Target Corporation (NYSE: TGT) is one of the most successful and iconic retailers in the United States, with a storied 120-year history and a devoted customer following. With its appealing "Expect More, Pay Less" value proposition, curated assortment of owned and national brands, and inviting store experience, Target has cultivated a unique position in the hearts and wallets of American consumers.
However, Target faces intense competition from a wide array of retailers seeking to chip away at its market share. From mammoth discount chains to ascending e-commerce players to specialty category killers, Target must contend with a host of formidable rivals. Here is an in-depth look at the top 10 companies competing with Target and how the bullseye is fighting back to stay on top.
1. Walmart
| Metric | Value |
|---|---|
| Revenue | $572 billion |
| Stores | 10,500+ |
| Countries | 24 |
| U.S. Employees | 1.6 million |
Walmart Inc. (NYSE: WMT) is the world‘s largest company by revenue and Target‘s most direct and powerful competitor. What started as a small discount store in Arkansas in 1962 has grown into a global retail juggernaut, with over 10,500 stores across 24 countries. In the U.S. alone, Walmart operates 4,700 namesake stores and 600 Sam‘s Club warehouses, employing 1.6 million associates.
Like Target, Walmart offers a wide assortment of general merchandise and groceries at everyday low prices. However, Walmart super centers are typically much larger than Target stores, at around 180,000 square feet compared to 130,000 square feet, and offer a broader selection of around 142,000 different items (vs. 80,000 to 100,000 at Target). Walmart is also the nation‘s largest grocer, with food and consumables accounting for 56% of its U.S. sales.
Walmart‘s key competitive advantage is its scale, which allows it to pressure suppliers and ruthlessly drive down costs to offer unbeatable prices. "Walmart‘s core DNA is delivering the lowest prices on a broad assortment, which drives tremendous loyalty and stickiness with the consumer," said Simeon Gutman, retail analyst at Morgan Stanley.
In recent years, Walmart has invested heavily to compete with Amazon and Target in e-commerce and omnichannel services. Walmart now offers free 2-day shipping on millions of items for orders over $35, with no membership fee required. It has also rolled out grocery pickup to 3,100 stores and same-day delivery to 1,600 stores while acquiring digital native brands like Bonobos, Eloquii, and Moosejaw to broaden its online assortment.
Still, Target has established a more premium, fashionable brand positioning than Walmart, with its stores designed to encourage inspiration and discovery. "If Walmart is about offering the most stuff for the least amount of money, Target is more about curation and making it easy to put together a stylish look," said Sucharita Kodali, retail analyst at Forrester Research. Target has also developed trendier owned brands and collaborations with up-and-coming designers to differentiate from Walmart.
2. Amazon
| Metric | Value |
|---|---|
| Revenue | $470 billion |
| Prime Subscribers | 200 million+ |
| Fulfillment Sq. Ft. | 410 million |
| Marketplace Sellers | 2 million+ |
Amazon.com, Inc. (NASDAQ: AMZN) may have started as an online bookseller, but today it is an e-commerce behemoth that competes with Target in virtually every product category. With net sales of $470 billion in 2021, 40% of which came from general merchandise, Amazon has fundamentally reshaped consumer expectations around convenience, selection, and delivery speed.
Amazon Prime, the company‘s $139/year loyalty program that offers benefits like free 2-day shipping and video streaming, now boasts over 200 million paid subscribers globally. Amazon‘s unrivaled fulfillment network, spanning 410 million square feet, enables it to offer over 350 million products for fast, free, and reliable delivery. Amazon‘s third-party marketplace, with more than 2 million sellers, gives it an even bigger assortment advantage.
"Amazon‘s dominance in e-commerce and adjacent businesses like cloud computing, media, and devices gives it tremendous cash flow to keep investing in innovation and market share gains," said Guru Hariharan, CEO of CommerceIQ, an e-commerce management platform for brands. In 2021, Amazon spent $55.4 billion on technology and content, much of it to enhance the online shopping experience.
Since acquiring Whole Foods in 2017, Amazon has also emerged as a fiercer competitor to Target in the grocery category. Amazon now has over 500 Whole Foods locations, 38 Amazon Fresh supermarkets, and 24 Amazon Go convenience stores, with plans for hundreds more. It has also expanded grocery delivery from Whole Foods stores to more than 2,000 cities and towns.
Despite Amazon‘s ascendance, Target has several key assets that have allowed it to keep thriving in the e-commerce era. First and foremost are its approximately 1,900 stores, which are located within 10 miles of 75% of the U.S. population. Target has transformed these locations into hubs for fast fulfillment, with around 95% of its orders now fulfilled by stores. Target has also acquired Shipt, a same-day delivery platform, and rolled out curbside pickup and in-store retrieval to make online ordering even more seamless.
"Stores are providing Target a critical competitive advantage by enabling more choice and flexibility in how shoppers receive online purchases," said Michael Lasser, retail analyst at UBS. In 2021, Target‘s same-day services (Shipt, Drive Up, Order Pickup) grew 45% and accounted for more than half of its $20 billion in digital sales. Target stores also offer services, immediate gratification, and inspiration that round out the customer experience.
