Kevin Ross on LinkedIn: Target CEO says retailers can't actually afford price gouging (2024)

In today’s highly competitive retail environment, the concept of price gouging is not just unethical—it’s also impractical. According to CNBC, Melissa Repko, as Target CEO Brian Cornell emphasized, retailers operate on razor-thin margins, meaning there’s no room for inflated pricing if they want to stay in business. Retailers must be laser-focused on customer responsiveness, as even minor price differences can send shoppers to a competitor.This isn’t just rhetoric; it's reality in an era where consumers have unprecedented access to price comparison tools at their fingertips. In response to rising concerns about inflation, Target has taken proactive steps by cutting prices on thousands of everyday items to drive traffic and maintain customer loyalty. These moves have already started to pay off, as evidenced by a 3% increase in customer traffic, even if basket sizes have slightly shrunk.The broader retail sector is also feeling the pinch of inflation, with companies like Walmart pushing back against stubborn price increases in certain categories, notably dry groceries and processed foods. The message from industry leaders is clear: maintaining value for consumers is not just a strategic imperative—it’s woven into the very fabric of their business models.As retailers navigate these challenging economic conditions, the emphasis on value and customer-centric strategies will continue to differentiate the winners from the losers. For businesses, the takeaway is that success in retail isn’t just about competing on price; it’s about offering consistent value and fostering trust in every consumer interaction.https://lnkd.in/gDrjaYq5

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For the past year or so, many retailers and brands have been cutting their SKUs. As an interesting article in Modern Retail (link in comments) points out, this includes Dollar General and Hasbro. A large part of this is linked to as sea change in the way consumers approach shopping. Much of the shift is economic. Inflation has created financial constraints which, in turn, has made people more cautious and careful about what they buy. The headline retail sales numbers have looked good precisely because inflation has flatted the numbers. But dig beneath the surface, and volumes are generally down.When people buy less ‘stuff’ the cuts they make are not spread evenly. Certain brands, products, or configurations fall out of favor more than others. That results in retailers reviewing assortments to cut out underperforming lines.This is probably a necessary correction. Retail is, if anything, over-inventoried. There is too much choice. And some retailers are guilty of a “throw it at the wall and see if it sticks” approach to merchandising.Buy beyond the economics, there are some psychological shifts too. As well as being financially constrained, consumers are time poor. They don’t want to spend hours sifting through products to decide what to buy. They want retailers to edit choice and simplify their decision making. This is especially so in physical stores.Of course, cutting SKUs can be beneficial for retailers if it drives more volume through fewer lines. Aldi is an extreme example of how this can work. However, it also carries risk: you have to place a bigger bet on fewer products, so the cost of getting it wrong can be far more damaging.What’s interesting is that confident retailers, with good buying and operations teams, are willing to make those bets. Retailers less sure about their position and customers are more far more reluctant. This further exacerbates the polarization between the winners and the losers. #retail #retailnews #merchandising #economy___Retail themes for 2024, including the shift to more considered consumption.

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There’s no room for price gouging in an ultracompetitive business like retail,TargetCEO Brian Cornell said Wednesday.In an interview on CNBC’s “Squawk Box,” the retail chief disputed campaign talking points accusing grocers of inflating prices. He said retailers have to be responsive to customers or risk losing business.He was asked by CNBC’s Joe Kernen, who referred to comments by Democratic presidential nominee Vice President Kamala Harris and asked if Target or its competitors ever benefit from price gouging. Harris last weekproposed the first-ever federal banon “corporate price-gouging in the food and grocery industries,” saying some companies are charging excessively and fueling household inflation.“We’re in a penny business,” Cornell responded, noting the small profit margins in the retail industry. He described the many places that customers can turn to check for lower prices or to find merchandise elsewhere, from going to stores to browsing on their phones to compare the prices of a gallon of milk at different retailers.Target’s retail chief made the comments after the discounterbeat Wall Street’s expectationsfor earnings and revenue on Wednesday, but struck a cautious note with its full-year guidance. It said it expects comparable sales, which take out the impact of store openings and closures, to be on the lower side of its range of flat to up 2%. Yet it raised its profit guidance, saying it expects adjusted earnings per share to range from $9 to $9.70, up from the previous outlook of $8.60 and $9.60.Inflation andconsumers’ outrage about high priceshave continued to loom large for companies like Target. A wide range of retailers, includingHome Depot,WalmartandMacy’s, have reported over the past two weeks that cautious consumers are being picky about where they’re spending.Cornell said on “Squawk Box” that the retailer is trying to appeal to “a consumer who is managing their budget carefully” and said “value is in our DNA.”Target is one of the consumer brands that hasresponded to shoppers’ concerns by lowering prices. Itcut prices on about 5,000 everyday items, such as diapers and peanut butter, to try to drive higher traffic and sales. Others, such asMcDonald’s, havedebuted value meals.So far, those discounts have shown signs of resonating at Target: In the quarter, customer traffic across Target’s stores and website rose 3% — even as shoppers put a little less in their shopping carts than they did a year ago.WalmartCEO Doug McMillon said last week thatprices have come downin many merchandise categories, but said that inflation “has been more stubborn” in the aisles that carry dry groceries and processed foods.

