Market Shift: Mega-Retailers Wal-Mart and Target Look to Redefine Their Approach

Insulated by nature, mega-retailers Wal-Mart and Target have done comparatively well to the overall market in the economic downturn since 2007. Even the best positioned and most efficiently run retail networks in business have had problems though. Both retailers have had to reconsider and re-tool their approach to the market, and it seems that smaller is better - or at least bears further investigation. Wal-Mart has had more struggles than Target with continually declining quarterly profits. Target has decided not to wait, however, and take action before they share the same fate.

The new breed of Target stores will range in size from 60,000 to 90,000 square feet. Currently, the typical Target store ranges in size from 125,000 to 180,000 square feet. These new stores will have fewer SKU's (product choice), yet will be much larger than a Walgreens or CVS drugstore. Walgreens and CVS by comparison average 10,000 to 15,000 square feet.


Wal-Mart retailers are experimenting with a more aggressive approach that includes much smaller stores than Target. Wal-Mart looks to roll out a 20,000 square foot prototype that will compete much more directly with the current drug store model. These small stores will be 20-50% larger in size than your typical neighborhood drug store, yet offer a wider range of product choice with the same convenience and lower prices. If Wal-Mart successfully leverages their attempt at this smaller and more convenient store, it could spell disaster for Walgreens and CVS. Wal-Mart has already exhibited dominance in the drug market and can use their unparalleled supply and distribution network to squeeze out their smaller competitors.


It will definitely be interesting to sit back and watch the two different strategies roll out and see who's the winner. It's hard to tell; these are the two most powerful and innovative retailers in the market and both approaches have merit.


About the Author:
Michael Blount Jr is a Realtor and Broker in the Houston metro area, living in The Woodlands, TX.  Michael is knowledgeable in both residential and commercial real estate and studies the market and trends to better serve his clients.