Once High-Flying Target Faces Identity Crisis

Target faces identity crisis
Steven Senne/AP
By ANNE D'INNOCENZIO

NEW YORK -- Target is having an identity crisis.

The nation's third-largest retailer was once high-flying, but now it's struggling to find its place in the minds of American shoppers.

Once known for its cheap chic fashions and home accessories, Target (TGT) faces competition from trendy chains like H&M. The discounter also hasn't been able to ditch the image that its prices on staples like milk are higher than rivals like Walmart (WMT). And it's battling the fallout from a massive data breach that has hurt its reputation.

Meanwhile, Target on Tuesday fired the president of its Canadian operations following some missteps in that country. The ousting comes two weeks after the Minneapolis-based discounter announced it was looking for a new leader after the abrupt departure of its CEO.

All of Target's challenges come as the broader retail industry is dealing with a slow economic recovery that hasn't benefited all Americans equally and a move by shoppers away from buying in stores and toward shopping online.

As a result, Target reported its first annual profit decline in its latest fiscal year in five years. Target's first-quarter results, which are slated to be released Wednesday, will offer more insight. And its shares have fallen 10.5 percent this year.

"The nature of the retail landscape has changed," said Brian Yarbrough, a consumer products analyst at Edward Jones. "I don't think Target has addressed the changes well."

Here's a look at the four big issues Target faces:

The Problem: Cheap Chic Strategy

Target was the first low-price retailer to team with designers to create affordable lines when it forged a partnership with Michael Graves in the late 1990s. But that niche has been copied by traditional stores and foreign imports like H&M. Analysts say Target took its eye off the ball on its trendy offerings when it focused on expanding its food business since the recession.

Target also has tripped up on some of its designer collaborations. During the holiday 2012 season, its collaboration with posh retailer Neiman Marcus turned out to be a dud as the merchandise was criticized for being too expensive, among other things.

The Solution:

Target says it's moving more quickly to test the latest items in stores. It also made some personnel changes on Tuesday that are aimed at making it more nimble. "We're getting back to what we were known for," said John Mulligan, Target's chief financial officer and interim CEO said in a recent interview with The Associated Press.

The Problem: Price

Since the economic downturn, Target has battled the perception among tight-fisted shoppers that its prices are too high when compared with rivals. That challenge only increased as Walmart, the world's largest retailer, has pushed its lower prices even more lately.

According to a pricing survey conducted in January in the Northeastern area by Kantar Retail, a retail consultancy, Walmart's prices on an overall basket of more than 40 nationally branded groceries like health and beauty items were nearly 4 percent less expensive than Target. That lead widened from a year ago when Walmart was only 2 percent cheaper.

The Solution:

Target has been pushing the "Pay less" part of its advertising slogan "Expect More, Pay Less." Last year, it touted prices on products in holiday TV ads, the first time it had done so in at least a decade.

The Problem: Technology

Target's data breach late last year, which compromised the credit card and other personal information of millions of customers, exposed big flaws in its security system. Analysts also criticize the company for being too slow in creating a seamless experience for shoppers to jump from physical stores to the web. For example, it just rolled out a program late last year that allows shoppers to order online and then pick up at the store when rivals have been doing that for years.

The Solution:

Target is overhauling some of its divisions that handle security and technology. It's also been accelerating its $100 million plan to roll out the more secure chip-based credit card technology in all of its nearly 1,800 stores. Beginning in early 2015, Target will be able to accept these payments from all Target-branded credit and debit cards -- becoming the first major U.S. retailer that will have its own branded cards with this technology.

The Problem: Canada

Target's expansion into Canada with more than 100 stores last year has been fraught with problems. Shoppers have complained that prices are too high, and the stores have been wrestling with inventory problems.

As a result, the company's sales in the country were weak and it recorded a nearly billion loss for the latest year.

The Solution:

Target said Tuesday that it replaced Tony Fisher, the president of its troubled Canadian operations, with a 15-year U.S. company veteran.

Mark Schindele, 45, who was senior vice president of merchandising operations, will now run the Canadian operation, effective immediately. Schindele, who was senior vice president of merchandising operations, played a key role in launching an expanded grocery area, among other achievements.


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socalflash

I stopped going to Target when they would not let the Salvation Army stand in front of the store during the Christmas Season. That was quite a few years ago.

