Target misses the mark

Summary

Today, Explained: Target Misses the Mark

Episode Overview

In the December 9, 2024 episode of Today, Explained, hosts Sean Rameswaram and Noel King delve into the recent struggles of retail giant Target Corporation. The episode, titled "Target Misses the Mark," explores Target's third-quarter earnings miss, the competitive pressure from Walmart, and the broader challenges facing the retail sector. With insights from Wall Street Journal retail reporter Sarah Nassauer, the episode provides a comprehensive analysis of why Target is underperforming and how Walmart is capitalizing on this downturn.

---

Target’s Third Quarter Earnings Miss

Earnings Call Disarray

The episode opens with Noel King referencing Target's chaotic third-quarter earnings release conference call:

Noel King [00:03]: "Ladies and gentlemen, thank you for standing by. Welcome to the Target Corporation third quarter earnings release conference call. The next 68 minutes of that call in November were a mess."

Despite Target CEO’s confidence in the company's long-term strategy, the earnings report revealed disappointing performance, signaling that American consumers are drifting away from Target.

Lack of Sales Recovery Post-COVID

Sarah Nassauer explains that Target’s sales haven't rebounded from the post-COVID era as expected:

Sarah Nassauer [00:26]: "They just haven't seen their sales, you know, bounce back at all from sort of the post Covid era."

---

Walmart’s Competitive Edge

Walmart’s Robust Performance

In stark contrast, Walmart's CEO Doug McMillon paints a rosy picture of his company's performance:

Doug McMillon [00:45]: "All three segments of our business performed well. Sales for Walmart International grew 12.4% in constant currency."

This sets the stage for a discussion on how Walmart is encroaching on Target’s market share.

Retail Wars: How Walmart Is Gaining Ground

Sarah Nassauer provides historical context, tracing Target’s origins back to 1962 in Roseville, Minnesota, and contrasting it with Walmart’s establishment in Arkansas the same year. While Target positioned itself as a higher-end department store with a trendier product mix, Walmart maintained its identity as a low-price leader and the largest grocer in the U.S.

Sarah Nassauer [03:18]: "Target is a fun place to shop."

This distinction initially set Target apart, attracting a slightly higher-income shopper base seeking a more enjoyable shopping experience compared to Walmart’s purely cost-focused approach.

---

Current Challenges Facing Target

Inflation and Consumer Spending

The episode highlights how persistent inflation has strained consumers' budgets, making discretionary spending on items like throw pillows and candles less feasible. Target, which relies more heavily on these discretionary purchases, finds itself at a disadvantage compared to Walmart, which benefits from steady grocery sales.

Sarah Nassauer [06:25]: "They tend to have a little bit of a disadvantage in that environment because more of their sales are based on what they call discretionary items."

Operational Missteps and Market Share Loss

Target's recent earnings showed flat sales while competitors grew, indicating potential operational missteps and a loss of market share. Customers have reported issues such as out-of-stock items, longer checkout lines due to new anti-theft measures, and a perceived decline in product excitement:

Sarah Nassauer [08:36]: "A lot of them are saying sort of a combination of things. One is, hey, I've just, you know, noticed some products are out of stock... People are talking about longer checkout lines..."

Customer Sentiment

Interviews and field reports reveal a growing discontent among Target shoppers, with frustrations over product availability and the shopping experience becoming less enjoyable.

Customer [09:23]: "I feel like we're witnessing the downfall of what used to be a really nice grocery store into something that's more like a Walmart."

---

Walmart’s Strategic Moves

Attracting Higher-Income Shoppers

Walmart is actively courting higher-income customers by enhancing its product offerings and improving the quality of its fresh produce and apparel:

Sarah Nassauer [21:12]: "They've worked hard to improve like their fresh produce. So just the quality of the fresh produce, more organic food, probably a little bit more distinctive brands..."

Walmart's introduction of private label brands like BetterGood, which includes plant-based cheeses, exemplifies their strategy to appeal to more affluent shoppers seeking quality without compromising on price.

Amazon Q [19:11]: "Walmart just launched a new private label brand called BetterGood. BetterGood has a really interesting lineup of products including plant-based cheeses."

E-commerce Enhancements

Walmart has also strengthened its e-commerce capabilities with smoother online ordering and in-store pickup options, making it more convenient for customers and attracting those who prefer shopping online.

