Whole Paycheck Tracker: Target, Walmart Comparison Uncovers Different Digital-First Strategies

Traditionally our Whole Paycheck tracker covers the mano a mano of Amazon and Walmart as they battle it out for their share of the American paycheck. But as the pandemic has progressed it has become increasingly clear that Target is also laying claim to the paycheck, and is often more innovative and digital-first than Walmart. It’s hardly competing with Amazon yet, but Target has shown more digital momentum than any major retailer during the pandemic. It’s worth looking at how the two brick-and-mortar champions, Walmart and Target, stack up.

By a strict look at the macro numbers, Target still pales in comparison. Stores: Walmart, 11,500; Target, 1,868. Total Q3 revenue: Walmart, $134 billion; Target, $22.6 billion.

But get into the strategies around eCommerce and things start to get very interesting between the two. Q3 increase in eCommerce sales: Walmart, 79 percent; Target, 154 percent. The difference here can be attributed to the business models for each company. Target has invested in technology and acquisitions to keep its digital assets in-house. Examples of this include its use of stores as fulfillment centers and judicious use of off-site “sorting” centers to keeps goods moving and shipping delays minimal. It has also kept its acquisition of delivery service Shipt close to the company even though it is not exclusive to Target. Walmart has relied on its massive ground and air transportation network to feed its eCommerce effort, most of which is fed through its distribution centers instead of stores. So far, it looks like Walmart could steal a few pages from its Minneapolis-based neighbor.

Walmart is looking at merging its fulfillment centers and the aisles of its stores. As online sales surge during the pandemic, the retailer plans to test a new concept at four stores that will “operate as both physical shopping destinations and online fulfillment centers,” the company stated. “In this new era of retail, assets that used to serve a single purpose will transform into flexible, scalable assets that can be used in multiple ways to serve customers how, when and where they need,” Walmart said in a press release. The company said that “evolving” its stores is part of its plan to gear up for the future.

And when attention turns to loyalty programs, the comparison is even more dramatic. If loyalty programs are defined as a strategy to increase the recency, frequency and size of consumer spend, Walmart actually has two of them. The more standard one is the Capital One-issued rewards card. But then there is the Walmart+ subscription plan, which is technically a loyalty program that the company would like to compete with Amazon Prime. A PYMNTS study of a census-balanced sample of 2,165 consumers conducted Oct. 27-28 of this year reveals that roughly 17 percent of U.S. consumers report having a Walmart+ membership, just a bit more than a month after its launch. That compares to 68 percent of consumers who report belonging to Amazon Prime — a program that launched in February 2005 and now counts 150 million members globally. Of that 17 percent with Walmart+, 15 percent are consumers who already had an Amazon Prime account and about 2 percent of them did not.

Target, on the other hand, just canceled its subscription plan after launching a fairly traditional loyalty plan. The plan was a foray into bulk discount purchasing launched seven years ago. Through the service, Target customers were able to automatically reorder items in bulk while earning a 5 percent discount, with the items shipped to their homes. A spokesperson for Target told Bloomberg that customers had migrated away from the subscription service to the retail giant’s other delivery and ordering services.

Its existing loyalty program, Target Circle, just celebrated its one year anniversary last week. According to the company it has already attracted 80 million members and has saved nearly $2 billion through Target Circle offers for its members. The company also estimates that it has earned nearly $200 million by getting 1 percent rewards on purchases to put toward future Target visits and directed more than $7 million to more than 2,500 local and national nonprofit organizations.

“In just one year, it’s been amazing to see how our guests have embraced Target Circle, saving millions of dollars and helping give back to their local communities,” said Rick Gomez, executive vice president and chief marketing, digital and strategy officer, Target. “Heading into the holidays, our nearly 80 million members — and growing — will have access to even more great deals. Combined with the safety and ease of our contactless same-day services, it’s an unparalleled offer — with no membership fee required.”

The two also part ways on retail partnerships: Walmart has been creating partnerships for in-store sales such as its newest ones with Jamie Oliver for cookware and Verizon for phone plans. Target bakes them into everything as seen with its partnership with Ulta Beauty and its new partnership with FAO Schwartz. Ulta will have a store-within store concept both online and for brick-and-mortar locations. Target is leveraging its new relationship with FAO for the holiday season.

Back to the bottom line, which is the claim on the U.S. paycheck. Walmart’s scale is simply hard to beat. However, Target, for its scale, has been scrappy in terms of its eCommerce investments and retail partnerships. It is winning on the digital-first front with innovation and investment. It won’t compete on a scale level, but Target’s management team and commitment to eCommerce make it a retailer to watch as it grows.