Diverging effects of the pandemic visible in the numbers at Target, Walmart
Walmart last week reported a strong second quarter of growth. But it sure looked unimpressive next to Target’s booming performance, with record sales growth and record earnings-per-share. Yet it’s not obvious Target is doing a lot better than Walmart. It might just be that Target’s customer is doing a lot better than Walmart’s customer.
And in a pandemic year, it’s worth taking a close look at why that is happening.
Even as people were still staying home in March and April, talk flipped to what kind of economic recovery there would be, with hopes for a quick bounce back that would form a big “V” on a chart. And that sounded great, nearly everybody hopefully soon doing better. That didn’t happen, and lately there’s a new letter being talked about, the “K-shaped” economic recovery. So imagine a K on a chart, with one line representing a big chunk of the country still sliding down. That’s the industries that hire a lot of lower-wage workers. Meanwhile, upper-income people have largely kept their jobs while their assets have either recovered in value or have even appreciated. And Target simply has more of these people as customers.
It has long been understood that these two companies have a different core customer, even with a big overlap in merchandise at similar prices. It’s maybe best explained by their very different histories. While both got their starts in the early 1960s, Minneapolis-based Target was a successful in-house innovation of a fashionable department store company. Customers should expect to find more than cheap goods at a discount store.
Walmart had grown out of founder Sam Walton’s small-town “five and dime” store in Arkansas. His original mission is still prominent on Walmart’s website: to help people save money so they could live better. A lot of years have gone by, yet today big differences remain. The Walmart customer is more likely to be male, white and older than Target’s typical customer, according to a Business Insider analysis this year of five big retailers’ customers, using 2019 data from the firm Kantar Retail. In fact, more than 40% of Target’s customers are from the millennial generation.
Close to 40% of Target’s households have income of at least $100,000, more than even Amazon.com. At Walmart, about 30% have that level of income. And as you would expect, Walmart had a bigger share of its customers at the bottom end of the income ladder. That matters this year because recessions are typically much harder on lower-income workers, and this year’s deep recession already looks to be even worse. Industries like food service, hospitality, and retail employ a lot of lower-wage workers, and they have all been crushed as the COVID-19 disease spread.
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https://www.startribune.com/schafer-diverging-effects-of-the-pandemic-visible-in-the-numbers-at-target-walmart/572185682/
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