it’s creating a poor shopping experience. Customers often wait up to 10 minutes for assistance just to access basic items. For people who value convenience and speed, this feels like a betrayal of the seamless experience Target is known for.

Another major factor is the broader shift in consumer spending habits. With inflation continuing to weigh heavily on households — including affluent ones — shoppers are prioritizing essentials over non-essentials. This has hit Target hard, as it’s seen as the go-to destination for stylish home decor, trendy apparel, and other discretionary items. While that reputation worked in a more stable economy, it’s proving to be a liability now that wallets are tightening.

For example, research from the Telsey Group reveals that Target’s grocery prices are still 6% to 7% higher than Walmart’s. A 2019 analysis also found that a basket of 30 identical items at Target cost $593.31 compared to Walmart’s $588.58. On the surface, these differences might seem minor, but for families shopping week after week, they add up quickly, especially during times of economic uncertainty.

Target’s struggles haven’t gone unnoticed internally. During its Q3 2024 earnings call, CEO Brian Cornell acknowledged that shoppers are pulling back on discretionary spending. “Consumers continue to spend cautiously, most notably on discretionary items,” he said, pointing to the pressure of “multiple years of price inflation.” 

Another missed opportunity for Target has been its slower embrace of influencer marketing. Gen Z, in particular, is heavily influenced by social media, discovering new products and trends on platforms like TikTok. Target has lagged here, allowing competitors to capture the attention of this digitally savvy generation.

Finally, never-ending operational issues have only added to Target’s challenges. Reports of empty shelves, long checkout lines, and inconsistent inventory have damaged the convenience and reliability that once defined the Target shopping experience.

They say, "what one struggles with, the other excels at," and this perfectly describes the current situation of Target and Walmart. 

Purple Patch

Walmart has always been a favorite for bargain hunters and shoppers looking to find steep discounts on everyday items. But recently, Walmart has started attracting a new kind of customer: households earning over $100,000 annually. This shift is a significant milestone for the retail giant, signaling its appeal is growing beyond its traditional base of low- and middle-income shoppers.

In a recent earnings call, Walmart CEO Doug McMillon highlighted this trend, saying, “High-income households are shopping more at Walmart, with its delivery services and membership programs helping drive the growth.” 

By making the shopping experience as seamless as possible, Walmart has managed to cater to customers who value both time and money—something that resonates strongly in today’s fast-paced world.

But it’s not just about logistics. Walmart has also expanded its product range to include premium lines like BetterGood to attract high-income grocery shoppers. This strategic move helps Walmart cater to a broader audience while maintaining its core commitment to affordability.

Interestingly, Walmart’s ability to tap into social media trends has also been a game-changer. Collaborating with influencers on platforms like TikTok and Instagram, Walmart successfully marketed its new and affordable product line called Dupes — budget-friendly alternatives to high-end products. These collaborations have struck a chord with younger, affluent shoppers, who enjoy finding trendy items without overspending.

For instance, Walmart’s affordable alternatives to popular products in home decor, beauty, and fashion often go viral. The latest example is Drew Barrymore's "Beautiful Drew Chair." It was part of Walmart's Cyber Monday sales; the chair was offered at a discounted price. 

And all of this is happening against the backdrop of persistent inflation, which has driven shoppers across income levels to prioritize value. Low prices are Walmart’s bread and butter, and this commitment to affordability has helped it perform exceptionally well during these uncertain economic times. 

Now, let’s dive into one of the key drivers behind Walmart’s consistent success year after year—its grocery business.

Groceries 

In the third quarter of fiscal year 2024, Walmart reported a solid 5.3% increase in U.S. comparable store sales, and guess what was leading the charge? Groceries.

Let’s break it down. Grocery sales account for nearly 60% of Walmart’s U.S. revenue, and there’s a simple reason for this—groceries are essential. No matter the state of the economy, people always need food and household basics. This reliability forms the foundation of Walmart’s strength.

But the impact doesn’t end there. Customers who come in for milk or bread often leave with a hoodie, headphones, or even a blender. For Walmart, groceries are not just generating sales — they are driving traffic and boosting purchases across all categories.

Walmart has also nailed the convenience factor. With online grocery pickup available at more than 3,450 locations and same-day delivery at around 2,730 stores, they’ve made shopping as easy as clicking a button. It’s perfect for busy families and individuals who just don’t have time to roam the aisles.

And then there’s the price—Walmart’s ultimate weapon. Their “everyday low prices” mantra has always been a hit and especially has worked wonders for their grocery division. 

If groceries are one-half of Walmart’s winning formula, e-commerce is undoubtedly the other. But how did a traditional retail giant like Walmart crack the online game? That’s where Marc Lore comes in.