Sarah Nassauer [21:07]: "They're trying to lean into some of their e-commerce stuff like buy online, pick up in a store parking lot. Those types of systems have gotten just smoother..."

---

Walmart's Response to DEI and Market Positioning

Rolling Back DEI Initiatives

In a significant move, Walmart announced the rollback of its diversity, equity, and inclusion (DEI) initiatives due to pressure from conservative activists. This decision includes discontinuing the term DEI in favor of "belonging" and phasing out related programs:

Sarah Nassauer [24:04]: "They are now using the word belonging. That doesn't mean that the policies change necessarily, but the corporate titles and the report that you get every year now has the word belonging in it."

This strategic shift aims to align with changing societal and political landscapes, though it raises concerns about customer and employee reactions.

Impact on Corporate America

Walmart's decisions have a broader impact on corporate America, potentially influencing other companies to reconsider their DEI efforts. However, the immediate concern for Walmart is maintaining shopper loyalty and employee satisfaction amidst these changes.

---

Takeaways and Future Outlook

Target’s Struggle to Differentiate

Sarah Nassauer concludes that Target’s long-standing challenge is maintaining its distinctive, enjoyable shopping experience during times when consumers tighten their budgets. The emotional attachment customers have to Target is a double-edged sword; while it fosters loyalty, it also makes it difficult to adapt when the economic climate shifts.

Sarah Nassauer [25:16]: "If your thing is selling cheap groceries like Walmart or an Aldi or someone else like that, it's easier to have kind of a steady Eddy business... Target is in a place where what people love about them is this fun thing..."

Walmart’s Growth and Strategic Positioning

Walmart's aggressive strategies to attract higher-income customers and enhance its product offerings are effectively drawing business away from Target. By balancing lower prices with improved quality and diverse product lines, Walmart is positioning itself as a versatile retailer capable of catering to a broader demographic.

Long-Term Implications for Retail

The episode underscores the ongoing ebb and flow within the retail sector, where companies must continuously adapt to changing consumer preferences and economic conditions. Target’s current struggles highlight the importance of flexibility and innovation in maintaining market relevance, while Walmart’s success illustrates the benefits of strategic expansion and customer base diversification.

---

Conclusion

"Target Misses the Mark" offers a detailed examination of Target’s recent performance issues and how Walmart is leveraging its strengths to capture a larger share of the retail market. With actionable insights from Sarah Nassauer, the episode provides listeners with a nuanced understanding of the competitive dynamics shaping the American retail landscape.

---

Notable Quotes:

• Noel King [00:03]: "The next 68 minutes of that call in November were a mess."
• Sarah Nassauer [06:25]: "They tend to have a little bit of a disadvantage in that environment because more of their sales are based on what they call discretionary items."
• Doug McMillon [18:08]: "Walmart's super inflation buster sale blasts through the inflation barrier with big discount savings on hundreds of everyday items like Conair's, Lots of curls."
• Sarah Nassauer [25:16]: "Target is in a place where what people love about them is this fun thing, this like I am just going to go to Target and browse the aisles and it's almost self care."

---

Produced by Amanda Llewellyn, Edited by Matthew Collette, Fact-Checked by Laura Bullard, Engineered by Patrick Boyd and Rob Byers. Hosted by Noel King.

Transcript

[Noel King]

Ladies and gentlemen, thank you for standing by. Welcome to the Target Corporation third quarter earnings release conference call. The next 68 minutes of that call in November were a mess. Oh sure, Target CEO talked about having confidence in our proven long term strategy, but the company's earnings had missed their mark. Their Target if you will. Americans seem to have fallen out of love with Target.

[Sarah Nassauer]

The they just haven't seen their sales, you know, bounce back at all from sort of the post Covid era.

[Noel King]

But why? Well, on another November earnings call just across town, not literally, Walmart CEO Doug McMillan was gloating.

[Doug McMillon]

All three segments of our business performed well. Sales for Walmart International grew 12.4% in constant currency.

[Noel King]

Coming up on Today explained retail wars how Walmart ate into Target's business.

[Amazon Q]

Amazon Q Business is the generative AI assistant from aws, because business can be slow, like wading through the mud. But Amazon Q helps streamline work so tasks like summarizing monthly results can be done in no time. Learn what Amazon Q Business can do for [e-mail] learnmore that's aws.com learnmore.

[Noel King]

Support.