May 24 2014 at 4:59 PM Report abuse rate up rate down Reply
vietnamvet1967

After the Holisays where there CC was taken by crooks, we stopped in ( ONLY ) to see if they has something my wife wanted, you will not believe the people putting in CC and target ones to boot. Even though they had not fixed the problem YET
What fools we have in our Country today

May 24 2014 at 6:24 AM Report abuse rate up rate down Reply
imaviper49

Got word today my local Target is down more then $ 90,000. for the month. Doesn't say great things about how shoppers feel about this store. Target has changed and long time consumers are now going where they can still get value for the lower prices Target use to offer.

May 21 2014 at 8:15 PM Report abuse +1 rate up rate down Reply
STAN

My last 4 forays into Target netted me absolutly nothing.
Everplace i go shopping i have a specific item or items i buy from that store,that's what keeps me comming back.Sometimes it's the price,sometimes item availiablilty or uniqueness.Target has non of these for me anymore.I go to food stores to buy food and dept. stores to buy non food related items.Most stores i used to go to stopped selling many products all together so i no longer have any reasons to go to them,Target is just one of them.

May 21 2014 at 7:14 PM Report abuse +1 rate up rate down Reply
shesasexxxywrtr

I used to be an employee of one of the Target stores and being an senior citizen now, they don't cater to older people for clothing, which they should. I very rarely go into Target anymore, except for may be cleaning supplies and cat litter once in a while...everything else in that store is too expensive. There slogan, "Expect More, Pay Less"...it used to be that way at one time with Target, but for the last couple of years, it has been just expensive as other retailers. When it comes to clothes, I bypass Target and end up buying on Ebay. WalMart also needs to revamp the line of clothing they carry as there's is just as bad!

May 21 2014 at 6:06 PM Report abuse +1 rate up rate down Reply
sam

Target is great, all departments are well stocked and well priced, the food market is wonderful and their private labels like Simply Balanced (organics) and Archer Farms, are excellent, well priced products. The ONLY sore spot for me is that yes, Target has abandoned the larger, older population when it comes to clothing. I used to find nice items, but now their nice clothes are all aimed at skinny teens. Not a smart business strategy, IMHO. But for everything else, I go there every week, at times more than once a week. I avoid Walmart like the plague! Crowded and not very clean, the occasional deal does not make up for the discomfort, and their clothing is pathetic. Goodwill has better things. I hope Target gets over their funk, I would be lost without it.

May 21 2014 at 5:21 PM Report abuse +1 rate up rate down Reply
Carol

I have always loved Target. I have been shopping with them since the early 1970s. I like just about everything about them except their clothes. They don't have anything in my size. Yes! I'm a big lady and can't ever find anything for me in their store. I think they used to have a good slections of clothes but not any more. I buy mostly kitchen stuff from them and stuff for the rest of the house. I hope they don't go out of business.

May 21 2014 at 4:25 PM Report abuse +3 rate up rate down Reply
1 reply to Carol's comment
vietnamvet1967

Hope you used your CC, so it can be stolden again of all info

May 24 2014 at 6:25 AM Report abuse rate up rate down Reply
lauramchal

Their clothes are neither a good deal or made well. Can get a better made product for less at the bigger department stores like Boscov's, JC Penny's, Sears, etc. Even their sales for clothing is too high, especially for what you are getting. Everything else in the store is good. They need to revise their clothing department, in my opinion.

May 21 2014 at 1:55 PM Report abuse +2 rate up rate down Reply
toneitup

Your Liberal views have isolated you from your customers

May 21 2014 at 12:41 PM Report abuse +2 rate up rate down Reply
2 replies to toneitup's comment
sam

Well, it was bound to happen... sooner o later a disgruntled neocon was bound to blame liberals for Target's business problems... LOL!!!

May 21 2014 at 5:12 PM Report abuse +3 rate up rate down Reply
1 reply to sam's comment
vietnamvet1967

It is Bush's Fault

May 24 2014 at 6:26 AM Report abuse -2 rate up rate down
brenhatestwinkie

that was a common compliant, you stupid con

May 21 2014 at 10:45 PM Report abuse -1 rate up rate down Reply
rbhbear

Target lost me when they hiked the prices and attempted to be more "uptown."
The fact that they started shipping off clearance items to Goodwill, rather than offering their own customers a good deal on clearance, sealed the deal. No longer a Target customer.

May 21 2014 at 12:12 PM Report abuse +3 rate up rate down Reply