Target: The Birth of Cool

Lady Gaga stunned the world when she came to the MTV Music Awards in a dress made entirely of raw meat. Her albums create singles like a wildfire, and even dreadful songs like 'Alejandro' went platinum in three countries. Lady Gaga is so influential, Hollywood has taken notice, and it is expected that fashions at this years Oscars, (the annual event where Hollywood gets together to stroke each others egos) will be significantly bolder (perhaps we will see Natalie Portman in a dress made entirely out of dairy products). Whatever Lady does, either in music or in fashion, she draws tremendous press, and today she released an new edition of her latest album exclusively at Target.

(Entertainment Newsweekly Feb. 25, 2011)

Why Target though? With revenues only one fourth the size of the market leader Wal-mart, surely Lady Gaga would have reached a greater audience, if she had decided to go with ole Sam Walton's spawn. Surely Best Buy, which specializes in selling items like music, would have been a more advantageous place to release an exclusive album.

The reason that I believe Lady Gaga chose Target over other options is fairly simple. Target is cool.

Target has created a a sizable and profitable retail niche by offering “cheap chic” fashion forward apparel and home décor products (On Target, Alice Z. Cuneo, Avertising Age 2000). Their exclusive lines of apparel and housewares from famous designers like Alexander McQueen have allowed Target to differentiate itself from other mass retailers like Wal-mart and K-Mart. Further, Target's products resonate with both style conscious consumers and value conscious consumers (Morningstar company report).

Wal-mart has not been blind to these developments. They have seen their sales growth slow to a crawl. Just recently, Goldman Sachs lowered it's target price on neutral rated Wal-Mart shares. Target on the other hand, while struggling like all other retailers has continued to be seen in a favorable light and has a buy rating from Goldman Sachs (Goldman Sachs Lowers Price Target on Wal-Mart (WMT), Sees Company's Pain As Target's (TGT) Gain, StreetInsider.com)

Wal-mart's jealousy over Target's successes can be seen in some of their recent strategies. In an attempt to mimic Target, Wal-mart launched exclusive clothing lines and cleaned up their stores in an effort to However, Wal-mart's “Metro 7” line of clothing flopped and that year they saw their same-stare sale rise only 0.5% down from their predicted 4%. What went wrong? According to veteran retail consultant Howard Davidowitz, "Wal-Mart is not cool." (http://money.cnn.com/2006/10/30/news/companies/walmart_setback/index.htm ).

Take a look.  

I'll let you decide if Wal-mart is cool.

So, my question is: How did Target get so “cool”?

Target wasn't always the cool brand. They were in the recent past, just another mass retailer. At some point though, Target executives choose this path, and I want to figure out how they made that change.

So, did they manage this transition? Here are some thoughts and questions:

• Does Target's success have to do with a cult following? Given that Target (or Tar-zhay as said with a faux French accent) has developed such a devoted following, how can Target continue promote customer loyalty in a time economic recession?
• Why did Wal-mart's attempt at “cool” fail?
• Is Target cool because Wal-mart isn't? (Is Target the Anti-Wal-mart?)
• What about Target's customer experience that keeps people coming back?
• How does a company change their personality from uncool to cool?
• Finally, what is preventing Wal-mart from making another attempt at seizing Target's “cheap chic” market segment which has proven to be profitable? 

Why I Buy

When I read the prompt for this blog I was very excited. This was a chance to rant and rave about the terrible customer service I received from HP when my computer literally broke in half or complain about Delta for leaving my family and I out on the tarmac for hours after an aborted take-off. I find though that it is somewhat healthier, for both mind and soul, to focus on the positives (and boycott the aforementioned brands).

Creating a consumer experience is all about producing the conditions for repeat purchases. One company that shines for me is Amazon. As I stated in my last blog post, I rarely like to shop at physical stores. Sometimes it is necessary see and feel the purchases, but for everything else, there is MasterCard Amazon.

Why Buy From Amazon?

About a year ago I got an email from Amazon suggesting that I become a member of Amazon Prime. For those of you not in the know, Amazon Prime membership gives customers free two day shipping at a cost of $80 per year. At that time I ordered from Amazon maybe 4-6 times a year, so as a poor college student, this service didn't appeal to me. The membership fee was far too high, and I wasn't ordering often enough to see real savings. However, the email I received was offering Amazon Prime membership for free.

Free always gets my attention, but also draws my skepticism, so I headed over to Amazon to read the fine print. This offer; however, was the real McCoy. Amazon was really giving away free memberships to Amazon Prime to college students.

I immediately bought something.

In fact because Amazon keeps track of my purchases (a little Big Brother-y, but hey, you have to pay some price for convenience, right?) I know that the year before a joined Amazon Prime I made 5 purchases. In the following year, I made 24. That number jumps to a staggering 50 if you include digital downloads of music.

Not only did I begin to make more purchases from Amazon, I also began to sell via Amazon. Fed up with the buy back prices offered at the Co-op, ($50 for a book I purchased for nearly $200) I decided to try my hand at selling them on my own on Amazon Marketplace. The whole experience was incredibly easy. Amazon Marketplace allows you create a seller profile and post the items for sale. All you need to have is the ISBN code from your text book and Amazon will create a listing for that book. When some one orders from you, Amazon sends you an email and you log on to get the mailing information. Payment was what I was most worried about, but was actually the easiest part of the whole experience. Amazon direct deposits the money to a bank account of your choosing. The whole experience went seamlessly. I got a better price for textbook than I could have selling it to the Co-op, and Amazon got a cut of the sales price.

Clearly Amazon is doing something right seeing as my usage of their services has skyrocketed. A big part for the reason that my buying habits have changed is Amazon Prime. The idea that you are part of this “exclusive club” appeals to many people. I realize of course that Amazon Prime is hardly exclusive, but it FEELS nice that that I am receiving things that the general public doesn't. When you log into Amazon Prime, the header that normal reads “Amazon” changes to read “Amazon Prime.” A very trivial change admittedly, but it helps create a feeling of loyalty and general goodwill towards Amazon. When I am shopping online, Amazon is always one of the first places I look. I want to shop there, because I am part of the club.

Another aspect of Amazon that appeals to me is the prices and savings that I appear to get. This appeals to my intellectual side which wants to THINK that I am getting the best deal possible. On most Amazon product listings, Amazon shows you the list price, and then their price with the percentage you are saving in big red letters. It makes that purchase all more appealing to know that you are saving 33% off list price. The free shipping that comes with Amazon Prime membership also appeals price sensitive personality. Why not order something if you are getting 33% off list price and the shipping is free? I'm surely saving tons of money... right? Well, I guess you have to question if you are truly saving money if you are making a purchase that you otherwise wouldn't without the savings... That is a different question though. What matters is I think that I am getting a good deal.