[Shopify]

For this podcast comes from Shopify. Companies need sustainable sales to thrive if you want to move your own business in that direction, you might want to check out Shopify. Shopify is an all in one digital commerce platform that wants to help your business sell better than ever before. Shopify says they can help you convert browsers into buyers and sell more over time. You can upgrade your business and get the same checkout allbirds uses. With Shopify, you can sign up for your $1 per month trial period at shopify.com VoxBusiness all lowercase. Just go to shopify.com VoxBusiness to upgrade your selling today. Shopify.com VoxBusiness.

[Sarah Nassauer]

Against false shoppers there is a clearance as today explained.

[Noel King]

Sarah Nassauer, you are a retail reporter for the Wall Street Journal. I think I first heard the Target name when maybe 19 or 20 or 21, and my friend very earnestly said Target and I was told that it was a fancy thing, like it was an event to go shopping there. So that would have been I guess the early 2000s. Where did Target start and how did it expand?

[Sarah Nassauer]

Yes, so the first Target store opened in 1962 in Roseville, Minnesota, which happens to be the town I grew up in primarily. And that was the year that the very first Walmart store opened also to the south in Arkansas. And they were both open. In this era of discounting, sort of the rise of the concept of a discount store, the Difference for Target is that it was a department store. And so Target approached the sort of idea of a big box discount store with a department store's mentality.

[Doug McMillon]

Target is a fun place to shop.

[Sarah Nassauer]

Which meant from the beginning, it was a little higher end. They were really trying to draw people in with specialized merchandise and they were less concerned about being sort of the very lowest price on a commodity item.

[Doug McMillon]

Target is a fun place to shop.

[Noel King]

I did not realize it started all the way back in 1962. I would have guessed, honestly, the 80s, maybe the early 90s. How does Target go from being a department store in Roseville, Minnesota in 1962 to. To being literally everywhere in the country?

[Sarah Nassauer]

Well, you know, over time, really, that 80s period where it's in your brain, that is the expansion era of discount stores. Right. This was one sort of experiment, right. In 1962. Right. It was just an experiment, one store. And they found that it worked. Right. And so they gradually opened more and more stores. Eventually they added food into the mix. But originally there was no food in a Target store. And, you know, now they're up close to 2,000 stores around the country.

[Noel King]

2,000 stores around the country. And to this day, they're selling the food, they're selling some department store stuff. What else has Target added over the years?

[Sarah Nassauer]

Well, you know, they have added and also subtracted. You know, there's been a few iterations. Like, you know, when the food concept first came to be at Target, they sold things like fresh sushi at one point.

[Noel King]

No, no, no. Yes.

[Sarah Nassauer]

So there's been lots of iterations of what food could mean at Target and also lots of iterations of what things like fashion could mean. But this idea that, like, is very familiar to all of us, right? Like, you go to the store and I kind of know I can buy toothpaste. And also I'll look at a little, maybe some clothes, but I need a gallon of milk. Like that kind of shopping experience that's, that's been around for decades now.

[Noel King]

And you will also buy a candle and you will also buy a throw pillow. You don't need either one, but you will definitely pick them up at Target on that same trip.

[Sarah Nassauer]

That is the model. And what they, like, really hope that you do, right, Is that you walk in there and you're trying to spend 20 bucks and you walk out and you've spent 100.

[Noel King]

And truthfully, I mean, Target is not just. It's not just a store. I mean, like, SNL has that character, the Target lady. It's like a Piece of Americana at this point, for sure.

[Sarah Nassauer]

For sure. I mean, everyone kind of has, like, a feeling about Target, right? That means it's like, that's a big brand. That's a big, like, part of culture when everyone has a opinion and an idea about what it means to them.

[Content Creator]

This is my personality in a Target grocery haul.

[Sarah Nassauer]

Same store, different day.

[Shopify]

Oh, my gosh.

[Sarah Nassauer]

I'm back. Hey. Hey. We have another question. They want to know what is your favorite store? I love Target. Me, too. So.

[Noel King]

So given all of this, all of its successes in making me buy things I need and don't need, what's going on? Why is it not doing well?

[Sarah Nassauer]

Well, there's a few things going on. One is, so we're still in a period where even though inflation has cooled a little bit, for most people, things feel really expensive. They're a lot more expensive than they were a few years ago. And so that's things that you need to buy, like food and childcare and rent. And people are still spending more on that stuff than they were a few years ago. And Target tends to have a little bit of a disadvantage in that environment because more of their sales are based on what they call discretionary items, which really just means things we want but might not need.

