Sell Target, Walmart; Buy Whole Foods
I just cannot get 100% behind a largely suburban, ex-urban or rural strategy during a time defined by housing crashes (mainly in suburbia) and an economic divide where urban affluence bubbles to the surface.
I am not sure how Target and Walmart can expect their consumers to come through when Whole Foods (and Amazon.com(AMZN) ) stands in the way.
Whole Foods owns and superserves a series of demographics with disposable income and fewer concerns over economic uncertainty. Target, and especially Walmart, does not.
It doesn't take a multimillion dollar research study to figure it out: The typical Whole Foods customer would not be caught dead buying apples at Target or Walmart, even if they're the same or better apples. It's a status thing. And, in some cases, it's a proximity thing.
That said, do you really think a family that does its grocery shopping at Whole Foods or Trader Joes in downtown San Francisco will transition to CityTarget for the same or similar items when it opens later this year? I don't.
It comes down to not only income, but, as Whole Foods CEO John Mackey said, somewhat smugly, on a conference call last year:
Whole Foods Market does not locate stores on the basis of income. That's just a myth out there. It's about education. It's about awareness. We have sites that do extremely well in areas that are not of high income. But it does require a certain level of consciousness, and that generally indicates better education and, of course, income correlates with education. But that is the bigger predictor of our success is not income but people's education levels.
Don't get me wrong. CityTargets will do well in the dense urban cores and select neighborhoods of places like San Francisco and Los Angeles, but they'll always appear as little more than inferior knock-offs to the upper echelon of society that Whole Foods owns. Simply put, Whole Foods has built a strong brand and created powerful perceptions. These things could just be a bit too much for a company like Target to wage war against.
Maybe this is why Target does not make its urban strategy a topic of conversation on its conference calls. Worse yet, why isn't anybody asking about it?