Why Walmart Should Be Worried: Target's Cheap Chic Is Hitting the Bulls-Eye

Target (TGT) surged past Walmart (WMT) in a new consumer preference study, and signs point to more consumers aiming their purchases at the bullseye.

Consumers are beginning to open their wallets, according to the analysts at Retail Eye Partners, and they are giving Target credit for better prices. That's important.

As the recession hit, Target knew it had to compete on price with bargain retailers. Customers conceded the "chic" in Target's "cheap chic" ethos but were unconvinced by the "cheap." So the retailer cut prices, kept up with Walmart in electronics and books and launched a warehouse-club style of promotion of bulk products after Christmas.

Trust us, it argued: We are all about providing a better value in tough times. Now, according to Retail Eye Partner's "Walmart Versus Target Report," people are believing.

Among its findings:

• Target gained additional consumer shopping trips at a faster rate, up 17 percent, than did Walmart, up 14 percent, in the four weeks preceding the study, which was conducted earlier this month.
• Both Target and Walmart are being more thoroughly shopped this year than last but 24 percent of study participants reported visiting more departments at Target versus 18 percent at Walmart.
• Walmart remains the undisputed price leader in price, sales and discounts, but shoppers say both Target and Walmart have improved prices versus last year.
• Walmart's heavily marketed price rollbacks are resonating with shoppers, but so are Target's sharper prices on everyday products such as detergent and food as well as marketing campaigns that have touted the retailer's lower prices.
• Target has improved the shopping experience, service, merchandise selection and merchandise quality, beating Walmart in all those areas.

In short, cheap chic is back in style -- and that has to give Walmart pause.