[Doug McMillon]

Consumers tell us their budgets remain stretched and they're shopping carefully as they work to overcome the cumulative impact of multiple years of price inflation.

[Sarah Nassauer]

So in this environment, you know, a traditional grocery store or a Walmart, which is the country's largest grocer, tends to do a little better because we need to spend more on groceries and a little less on throw pillows and candles. So that's part of it. However, you also see, especially in their last results, that they're starting to get. They're a little bit out of step with the market, which means that their sales are pretty flat, while other folks that are selling similar things, in some cases their sales are growing a little more. And that means they're probably also making some operational missteps and losing market share.

[Noel King]

Have you done the retail reporter thing where you run around the parking lot of the Target and you ask customers, like, why don't you like it as much as you used to?

[Sarah Nassauer]

I've done that, though. I also do it in stores. I try to get in the store where it's warm.

[Noel King]

Do you ever get kicked out?

[Sarah Nassauer]

I don't know if I've ever gotten kicked out of a Target. I have definitely gotten kicked out of malls. I've gotten kicked out of many stores over many years.

[Noel King]

I got kicked out of a Ralph's in Los Angeles once. It was like a violent ejection, but I had a microphone. Yeah, I could see that.

[Sarah Nassauer]

Yeah, that makes it harder. I usually am just going in with my notebook and so I'm a little bit more subtle. And also the thing is, I always tell people who I am, right? And I always explain to the security guard or whoever, like, if people don't want to talk to me, they don't have to talk to me, you know.

[Noel King]

So what are customers actually saying about their. What is the nature of their discontent?

[Sarah Nassauer]

Well, a lot of them are saying sort of a combination of things. One is, hey, I've just, you know, noticed some products are out of stock, right. Like, I go in, I know that there's this Target thing that I like, like this certain brand of like mixed nuts or whatever it is, and they don't have it. And then that's really annoying. And then I have to make a second stop. People are talking about longer checkout lines, which is a perennial retail problem. Right. And they feel they've gotten longer in some cases because Target has been making some changes with how they do self checkout as an anti theft measure. Some people don't like that more products are locked up as an anti theft measure. And then some people sort of have more of a just general sense that the products aren't as exciting or interesting and tempting as they used to be, and that makes it a little less fun.

[Amazon Q]

Has anyone else noticed the absolute dumpster fire that Target is slowly becoming? Bro, this is crazy. They're locking up the toothpaste.

[Sarah Nassauer]

Ended up not even getting anything because everything I went in there for is completely out of stock.

[Amazon Q]

I feel like we're witnessing the downfall of what used to be a really nice grocery store into something that's more like a Walmart.

[Sarah Nassauer]

The thing is, all of these are just common retail challenges, right? Like lots of stores, you know, face these things from time to time. People feel they're getting a little bit worse at Target. But also Target is a place that again, you go because it's kind of fun, not necessarily just to buy cheap groceries. So people's standards for some of this stuff are a little bit different because it's supposed to be a fun place to shop, right?

[Doug McMillon]

Target is a fun place to shop.

[Noel King]

Yeah. I want to have a good time. So what is Target doing to try to combat this problem?

[Sarah Nassauer]

We don't know for sure because they aren't defining their problems in this way. We heard them talk about on the last earnings call that their customer service scores over the last quarter are better than they were the same period last year. Right. So they say things like checkout wait times, like customers experience of those moments is improving, but they're not telling us exactly how they're improving or how bad their internal data shows that those things are. They're telling us that it's on a road to improvement.

[Doug McMillon]

Net promoter scores for wait times at checkout lanes, satisfaction with team member interactions at both checkout and while shopping, ability to find products and the cleanliness of our stores are all up year over year.

[Sarah Nassauer]

One thing that they have talked about when questioned by analysts or investors about what they're going to do about the sales decline is they do try to emphasize that they have tried to lower prices this year. They said they have lowered prices on 5,000 everyday items.

[Doug McMillon]

Earlier this year we reduced prices on an additional 2,000 items to drive traffic and help celebrate the holidays.

[Sarah Nassauer]

They realize that shoppers want cheaper stuff. Right. They want lower prices. So they're focused on that. And then they're sort of matching that with what they call sort of distinctive product. Right. They know that people come to them because they want something cool and interesting. So they're trying to redouble their efforts on that front as well.