There's been this City/Wall-Street driven belief that 'choice' is a synonym for 'freedom' and what red-blooded American CEO wants to give freedom the bird. It has been the norm for a long while that announcing 'even more choice' was a feather in that CEO's cap.But customers have never wanted choice without curation. Never. BUT they always say they do:"Gah, I couldn't find the mustard I wanted, so on this feedback form I'll say 'show me more mustard'".But that customer doesn't mean give me more choice, they are trying to say "You failed to show me the right mustard, get better at showing me the right mustard" NOT 'more mustard'.Curation, simplicity, trust. These things are all connected. Curation doesn't even mean less, it means merchandising in such a way that diverse missions, mindsets and needs are met in combination. Tesco's original 'good, better, best' execution was the absolute Zero Case Study for this: three different missions and mindsets met simultaneously, through great merchandising, incredible data-driven offers, and super clean presentation. Muddied a bit since but the original is still breathtaking.#retail #choice #feedbackissmeedback

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A “perfect damn company” with an “arrogantly simple” business modelThe Economist:Most retailers boost profits by marking up prices. Not Costco. Its gross margins hover around 12%, compared with Walmart’s 24%. The company makes up the shortfall through its membership fees: customers pay $60 or more a year to shop at its stores. In 2023 fees from its 129m members netted $4.6bn, more than half of Costco’s operating profits.Joe Feldman, an analyst at Telsey Advisory Group, a research firm, argues that the membership model creates a virtuous circle. The more members the company has, the greater its buying power, leading to better deals with suppliers, most of which are then passed on to its members. The fee also encourages customers to focus their spending at Costco, rather than shopping around. That seems to work; membership-renewal rates are upwards of 90%.By limiting its range, Costco can better focus on maintaining quality. Less variety in stores helps it use space more efficiently: its sales per square foot are three times that of Walmart. And with fewer products, Costco turns over its wares almost twice as fast as usual for retailers, meaning less capital gets tied up in inventory. It has also expanded its own brand, Kirkland Signature, which now accounts for over a quarter of its sales, well above average for a retailer. Its margins on its own-brand products are about six percentage points higher than for brands such as Hershey or Kellogg’s.https://lnkd.in/e6phA8m6

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The Evolution of Off-Price Retail: Then and Now In 1985, Harvard Business School discussed off-price retail as a burgeoning force poised to disrupt the industry. Fast forward to today, and it's clear those predictions were spot on—off-price retailers like Marshalls, TJ Maxx, Dollar Tree, Ross, and 5 Below now dominate mainstream retail. Here’s a look at what was predicted and what's transpired:What Was Right:Market Disruption: Off-price retailing indeed shook up the industry. Originally occupying a gray area between full-service stores and discounters, these retailers capitalized on overstocks, closeouts, and irregular merchandise, selling brand names at significant discounts.Consumer Appeal: Consumers increasingly value quality and value. Off-price retailers offered both, enticing shoppers with the promise of national brands at lower prices, mirroring trends towards savvy consumerism.What Was Wrong:Growth Expectations: Predictions of rapid growth were somewhat conservative. While off-price sales did surge, the initial estimates may have underestimated their long-term impact.Market Dynamics: The article highlighted potential vulnerabilities as the market matured. While some casualties did occur, such as Plums and Taggs, the overall resilience and adaptability of major players like TJ Maxx and Ross have been remarkable.Educated Consumers and Value: Today’s consumers are more informed and discerning than ever. They seek both quality and affordability, traits that off-price retailers excel in providing. This shift in consumer behavior has propelled off-price chains from the fringes to the forefront of retail.Looking Ahead: As the retail landscape continues to evolve, off-price retailers must navigate new challenges like e-commerce and sustainability. Yet, their ability to offer a treasure-hunt shopping experience and unbeatable value positions them uniquely in the market. The impact on tech, especially Amazon and smart phones, had an impact, especially on the education of consumers, far beyond what anyone could have ever predicted.Let is not forget.... It is chic to be cheap! :o)Join the discussion on how off-price retail has reshaped consumer expectations and the broader retail industry. What's your take on this retail revolution?https://lnkd.in/eS-5i5ME

