An August 2014 report by Kantar revealed that Target has adjusted its pricing strategy to offer the same goods for almost 4% lower than what Wal-Mart charge. I still remember when Target first entered Canada, a majority of customers (including my own family) complained about its high prices. In spite of its new pricing strategy, Target Canada still can’t completely erase its impression for selling household items at a higher price than its U.S. stores. However, what was more shocking to me was that Wal-Mart is losing its price competition against Target. With its efficiency, short inventory period and policy of cutting down the manufacturers’ profit to a bare minimum, Wal-Mart is known for having a competitive advantage in its network and channels.
In Class 6, we learned about the importance of operation decisions and how that is linked to the accounting aspects of the firm. From looking at the example of big retailers, we can see that an efficient distribution channel with quick inventory turnovers can ensure a company’s steady cash flow as well as reduce its costs and depreciation for goods sitting idle. Ultimately, the nature of retail industry forces the retailers to compete in pricing, on top of convenience and efficiency for customers. Although Target may be behind, it is still the correct decision because price and convenience is what keeps retail stores survive in this age with more and more direct sellers.
Article link:
Strauss, Marina. “Target Canada Winning Price Battle with Wal-Mart.” The Globe and Mail. Theglobeandmail.com, 22 Sept. 2014. Web. 22 Sept. 2014.