Discount Stores Essay, Research Paper
The general issue that this article touches upon is the economic growth of the ‘discounter’ store called Target. Economic growth occurs because after deflating, or subtracting the inflation from the profit, the real income is higher than that of the year before. Target offers an original blend of products in the latest fashion and low-rent prices. It is called the “Kmart for yuppies”(Naughton). Initially, the regally pronounced “Tar-jaay” opened its services in the midwestern region, however, after the huge success, it is now planning to enter the Northeast market. There it will have to compete against another ‘discounter’ store, Wal-Mart. Target has launched a new ad campaign to create an image for itself as the ‘icon of affordable chic”(Naughton). To finance the campaign, the store is using part of the great profits it has made in the Midwest. Target’s profits have nearly doubled in the last four years and now account for three quarters of Dayton’s bottom line, which it its parent company. However, the analysts are warning that Target could miss the mark trying to cater to the fickle fashion sense of the Americans.
At the end of my junior year, Mr. Blanc has introduced economics by playing a game. The Students were to choose a corporation out of 40 choices or so, among which one could find such companies as Disney, etc. The students’ choice was to be based on the assumption of which of the latter would experience greatest development and thus, return the greatest profits. The option offering the largest returns turned out to be Target. One of the reasons why the store is experiencing such excellent results is because of the product it offers, which is referred to in the article as the “unconventional blend of high-style offerings and low-rent prices”. This means that the products that the store carries are satisfying the consumers’ demand for both quality and cost. They receive (most of the time) the upscale product that is currently in fashion for a very reasonable price as in comparison to their wages. The consumer does not have to compromise between getting a ’slightly imperfect’ product for an accessible cost, or on the other side of the extreme, the consumer doesn’t have to acknowledge that he doesn’t need the item (and I am referring to the word ‘need’ in the sense that we don’t need anything at all, the consumer might ‘need’ the item to ease his everyday existence, e.g. toaster; however he doesn’t need it). Looking at the supply side of this article, if Target is making such vast profits, the consumer response must be satisfyingly large enough to allow the prices to remain at level appealing to both sides of the market. Therefore, in this relationship between the customer and the supplier we see that equilibrium has been reached, a point at which the quantity supplied is equal to the quantity demanded. At the set price level, both the supplier and consumer are happy, because the cost of product suites the latter amount of disposable income, income after the required taxes and such are subtracted from. From the suppliers’ point of view, the price is adequate to cover the production costs as well as to allow for reasonable, and in Target’s case, lucrative profits. (Please refer to Graph 1). The mentioned ad campaign is obviously meant to keep the equilibrium by influencing consumers’ preferences. Nevertheless, I do agree with the skeptic views of critics warning Target about the massive ‘attack’ on new territories. Everybody knows that the West Coast is quite different from the West Coast when it comes to preferences. I would suggest an extensive study of preferences, as well as the background of the potential consumers. Things like consumer preference, wage rates, population are important to observe for they affect the demand curve on the Supply and Demand graph. It should be taken in to account that Wal-Mart is already well set in that region, therefore, the opportunity cost of taking the risk of competing with the strong Wal-Mart on one hand and the opportunity cost (the cost of the next best alternative) of expanding and improving the services offered here, in the Midwest.
Reference:
Naughton, Keith. October 11, 1999. Hitting the Bull’s-Eye