THOUGHTS ABOUT TARGETMINNEAPOLIS
, May 20, 2024 /PRNewswire/ — Target Corporation (NYSE: TGT) announced today it will lower everyday regular prices on approximately 5,000 frequently shopped items…
When I saw Target’s announcement (above) concerning merchandise price cuts, I had several questions. First, I wondered whether this was something peculiar to Target, or something indicative of bigger problems for the retail industry. But, that was not what concerned me the most. A more important question is whether Target’s woes are symptomatic of a fundamentally weak economy.
My own impressions of Target from a consumer’s perspective is that it is a fairly popular brick and mortar store with a variety of products which are moderately priced. I am not impressed with the grocery department and I don’t shop there for groceries. Otherwise, I find myself stopping by for a specific item or two from time-to-time. Given that I think most others who shop there find more to their liking and do so more often, I also wondered “Why is Target experiencing this problem?”
Apparently, Target’s prices are not as “consumer friendly” as I had assumed. In fact, my wife, who works in Campus Recreation Department for Utah Tech University, related a story concerning the purchase of some needed supplies. The supplies are normally ordered online via another source. The words used were “expensive” and “over-priced.”
Target’s own announcement and articles about it are universal in their indication that the purpose of the price(s) reduction is to attract customer traffic and increase sales. Recognition is given to inflation and the toll that higher prices have extracted on consumers.
Is it Target’s niche market that is suffering more from the effects of inflation? Or, is this something that is happening to others in the retail industry or throughout the economy? For example, can we expect a similar announcement from Walmart in the future?
Some additional questions: 1) Will this round of price cuts for Target be enough to draw sufficient traffic into the stores? 2) Will additional traffic translate into higher sales volume AND net profits for Target?
Normally, the higher consumer prices associated with inflation help compensate the retailer for their own higher costs to bring goods to the marketplace. It seems logical then, that if those higher prices are necessary to cover costs, and that customer traffic is declining; then, how can price reductions, even if they accomplish the primary purpose (to attract customer traffic), make up for the absorption of higher costs by the retailer? A smaller profit margin will require a lot more sales revenue to maintain profitability.
This begs the question, “Is one round of price cuts enough?” Further price reductions can only be undertaken if the profit margin is large enough to accommodate them. Otherwise, the purpose changes to just an attempt to accelerate cash flow, albeit temporarily.
If Target’s problems are not unique, then the entire retail industry might be in trouble. Depending on how widespread and how deep the issues are, then the indications for the economy as a whole are ominous.
Below is a chart of retail sales…
Real (inflation-adjusted) Retail Sales Historical Chart
Thanks for A very insightful article ! As I generally enjoy KW articles this one begs several other questions. I hate to say I’m old fashioned or that I should just accept inflation or higher prices. Sorry I can’t go for that. I’m going to be seventy one come this July 4 th and I have never seen such rapid inflation like we’ve seen the last few years. It’s really appalling to say the least. Have manufacturers cost really risen as dramatically as prices at the supermarket or retail businesses in general? What I’ve noticed is that big food corporations are what I’d call greedy and not suffering from increased material expenses . For example, I couldn’t believe a bag of good old Frito Lay corn chips was $6.50 at our local discount market ( and the size & weight has been noticeably reduced! Also I fancy fig newton cookies. Nabisco has jacked the price to over $5.00 ( and again reduced the package weight .. by 30% !! At the same discount market however a larger bag of corn chips goes for $2.00 ! At Walmart super stores I can puchase their generic Fig newtons, twice the size of Nabiscos and for nearly half of Nabiscos price! Are the much higher price items worth it or justified? The American consumer is not as stupid as big corporations may think . Sorry folks!…I see plain greed!
I could literally go on with dozens of other’ highway robbery’ price increases but I’ll limit my disgust to one last item ! Nothing like a scoop or two of good old American ice cream…right? How about $8. for a single scoop ice Cream in Portland Oregon! That came to a quick $40. to treat five people. Almost unbelievable, right? Any of you readers out there that are seniors or even middle aged may remember Thrifty s and Baskin Robins 31 flavors ice cream. I remember paying 10 and 12 cents for single scoops and a double for a quarter. It’s my belief this price gouging will eventually eliminate thousands of businesses who won’t offer food , merchandise or services at reasonable and fair prices.
Over a long periods of time the loss of purchasing power in the dollar shows up as higher prices for goods and services. However, prices can be affected by other things, too, such as supply chain issues, crop failures, etc. Also, the effects of inflation are not uniform or proportionate in their impact on consumers. Some of the things you mention are factors that contribute to reduced customer traffic and cautious attitudes that retailers are dealing with now. Retailers (Target, Walmart, Walgreens, and others) and some fast food companies are now starting to reduce prices, so maybe there is potential relief on the horizon.