Will Target’s New Strategy Drive Sales or Hurt Margins?
Trying not to disappoint the bank’s prediction for accelerated sales growth, Target announced that it would immediately begin a program to match the sales price on certain items (particularly popular electronics) with its top online competitors. This includes Amazon (NASDAQ:AMZN), Wal-Mart (NYSE:WMT), and Best Buy (NYSE:BBY).
“Guests can confidently shop at Target every day for the best value in retail,” commented Gregg Steinhafel, Target’s chairman, president, and CEO in a statement. “We know that our guests often compare prices online. With our new Price Match Policy and the additional five percent savings guests receive when they use their REDcard, Target provides an unbeatable value.”
That unbeatable value comes with a risk, though. Target is teeing up against retailers with slimmer operating margins (all eyes on Amazon). The price-matching scheme could bring down the profit margin on popular items and, as a result, cut into earnings.
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