[Noel King]

And so the feeling about Target among people in your profession who know what they're doing is it's still, there's still some mehness here. There's still some potential problems here. Is this a Target problem or is this a problem for every store that is like Target right now?

[Sarah Nassauer]

It's a Target problem. Target is a place that does sort of attract this like, you know, people love to shop there. Right. It has like this emotional attachment for a lot of people, especially I think moms that want to like get away from their kids and browse the aisles story I hear about often, you know, that's not gone. We're not at a place where we're like, Target's going out of business and they're the next Sears. Like we are not there yet. Right. But we are at a place where you see their sales kind of getting out of step with broader trends. And that's the thing. I think that like that's why you saw the stock drop 20% after earnings. It's unexpected and it's a little out of step.

[Noel King]

The Wall Street Journal's Sarah Nassau are coming up Walmart's brilliant strategery. It is stealing Target's higher income customers. It's going organic, it's coming for Whole Foods. It's rolling back dei. Can one single store appeal to everyone? Walmart's gonna try Support for Today Explained comes from Mint Mobile, the company that likes to keep it simple. Many phone companies add piles of fine print to contracts, making it almost impossible to get the deal that you thought you signed up for. Mint Mobile doesn't do that. When you purchase a new three month phone plan with Mint Mobile, they say you'll pay just 15amonth. That's it, they say. No strings attached, they say. No sneaky fine print, they say. Just a great deal. All Mint Mobile plans come with high speed data and unlock unlimited talk and text delivered on the nation's largest 5G network. You can even keep that same phone, those same friends, that same number. You can get this new customer offer and a three month premium wireless plan for just 15amonth by going to mint mobile.com explained. That's mint mobile.com explained you can cut your wireless bill to 15 bucks a month at mintmobile.com explained $45 upfront payment required. Equivalent, you'll note to 15 per month for three months. New customers only speed slower above 40 gigabytes on that unlimited plan. Additional taxes, fees and restrictions do apply. Go to Mint Mobile for details. Support for Today Explained comes from DeleteMe. DeleteMe thinks your data might be one of the most important things that you own, and that is the reason that data brokers value it so much. What is your data? Your name? Your contact information, Your address? These are just some of the examples, but you can help protect yourself with the services of Delete Me. When you sign up for Delete Me, you'll see exactly the information you want deleted and their experts will take it from there. If you've got a loved one that wants to delete themselves, this could make a great gift. Our colleague Claire White actually did gift Delete Me to a friend and here's what she had to say.

[Phoebe Rios]

I gifted Delete Me to my best friends. They had heard me rave about it so many times about how I was not getting any spam calls, especially during election season when they were getting so many. I got to brag that all of my information had been removed from data brokers from Deleteme, so I wasn't dealing with the same stress as them.

[Noel King]

You can take control of your data and keep your private life private by signing up for Deleteme now at a special discount for our listeners and their loved ones. Today you can get 20% off your DeleteMe plan when you go to JoinDelete me.com today and use promo code today at checkout. The only way to get 20% off is to go to JoinDelete me.com today and enter code today at checkout JoinDeleleMe.com today code today.

[Content Creator]

Support for Today Explained comes from Noom. Noom wants to remind you that the end of the year is on the horizon and so if you made a New Year's resolution back in, you know, Jan, like it's crunch time, they say. And yes, maybe you cheated, maybe you lost track. We're all human. But Noom wants you to know that if you started rebounding with junk food on that diet, you resolved to commit to it may have less to do with discipline and more to do with psychology. Ask Phoebe Rios, one of our colleagues here at Vox who tried Noom herself.

[H]

I feel like the plan Noom created was catered to my individual needs. It was very thorough. I felt like the questions they asked, I hadn't even asked myself, like what time I get out of bed in the morning and if I eat with my phone in my hand. It was very helpful and very, very educating of how I spend my day.

[Content Creator]

Stay focused on what's important to you with Noom's psychology and biology based approach. Sign up for your trial [e-mail].

[Noel King]

Okay, let's see here.

[Sarah Nassauer]

Today, Today Explained. Explained.

[Noel King]

We're back with the Wall Street Journal's Sarah Nassauer who reports on retail. All right, let's talk about Walmart. So I have long been under the impression that Target is fancier than Walmart, possibly even fancy. But maybe I'm just a rube. Are Walmart and Target comparable stores?

