The opinions stated here are my own, not those of my company.
I recently read the article Big-Box Rebound: How Target Packaged a Turnaround. It’s online, so read it yourself too. It was originally published August 2019, so it’s not exactly new.
The tl;dr of the article is summarized in this chart:
In words:
- Sales hit the skids, for multiple quarters, going into 2017
- The company invested $7B starting in early 2017 to turn things around
- Two years later, It looks like the investment was well done and worked as intended
It’s now mid-2021 and Target’s stock has continued to grow (although I did not analyze beta).
Why does the chart only go back to late 2014, instead of late 2009 (i.e., the end of the US Great Recession)? The article does mention the “massive data breach” of 2013-2014, so perhaps they just elided data that complexified the immediate focus/narrative. Fair enough. Or maybe they just wanted to make the chart easy to read. Up, then down, then up again, nice and symmetric on the page.
But what caused the sales decline? The article wanders between talking about the sales decline and the stock price movements, but the sales decline is the more fundamental topic.
Here are some reasons proffered by the article:
“Some of the hip-on-a-budget store brands that had earned the chain the mock-highbrow “Tarzhay” moniker had grown too stale to lure new shoppers.” ⇒ Makes sense, but I wish the article had provided a photo of an example item from early-2017 Target that exemplified this problem. Show, don’t tell!
“Many looked shabby after years of insufficient upkeep” ⇒ Also makes sense, but again, I wish the article had shown a photo of one of these early-2017 stores to drive the point home. SHOW, DON’T TELL!
“Target was being outflanked by Walmart and others in retail’s price wars—particularly in apparel, where most of its older brands no longer had enough appeal to draw customers away from cheaper rivals.” ⇒ Show don’t tell aside, it’s not clear why this would have happened in 2016 but not 2015. What changed? Did Walmart release an amazing apparel line that year?
“Target also stumbled in the culture wars: After the company spoke out about allowing transgender shoppers and employees to use the restrooms of their choice, boycotts in relatively conservative markets like Dallas ate into its sales.” ⇒ Kudos to Target for being years ahead of the curve on this topic of affirming rights. But is the relationship between the boycott and a national sales slide correlation or causation? Was the boycott some kind of Gladwellian “Tipping Point“? Not impossible, but unclear. Like Gladwell’s books, it makes for tantalizing reading despite being wholly unconvincing to a firm logical mind.
The other elephant in the room mentioned in the article was the continued rise of Amazon, the convenience of shopping from home. All these points together support a plausible hypothesis for the consecutive quarters of sales decline, although the evidence is spotty. Aside from the transgender rights issue, all the other topics—price/selection competition from Walmart, convenience competition from Amazon, stale clothes, stale stores—have a common root: an inability to act fast enough to what was happening, and changing, in the world.
Part of this “slowness to act” can be explained by the other situations competing for attention/focus. The data breach, the failed Canada expansion. Even when “Cornell sold Target’s $4-billion-a-year pharmacy business to CVS Health”, that still took attention away from the core problems. Every action, positive or negative, carries an opportunity cost.
In fact, increasing execution speed was called out as one of the reasons for improvement, beyond just the dollar amount spent. “Target has also shortened the time it takes to bring new brands to market… within nine months, Target had launched its own swimwear brand; the retailer says it’s now the top U.S. seller of women’s bathing suits.”
Attention, focus, speed, decision making, and execution are all bound together, interwoven. A good reminder to prioritize smartly, focus on those priorities, avoid distractions (internal or external), make good decisions swiftly, and execute with urgency (because if you don’t, someone else will).