Giants Of Retail

With numerous locations and a tight grip on price, Wal-Mart and Target have grown into the nation's two largest general merchandisers.

March 21, 2004|By Andrea K. Walker | Andrea K. Walker,SUN STAFF

Ten years ago, three Wal-Marts were sprinkled throughout the Baltimore region, with no Target stores in sight.

Today, the two chains' stores in this region alone total more floor space than the Empire State Building's 2.1 million square feet.

Wal-Mart Stores Inc. and Target Corp. have transformed the retail landscape, locally and nationally. They not only redefined the discount store -- a concept that dates to 19th-century urban merchants Frank Winfield Woolworth and Sebastian Spering Kresge -- but their influence in pricing and marketing has shuttered other discounters, forced department stores to struggle for relevance and knocked whole industries off kilter.

Kmart Holding Corp. announced its first profitable quarter in three years last week, after emerging from bankruptcy last year, but same-store sales remained weak. The chain is still struggling to find a niche between whom, analysts say?

Wal-Mart and Target.

KB Toys Inc. and toy legend FAO Schwarz Inc. were driven to bankruptcy this year. Whom do they blame?

Wal-Mart and Target.

Sales at publicly traded footwear stores fell an average of 3.5 percent last year. Why?

Largely, because of Wal-Mart and Target's low-priced shoes.

Department stores have seen their customer base erode. Who's fingered as the culprit?

Wal-Mart and Target.

Ames, Bradlees and Caldor have liquidated. Who retired these granddaddies of discount retail?

You guessed it.

The story of how Wal-Mart and Target have remade discount retailing, if not retailing in general, is a combination of age-old business thrift and New World technology. Their rises have as much to do with dogged inventory control and holding the line on labor costs as with focused marketing and meeting consumers' changing tastes. Their evolution also shows how companies can take divergent paths yet arrive at nearly the same place -- competing with and complementing each other at the same time.

Though they are the nation's two most popular sellers of general merchandise, Wal-Mart dwarfs Target in size and sales.

The Arkansas-based company posted $256 billion in revenue for the 52-week period that ended Jan. 31 -- more revenue than International Business Machines, Coca-Cola, Time Warner and Microsoft combined.

It is the world's largest employer with more than 1.3 million workers and 4,300 stores around the globe. By virtue of size alone, it is the market leader in almost any area it touches. It's the largest seller of toys, jewelry, groceries and many other products.

Target's influence isn't nearly as immense, but its expansion during the past decade has also had a major impact on shoppers. With nearly 1,400 stores nationwide, it posted $48.1 billion in sales for the year that ended Jan. 31.

Because it employs name designers for its home furnishings and clothing lines, the company has also had as great an influence on setting style for Middle America as anyone other than Martha Stewart.

Its fans sometimes pronounce the store "Tar-j'ai," with faux French accent -- a sort of mock tribute to the stores' attempt to create a level of style and sophistication.

"Wal-Mart is a very infrastructure-focused company that relies on behind-the-scenes low cost to deliver in-the- store low costs. They're able to draw a lot of volume from small communities," said Gary Ruffing, a former Kmart Corp. executive who works for a Michigan consulting firm.

"On the Target side, they've been able to take a department store feel and bring to it a discount store price," he said. "It's two different approaches to the same end."

A little more than a decade ago, Wal-Mart Stores Inc. was barely known beyond its Southern roots. It got its start in a small Arkansas town in 1962 -- the same year Target opened its first store on 20 acres in a Minneapolis suburb.

Dayton's Department Store, the owner of Target, wanted to run Target like the department stores for which it was better known, including the venerated Marshall Field's flagship in Chicago.

Wal-Mart founder Sam Walton, on the other hand, was a five-and-dime franchisee whose idea for Wal-Mart was offering the lowest price possible. His first store had a bare bones, bargain basement feel with most of the merchandise stacked on tables or hanging from metal pipes, according to In Sam We Trust, a book by Wall Street Journal reporter Bob Ortega.

Wal-Mart entered the Baltimore market in 1992 when it opened a store in Glen Burnie. It now has 19 stores. Target moved into the market in 1994 and has 13 stores today.

Both chains continue aggressive expansion. Wal-Mart plans to open about 235 stores overall this year. Target plans to open 53 as it moves to sell Marshall Field's and Mervyn's stores to fortify resources for its stronger Target line.

The success of Wal-Mart and Target in the past decade has almost been counterintuitive as economic trends go: At a time when families are spending much more on new homes, cars and electronics than previous generations, shoppers became ever more cost-conscious for everyday goods, food and clothing.

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