[Sarah Nassauer]

The annoying answer is yes and no. They are comparable stores in that they're both a place where you can go and get lots like a wide variety of things, right, like the gallon of milk, the toothpaste and the throw pillow. But Target has always had a slightly higher income core shopper, a different real estate footprint, and again, remember, they have those department store roots. The whole model has always been about a little bit fancier product, a little bit trendier product and attracting people into the store for that. Walmart has been a discounter, a low price player, the country's largest grocer and people associate Walmart with a low price.

[Doug McMillon]

Walmart's super inflation buster sale blasts through the inflation barrier with big discount savings on hundreds of everyday items like Conair's, Lots of curls.

[Noel King]

And like Target, Walmart also reported earnings recently. What's going on there?

[Sarah Nassauer]

Walmart is doing really, really well. They're growing really fast. It should be noted Walmart is a much larger company than Target. People compare them. But Walmart is massive compared to Target. When they report positive sales growth of around 5% in the US like they did last quarter, they're growing really fast compared to Target. They're just grabbing a lot of business. The thing that's happening at Walmart is also in the post pandemic era they have really made a conscious effort to try to attract higher income folks because like you know, everyone shops at Walmart in America in some capacity at some times. Even if it's like you just go there once a year when you're on vacation in some place and you don't know where else to go. Right. You'd still go to Walmart. And so it's hard for them to grow. So they've made an effort to go after higher income folks with their apparel selection, their food selection and even like their marketing, the style of marketing.

[Amazon Q]

Walmart just launched a new private label brand called better goods. BetterGood has a really interesting lineup of products including plant based cheeses.

[Noel King]

They're saying that, you know, they're going after the Whole Foods customer.

[Phoebe Rios]

I am a fashion and style content creator and today I'm going to share all of my favorite fall finds all from Walmart.

[Sarah Nassauer]

So that's more of a direct threat to what Target does.

[Noel King]

Yeah. I always thought of Walmart as the place you go when you're broke and Target as the place you go when you're flush. Walmart wants to eat up targets, flush customer. What counts as an upper income earner these days?

[Sarah Nassauer]

Well, Walmart defines it as households earning $100,000 or more a year.

[Noel King]

Wow. Okay, so you're making six figures but you're still shopping at the Walmart, maybe even for like clothing and food. What is, what is Walmart doing to attract six figure earners?

[Sarah Nassauer]

Well, the first thing they did to attract six figure earners is just to be Walmart at a time when inflation is killing people's wallets. Right. It was sort of this moment where remember during the pandemic when we were all competing to get that big roll of toilet paper?

[Noel King]

Yes.

[Sarah Nassauer]

And everyone was just rushing around like a chicken with our head cut off trying to get toilet paper. Well, like all the retailers benefited. Right. Walmart, Target, everyone saw this huge surge in demand. We're buying throw pillows and like backyard grills and all this stuff. Right. And people are flush with stimulus dollars. So there was just like a huge influx of business for a lot of retailers. Walmart you know, coming out of that inflation was such a huge role that lots of high income households are going to Walmart just to get cheaper groceries. And so what Walmart is trying to do now is keep those folks even when they feel flush again. Right. It's about just naturally who they are. Kind of draws people in down times and Target struggles. But Walmart wants to keep those people now and has done a few things to try to do that.

[Noel King]

What, what has it done? What would I find at Walmart today that maybe I wouldn't have a couple years ago?

[Sarah Nassauer]

They've worked hard to improve like their fresh produce. So just the quality of the fresh produce, more organic food, probably a little bit more distinctive brands like you know, the sort of unique hot sauce that you might not think you could find there. They've tried to go a little bit higher end on their apparel. You know, the price points can be a little higher on those items than you're used to seeing at Walmart, but still a relatively good deal. They're trying to make those things like home goods and apparel look a little trash, trendier. I don't think that they're quite the same. Target is more universally trendy and stylish. When they're trying to design goods, they're not the same thing. But if you're going for cheap groceries you might think, well, this is good enough. The other thing Walmart is doing is leaning into some of their e commerce stuff like buy online, pick up in a store parking lot. Those types of systems have gotten just smoother and that is appealing to a lot of people as well.

[Noel King]

Walmart still does have a traditional kind of customer. And that traditional customer does not make 100 grand or more a year.

[Sarah Nassauer]

Correct.

