Since the 1970s Target has been synonymous with “cheap chic” – providing customers with low prices on quality, trendy items. However, in the wake of The Great Recession, Target began losing market share and suffered a string of financial setbacks that tarnished its long-held reputation. Today, Target is back on the rise to retail dominance and is rapidly reclaiming its mantle as the global leader in cheap chic. How did they recover and what can other retailers learn from their hits and misses?
Strike One: The Great Recession
The Great Recession hit retailers hard. After decades of conspicuous consumption, consumers were forced to cut spending on luxury items and focus on the necessities. Target responded to this shift by moving away from its core focus of fashion and trendy merchandise to basics and essentials. However, as the economy rebounded, Target did not. In 2013, after 13 consecutive quarters of flat sales, Target’s comps dove into the negative.
Strike Two: Major Consumer Hacks
To add insult to injury, Target also suffered a major credit card hack that same year, damaging consumer trust. Nearly 70 million customers had credit card and personal data exposed – one of the worst hacks in history. To date, the hack has cost Target $202 million, and they have yet to settle with consumers over the breach.
Strike Three: The Canadian Experiment
Flat sales and a consumer hack were just part of the story. In an effort to boost sales, Target took on an aggressive expansion into Canada in 2013. However, the company tried to expand too far, too quickly. Supply chain issues were a major problem, and customers complained of high prices and empty shelves. After suffering $1 billion in losses in Canada, they were forced to abandon their new stores and focus on the US.
2014: Rebuilding Begins
Facing bleak projections, in 2014, Target had to make some important choices. After replacing their CEO, they began an aggressive – and expensive – rebuilding strategy. First and foremost, Target vowed to return to its original values of providing low prices on quality, trendy merchandise.
Next, they announced a planned investment of $7 billion into its aging stores and a push to open smaller stores in college towns. Target also planned to expand its store brands, add more delivery options and improve the e-commerce experience. It was a bold plan that spooked many investors. When the strategy was unveiled, many sold off their stock, believing Target was throwing good money after bad.
2017: A Bright Future
Despite lack of confidence from Wall Street, Target pushed forward. Since 2014, they have:
- Rolled out 17 new private-label brands, with eight more to follow by 2019.
- Remodeled 300 locations and are on track to remodel 1100 by 2020.
- Expanded their grocery offerings.
- Expanded e-commerce delivery options to include free shipping, in-store pickup and same-day delivery and pickup.
Ecommerce and delivery are critical points for Target as Amazon continues to put pressure on retailers to offer cheap, speedy delivery. However, Target has not neglected its stores in favor of the website. The investments they have made in updating stores that reflect their cheap chic reputation has paid off. Locations with a facelift have seen an average increase in sales of 2-4%.
Brick-and-mortar stores have also become a critical piece of the e-commerce puzzle for Target. Stores are responsible for fulfillment of orders for local customers including in-store and drive-up service as well as traditional delivery. Target stock is up 40% thanks to its aggressive rebuilding efforts and returning to its core values.
Lessons For Other Retailers
Arguably, Target did not have much of a choice but to focus on basics and essentials during the recession because Americans had to cut their spending. However, they didn’t have their fingers on the pulse of what their customers wanted as the economy showed signs of improving, and they missed significant opportunities.
Instead of focusing on their loyal, core customers, Target took the bold step of expanding into Canada without proper research, planning and supply chain support. They also neglected to protect their loyal, core customers from the worst retail hack in history.
Target is recovering nicely, which makes for a heart-warming narrative, but if they had kept a closer eye on what their shoppers were doing and what they wanted, Target may have never lost its cheap chic reputation. In the face of potential adversity, retailers can learn a lot by staying connected to their customers and responding quickly to their needs and preferences.