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Here are some interesting stories from the world of retail for Thursday, June 13:👕 Shares of Oxford Industries fell after the owner of the Tommy Bahama and Lilly Pulitzer clothing lines cut its full-year sales and profit outlook, saying that consumers have become more cautious than originally anticipated.👟 Nike suffered a setback in its bid to trademark the capitalized version of the word “footware” for tech-related products after a European Union court upheld a complaint from German rival PUMA Group.🛠️ Lowe's Companies, Inc. names chief marketing officer: Jennifer Wilson was promoted to the role and oversees a number of initiatives including the company’s retail media network.🍋 Amazon Fresh is trying to remind customers it's not just a fancy returns point. The stores are offering a series of grocery coupons for patrons who use the stores to drop off items that they ordered on Amazon.💍 Kohl'splans to boost sales by expanding its jewelry options.The retailer had previously reduced space for jewelry to make room for Sephora, but now aims to re-establish its presence.🎯 In an interview with the WSJ, Gretchen McCarthy - Target's supply chain chief - said that a focus on using consumer aisles as fulfillment centers for same-day delivery helped streamline the flow of consumer goods.🥫 Grocery pricesstayed flat in May, afterticking downthe month before. But menu prices, a source of frustration for budget-conscious consumers, are still going up — even as restaurantsbrag about their discounted meals.🏭 Nordstrom expects tocomplete the transition of operations from its fulfillment centerin San Bernardino, California, to its West Coast omnichannel center in Riverside, California, during its second fiscal quarter.🍟 California’snew $20-an-hour minimum wage law for fast food workersplunged visits to popular chains as restaurants like McDonald's, Wendy's and Burger King hiked prices to offset higher costs, according to a study.🇨🇦 Canadian discount retailerDollarama L.P.reported lower-than-expected first-quarter sales growth as consumer demand begins to level off. Rrevenue for the three months reached C$1.4bn ($1bn), up from C$1.29bn a year earlier.📉 The chairman of the Federal Reserve Board has warned the battle to tame inflation is not over as policymakers signalled the central bank would cut rates only once this year.🎮 A selloff in GameStop shares on Wednesday corresponded with a surge in volume for call options believed to be owned by Keith Gill, better known by his online handle Roaring Kitty.📸 Creating another artificial intelligence tool for its sellers,eBay has introduced a photo background enhancement featureto improve product images, the e-commerce veteran announced.🪧 About 6,000 grocery store workers are set to vote on strike action after the expiration of their union contract with the Kroger-owned Food 4 Less chain.#retail #retailnews #economy#DailyRetailNews

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The move to Omni Channel fulfilment continues with more optimisation in process & speed. Now we need to ensure that packaging for Omni Channel is designed for purpose.

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Walmart: $570 billionAmazon: $386 billionKroger: $132 billionHome Depot: $132 billionCostco: $192 billionThis new chart from @VisualCap charts the 10 biggest U.S. retailers and their massive hauls.The full graphic profiles the histories and key stats behind 10 retail giants. Which companies surprise you with their scale and presence? What massive retailer is missing from this ranking in your opinion? Check out the full top 10 breakdown of America’s retail revenue juggernauts.https://lnkd.in/ewHDqj7c

A “perfect damn company” with an “arrogantly simple” business modelThe Economist:Costco is the world’s third-biggest retailer, behind Walmart and Amazon. Though its sales are less than half of Walmart’s, its return on capital, at nearly 20%, is more than twice as high.Most retailers boost profits by marking up prices. Not Costco. Its gross margins hover around 12%, compared with Walmart’s 24%. The company makes up the shortfall through its membership fees: customers pay $60 or more a year to shop at its stores. In 2023 fees from its 129m members netted $4.6bn, more than half of Costco’s operating profits.The membership model creates a virtuous circle. The more members the company has, the greater its buying power, leading to better deals with suppliers, most of which are then passed on to its members. The fee also encourages customers to focus their spending at Costco, rather than shopping around. That seems to work; membership-renewal rates are upwards of 90%.Costco stores stock a limited selection of about 3,800 distinct items. Sam’s Club, Walmart’s Costco-like competitor, carries about 7,000. A Walmart superstore has around 120,000. Buying more from fewer suppliers gives the company even greater bargaining heft, lowering prices further. By limiting its range, Costco can better focus on maintaining quality. Less variety in stores helps it use space more efficiently: its sales per square foot are three times that of Walmart. And with fewer products, Costco turns over its wares almost twice as fast as usual for retailers, meaning less capital gets tied up in inventory. It has also expanded its own brand, Kirkland Signature, which now accounts for over a quarter of its sales, well above average for a retailer. Its margins on its own-brand products are about six percentage points higher than for brands such as Hershey or Kellogg’s.https://lnkd.in/e6phA8m6