[Noel King]

Is there any risk of losing your, you know, your sort of legacy customer if you're like, let's go after the richer ones?

[Sarah Nassauer]

Yes, yes, definitely. And that's always the tricky play and that has actually been a problem. Walmart has tried to do this, you know, like grab and keep the higher income shoppers for decades. Right. There's been waves of that depending on who's in charge. And there's sort of an apocryphal tale in Walmart world where back in the day they tried to go higher end and compete with Target on apparel and brought their apparel offices to New York and really they just sold a lot less stuff overall because they ate into the sales of like the socks and the undershirts. And you know, for years there was sort of this like traumatic response, you know, when you talk to folks about that experience and that they knew they should stay in their lane. So what we're seeing now is kind of a revival of that thought and a different era, right, of doing that same thing.

[Noel King]

After the election, Walmart made some very big news about its plans for dei. What happened there?

[Sarah Nassauer]

So basically the week before Thanksgiving, Walmart said that it was going to roll back some of its DEI initiatives along with, you know, some of its broader policies that conservative activists would call sort of woke policies in corporate America.

[Noel King]

The company says it's ditching its $100 million commitment for diversity, equity and inclusion programs over growing pressure from conservative activists.

[Amazon Q]

So a few of the changes here, phasing out the term dei, winding down the center for Racial Equity, no longer giving priority treatment to suppliers based on race or gender diversity.

[Sarah Nassauer]

It was an interesting moment for me because I've covered a few of these announcements from companies, but none as big as Walmart. So when Walmart does something like this, it sort of has a different kind of effect on corporate America and response from shoppers and workers and all of those things. And from a company perspective, the concern is we're going to lose shoppers. We're going to lose shoppers or not be able to hire as many people if people perceive us this way. That said, this is part of a years long turn away from even the term dei. Last year, Walmart started to use the word belonging. That doesn't mean that the policies change necessarily, but the corporate titles and the report that you get every year now has the word belonging in it. There's, you know, it's acute, but it's also sort of a drip, drip, drip that we've seen in recent years.

[Noel King]

All right, so the story of retail is one of ebb and flow. Sometimes you're up, sometimes you're down, sometimes you're fancy, sometimes the other guy is eating into your fancy clientele. Target is not in a great spot right now. Walmart is booming. What is the takeaway here?

[Sarah Nassauer]

Well, I think the takeaway is that Target has long been in a tricky spot when folks are feeling less flush. Just what they do, you're not going to splurge as much when you're feeling less flush. That's a long term challenge for the company in down times. What we're seeing now, I think is another round of that where they have to decide, hey, can we be distinctive enough? Can our products be so cool that people will come to us? That's just a very tricky thing to do. I think the takeaway is if you're, if your thing is selling cheap groceries like Walmart or an Aldi or someone else like that, it's easier to have kind of a steady Eddy business, at least when it comes to demand. I think that Target is in a place where what people love about them is this fun thing, this like I am just going to go to Target and browse the aisles and it's almost self care. Yes, it's consumerism and I'm picking up milk, but I really enjoy it. That is a thing that I've heard about Target, you know, my whole life really. I remember when there was the first Target that opened in Brooklyn where I used to live and it was just mobbed. It was like people hadn't eaten in months or something and they were swarming this Target when it was open. So there's this kind of like fervent emotional attachment part of Target that I find really interesting. But that means that right now, when you see that Target is struggling to draw people in with its products if it's not cheap food, right, it means that it's hard, it's going to be hard for them to maintain that level of engagement with people in that way. And so they're just in a tricky spot right now and time will tell whether or not they can sort of get back on track.

[Noel King]

Sarah Nassauer of the Wall Street Journal Today's episode was produced by Amanda Llewellyn, edited by Matthew Collette Fact Checked by Laura Bullard, engineered by Patrick Boyd and Rob Byers and hosted by me, Noel King. It's Today Explained.

[Amazon Q]

Support for this podcast comes from Stripe. Stripe is a payments and billing platform supporting millions of businesses around the world, including companies like Uber, BMW and Doordash. Stripe has helped countless startups and established companies alike reach their growth targets, make progress on their missions, and reach more customers globally. The platform offers a suite of specialized features and tools to fast track growth like Stripe Billing, which makes it easy to handle subscription based charges, invoicing and all recurring revenue management needs. You can learn how Stripe helps companies of all sizes make [e-mail] that's stripe.com to learn more. Stripe Make Progress.