During the recent economic downturn, Target felt the financial pinch as customers pinched pennies. “The customer is very cash-strapped right now and in some ways, our greatest strength has become something of a challenge,” said Target’s president. “During these tough times, some of our consumers don’t want to be tempted as much as they have in the past.” Low prices became Target’s main message. The retailer faced another difficult challenge when Isaac Mizrahi, who designed many successful Target clothing lines, switched companies. To fill the sales void, Target started showcasing new designers and offering a wider range of stylish private-label apparel to appeal to shoppers interested in good design at a discount.

1. Is the distribution channel for Target’s private-label clothing and exclusive designs likely to be short or long? What does this mean for Target’s costs and pricing?
2. Compared with Target, Wal-Mart has many more stores and much higher sales volume. How would you suggest that Target compete with its rival’s low-price positioning?