Entry into e-commerce 

Marc was the CEO of Jet.com, a company Walmart acquired in 2016 as its entry ticket into the online retail space. Soon after, Marc took the reins as CEO of Walmart U.S. e-commerce. One of his standout strategies was offering free two-day shipping — no membership fee required — a direct challenge to Amazon Prime’s dominance.

But Marc didn’t stop there. He saw Walmart’s biggest strength in its massive network of brick-and-mortar stores and turned it into an e-commerce advantage. He expanded Walmart’s online grocery pickup service, effectively transforming stores into mini-fulfillment hubs. He didn’t just build an online presence; he turned Walmart into a serious competitor in the digital space. 

Thanks to all this groundwork, Walmart’s e-commerce business has grown into a powerhouse. In the third quarter of fiscal year 2024, Walmart reported a 27% jump in global online sales compared to the previous year. In the U.S., e-commerce sales grew by an impressive 22%. 

Walmart’s U.S. online sales hit $53.4 billion in fiscal year 2023—that’s nearly half of Target’s total revenue of $107.4 billion in the same period. 

New toys 

One of the key reasons behind Walmart’s e-commerce success lies in its relentless efforts to modernize its supply chain and fulfillment operations. To stay competitive in the fast-paced e-commerce world, Walmart has been automating its distribution centers and fulfillment centers that pack and ship online orders quickly and precisely.

The scale of investment is staggering. In 2021 alone, Walmart poured $14 billion into supply chain automation, rolling out advanced technologies like automated warehouse management systems, picking robots, and sorting technology. These innovations are designed to make the entire process faster, more accurate, and cost-efficient.

Walmart’s plans for the future are just as ambitious. By early 2026, the company aims to integrate automation into nearly two-thirds of its stores and have 55% of its fulfillment center volume handled through automated facilities. These advancements are expected to cut average unit costs by 20%. 

You may now ask when, compared to Walmart, how strong is Target’s e-commerce game? Let’s answer that.

Targeted e-commerce

Target is also making big moves in e-commerce and technology, carving out a strategy that plays to its strengths. Instead of pouring resources into massive warehouses, Target is leveraging its 2,000+ stores to handle 95% of its e-commerce orders. This approach turns stores into micro-fulfillment centers, enabling faster delivery for same-day and next-day orders.

Interestingly, over 75% of the U.S. population lives within 10 miles of a Target store. It’s a smart use of existing infrastructure that brings Target closer to its customers.

Unlike competitors, Target operates with just 14 dedicated fulfillment centers. Surprisingly, this isn’t a limitation—it’s part of the plan. The company says it’s 40% cheaper to fulfill orders directly from its stores compared to shipping from traditional fulfillment centers. This cost-saving strategy allows Target to stay competitive in the fast-paced e-commerce market.

To further streamline operations, Target has also invested in sortation centers—10 of them across the U.S. These facilities are game-changers, capable of processing an average of 35,000 orders a day. By efficiently organizing and routing deliveries, these centers help ensure that orders reach customers quickly and accurately.

Target Missed

Target has been grappling with sales and inventory problems for the past few years – since the end of the pandemic, to be precise. One major issue has been Target’s overstocking of inventory. During a recent earnings call, the CEO acknowledged a significant miscalculation: the company stockpiled excessive inventory earlier in the year, fearing disruptions from a potential port strike. 

While this move was intended to safeguard product availability, it backfired. Overstocking led to higher storage and markdown costs as demand for discretionary items like apparel and home goods dwindled. 

Another critical weakness lies in Target’s inventory forecasting. According to industry experts, Target has struggled to accurately predict demand. Its systems have proven less responsive to rapid changes in consumer behavior. 

Adding to these challenges is Target’s lack of strategic investments in the e-commerce ecosystem. In comparison, Walmart has made significant moves — such as acquiring Flipkart to strengthen its presence in India’s growing e-commerce market. Flipkart and the Big Billion Day Sales this year immensely helped increase Walmart’s global sales and generate new advertising revenue streams. Whereas Target remains heavily reliant on its U.S. operations with limited diversification. 

Final Thoughts 

The stories of Walmart and Target showcase the complex interplay between strategy, market positioning, and adaptability in the retail world. As both giants navigate a rapidly evolving retail landscape, one thing is clear: adaptability and innovation remain the keys to staying relevant. 

Target's road to recovery will require a recalibration of its operations, pricing, and digital presence. For Walmart, the challenge will be maintaining its growth trajectory while continuing to innovate and meet the demands of its increasingly diverse customer base. 

At the same time, Walmart is contending with Amazon, the undisputed titan of online retail. With nearly 40% of the U.S. e-commerce market under its belt, Amazon is dominating the online retail space. Walmart, holding about 7% of the market, understands the high stakes and is gearing up for the challenge. The rivalry between these two giants is reshaping the future of retail, making it a race that’s impossible to ignore.

This newsletter was written by Shyam Gowtham

Thank you for reading. We’ll see you at the next edition!