Target CEO: The Retail Landscape Hasn’t Been This Bad Since The Recession

Image courtesy of Steve

Brick-and-mortar retail is in trouble. You can tell that from reports on this very site of retail bankruptcies and store closings, and from the number of Amazon boxes piled in front of your and your neighbors’ front doors. Today, Target executives shared discouraging news of falling sales and profits at its investors day event, and explained that the chain’s way forward is to imitate Walmart.

Target plans some aggressive price-cutting, including an everyday low price strategy meant to bring back loyal customers. Stock traders didn’t react well to that news in the short term, but it should please Target shoppers, and they’re the ones who really matter.

In the long term, Target’s strategy is a variation on one that Walmart tried. Walmart Express stores were mini stores built in communities too small to support a full-line Walmart. The experiment ultimately failed, and all of the stores closed at the beginning of 2016.

Target is betting that the idea of mini discount stores can be made upscale, and is creating precise mixes of products for different neighborhoods. The difference from the Walmart Express concept is that instead of in tiny towns, the small stores will be in urban areas and tiny towns with colleges in them. They’ll have yogurt cafes and offer baby products in family-intensive neighborhoods.

Americans still are spending money, of course: We’re just spending it online or on experiences or groceries. Since Walmart’s grocery sections are larger and better established, Walmart is surviving this retail downturn a lot better than Target, which is still struggling to interest shoppers in its small grocery offerings. Target’s online sales are a tiny part of its overall revenue. If that’s where shoppers are heading, the retailer needs to figure out where to follow them.

For now, though, Target needs to concentrate on bringing customers back to the stores it has rather than on its plans to open hundreds of new ones.