3. Costco
| Metric | Value |
|---|---|
| Revenue | $196 billion |
| Members | 64 million |
| Renewal Rate | 92% |
| SKUs | 4,000 |
Costco Wholesale Corporation (NASDAQ: COST) is a membership-only warehouse club that offers a limited selection of nationally branded and private label products in bulk sizes at steeply discounted prices. With 828 warehouses globally (including nearly 600 in the U.S.), 64 million member households, and $196 billion in revenue in its last fiscal year, Costco is a formidable retail force.
Costco‘s product mix overlaps heavily with Target‘s, including groceries, household essentials, hardlines, softlines, and ancillary businesses like pharmacies, optical centers, gas stations, and travel services. By focusing on a smaller number of high-volume SKUs (around 4,000 on average), Costco can drive efficiency and sell products for 15-25% less than most competitors. Costco also uses a "treasure hunt" merchandising strategy, stocking a rotating selection of premium and one-time offers to create a sense of urgency and surprise.
However, Costco‘s key point of differentiation is its membership model and intense customer loyalty. For a $60 annual fee ($120 for executive), Costco members gain access to its low prices and exclusive offers. Costco‘s membership renewal rate is an industry-leading 92% in the U.S. and Canada. "Costco‘s membership model creates a powerful flywheel effect, generating steady subscription revenue, increased customer visits and spending, and operating efficiencies," said Oliver Chen, retail analyst at Cowen.
Target has taken several steps to sharpen its competitive position against Costco. It has expanded its own private label assortment, which now accounts for a third of its sales and spans over 45 owned brands such as Good & Gather, Smartly, Heyday, and All in Motion. Target has also added fresh grocery and adult beverage to more of its stores while redesigning the layout and displays to make shopping easier and more engaging.
Still, given Costco‘s entrenched position with many consumers, it remains a potent competitor that keeps pressure on Target‘s value proposition. "For many shoppers, a trip to Costco has become ingrained in their routine, making it very sticky," said Chuck Grom, retail analyst at Gordon Haskett Research Advisors. To stay in the consideration set, Target must keep strengthening its own assets around omnichannel, owned brands, partnerships, and experience.
Competitive Outlook for Target
Despite an intensely competitive environment with threats on all fronts, Target has a strong foundation and strategy to keep winning with consumers in the years ahead:
Differentiated Owned Brands
Target‘s unique owned brand portfolio, spanning apparel, home, hardlines, and food & beverage, allows it to offer great quality and style at affordable prices. Target now has 12 owned brands that generate $1 billion or more in annual sales, with dozens of others in earlier growth stages. By constantly refreshing these lines and layering in an exciting pipeline of limited-time partnerships with coveted national brands like Ulta Beauty, Levi‘s, and Apple, Target gives shoppers ample reason to visit its stores and website.
Omnichannel Strength
Target has built a top-tier omnichannel operation that seamlessly links its physical stores and digital properties. With industry-leading same-day services, an easy-to-use mobile app, and a website that offers an extended aisle of millions of items, Target enables customers to shop how, when, and where they prefer. Almost all of Target‘s digital orders are now fulfilled by stores, which has improved speed and reliability while reducing shipping costs.
Experiential Stores
Target‘s stores have long been a competitive advantage, with their bright, spacious layout, engaging displays, and friendly service. Target has further enhanced these assets by remodeling over 1,000 stores since 2017 and opening dozens of small-format locations in urban neighborhoods and near college campuses. These reimagined stores feature Target‘s most popular owned brands, fresh food, online order pickup, and locally relevant assortments. They serve as a powerful billboard for the Target brand while addressing consumers‘ desire for convenience.
Talented Teams
A key ingredient in Target‘s success has been its purpose-driven culture and highly capable team. Target has invested heavily in higher wages (starting at $15/hour), expanded benefits, robust training, and career advancement opportunities for its 400,000 frontline team members. Target also has a seasoned management team led by CEO Brian Cornell and a diverse board of directors that provides strong governance and strategic oversight. This talent enables Target to nimbly navigate an ever-changing environment.
Still, the retail sector will remain highly dynamic and disruptive, requiring Target to continually adapt. Macroeconomic factors like inflation, supply chain pressures, and the tight labor market could weigh on Target‘s short-term growth and profitability. The COVID-19 pandemic has dramatically accelerated the shift to e-commerce, raising the table stakes for digital capabilities. Many of Target‘s competitors are innovating and consolidating, from Walmart‘s launch of a Amazon Prime-style membership program called Walmart+ to Kroger‘s partnership with UK online grocer Ocado.
"Target will need to keep sharpening its pencil on price, investing in new tech- and data-driven capabilities, and elevating its assortment and experience just to keep pace," said Stephanie Wissink, consumer research analyst at Jefferies. By leveraging its unique assets and staying nimble, Target has the opportunity to keep delighting its customers and growing market share in the decade ahead. But with so many eager competitors on its heels, Target will have to work hard to stay on top.
