Target thrives in Wal-Mart's long shadow

Allison Linn Senior writer • Profile • E-mail

When Steve Zmak learned that a Wal-Mart was planned for his California seaside town, he quickly got involved in a campaign aimed at keeping the world’s largest retailer from finding a home there.

Among the reasons Zmak didn’t think Wal-Mart should come to Marina, Calif.: a Target already was planned nearby, and another one — where Zmak regularly shops — was just a few miles away in a neighboring town.

Wal-Mart did eventually make it to Marina. But the episode illustrates both the challenges Wal-Mart faces and the opportunity Target enjoys. When Wal-Mart’s detractors talk about how much they dislike the world’s largest retailer, they often also mention their affinity for Target, one of Wal-Mart’s chief competitors.

With its iconic red-and-white logo and snappy marketing, Target Corp. has managed to cultivate a reputation as a big-box discounter offering both affordability and style, while avoiding many of the controversies befalling its larger competitor.

The Minneapolis-based company is generally enjoying favorable sales increases at stores open at least a year, a key measure for retailing health. Its stock price is up around 20 percent over the past two years.

Riding on its success, Target has announced plans to increase its store count by one-third, to about 2,000 stores in 2011 from about 1,500 currently. Within 15 years, the company believes there could be room for as many as 3,000 Targets across the United States.

Wal-Mart Stores Inc., on the other hand, is facing a barrage of attackers who argue that the world’s largest discounter needs to treat workers better and make other major changes. The Bentonville, Ark.-based retailer also is dealing with a stagnant stock price and recently decided to scale back expansion plans to focus on improving results at existing stores.

Even as it grows, Target will still likely be dwarfed by Wal-Mart, which currently operates more than 4,000 Wal-Mart and Sam’s Club locations in the U.S. and plans to continue expanding, albeit at a slower pace than previously forecast.

Nevertheless, Target's growth carries with it the risk that the company will become, no pun intended, a target of some of the same problems that are currently dogging Wal-Mart. Other companies with significant brand cachet, such as Krispy Kreme Doughnuts Inc., have seen their fortunes fall rapidly after periods of strong growth.

Target already has faced pockets of dissent. Community members in towns including Davis, Calif., have objected to its expansion plans, and an environmental group recently took the company to task for stocking products that include potentially toxic polyvinyl chloride, or PVCs. But in general, the company has avoided the type of widespread attacks Wal-Mart faces, which include two union-backed opposition groups and many communities seeking to keep Wal-Mart out of their back yards.

WakeUpWalMart.com spokesman Chris Kofinis said his group has focused its criticisms on Wal-Mart because, as the nation’s largest retailer and biggest company by revenue, the discounter provides the biggest opportunity to force broad economic change. WakeUpWalMart.com would like to see Wal-Mart pay workers better, offer more affordable healthcare and make other changes.

“The belief is if you make Wal-Mart a more responsible employer, everybody else will get the message,” Kofinis said.

Still, Kofinis concedes that he doesn’t have much information about compensation at Target, where he said he shops occasionally.

“Is Target better than Wal-Mart? The truth is we don’t know,” he said.

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