After another disappointing earnings report this week for Target, it's time to take stock of what has happened to the cheap-chic retail industry darling that everybody used to call "Tarjhay."
Target cut its profit outlook on Wednesday, while reporting poor earnings and continued sluggish sales in the latest quarter. While the news was more or less expected—Target recently hired a new CEO to address its well-known struggles in the marketplace—things look as grim as ever for the all-purpose retailer that few shoppers refer to as the fancier-sounding “Tarjhay” anymore.
“Target has given investors ZERO reason to be encouraged that a global turnaround is secretly emerging,” Brian Sozzi of Belus Capital Advisors wrote, responding to Target’s latest earnings report—and rating Target stock as a sell. “At the domestic store level, merchandising issues persist, including weak assortments in apparel (notably the hot category of athletic apparel) and the over-buying of seasonal categories in light of persistent negative traffic.”
“You have seen a brand that has lost its way,” Steve Beck, founder of the management consulting firm cg42, said of Target in early August, after it was revealed Target had lost $148 million as a result of last year’s holiday season credit card data breach, according to MarketWatch. “And the end result is poor performance.”
So how exactly did Target lose its way? Why don’t shoppers flock to Target for cheap chic fashion in the numbers they used to? Target itself deserves much of the blame, but the economy and big shifts in the retail landscape also factor in.
Part of the explanation is that one-stop shopping, which not long ago was perhaps the best sales pitch in retail, is not the draw it used to be. The concept of one-stop shopping made sense for retailers on several levels. All-purpose stores like Walmart and Target expanded grocery sections in order to offer more convenience and efficiency to harried, time-crunched consumers. Many dollar store chains followed the same playbook, pumping up selections of groceries and other household staples to give shoppers reason to pop in multiple times a week, rather than every so often when they needed cheap party favors or random craft supplies.
The idea is that shoppers will come in specifically for low prices on certain items, and perhaps—in the case of Target, especially—for exclusive designer goods that can’t be found elsewhere, and that while they’re in the store, they’d also pile up impulse buys and needed household products alike into their shopping carts. This is all possible when almost everything under the sun, from spicy mustard to designer end tables, fishing poles to kids’ winter coats, is available under one store roof.
Yet at Walmart supercenters, which represent the ultimate in one-stop shopping in America, foot traffic and sales are on the decline. Sales and customer visits have likewise been falling at Target, and even smaller, nimbler dollar stores have seen growth go flat, prompting the need for a dollar store merger that’s yet to be determined.
Many factors have affected sales recently at these outlets, notably the decrease in food stamps to America’s poor, who therefore have less money to spend at Walmart and dollar stores, as well as the monumental data breach at Target, which damaged the company’s reputation among shoppers. Stagnant wages among American workers, and general uncertainty in the economy have hurt sales too. But part of the equation is that, in the age of Amazon Prime, one-click buying, and a range of online grocery shopping services that eliminate the need to browse store aisles, the appeal of one-stop shopping has diminished substantially. If saving time is a primary concern for consumers, there are far better, far quicker ways to run errands and gather essentials than hitting a gargantuan Target or Walmart location out at the mall or by the side of the highway.
When Target was the media and shopper darling nicknamed “Tarjhay” for its chic fashions and dependable household staples, the perception was that it truly delivered on its slogan “Expect more, pay less.” Target’s big problem is that the motto has rung hollow for quite some time. “The dimension of ‘expect more’ is gone,” said Amy Koo, a senior analyst at Kantar Retail. “As for ‘pay less,” well, pay less than what? Folks are savvier today. They’ll order at Amazon. It’s easy to find products that are much cheaper online, and it’s much more convenient to a shopper’s needs.”
Similarly, Walmart’s slogan (“Save money, live better”) is less resonant with shoppers today because if they were truly living better, they wouldn’t be shopping at Walmart—at least not in the physical stores themselves. Today’s consumers expect more than ever, and they want to live better by burdening themselves as infrequently as possible with chores such as shopping for groceries and other boring basics. Essentially, they expect more than even the biggest supercenter can provide—which will inevitably pale in comparison to what shoppers can find in terms of pricing and selection online.
While Walmart has mostly competed on price to keep sales from drifting away to its online and brick-and-mortar rivals, and it’s been extremely difficult to fend off dollar stores, Amazon, and the rest, Target became a phenomenon back in the day by having a pretty good track record at picking styles and designs that suited shoppers’ tastes at the time. Then the Great Recession destroyed household disposable income streams, and even cheap chic wasn’t cheap enough. There were some big mistakes—developing an online presence very late in the game, the epic debacle that was the high-price Target-Neiman Marcus partnership, a largely unsuccessful expansion into Canada—but none has been bigger or more destructive for sales in the post-recession era than Target’s concentrated appeal to a core group of wealthier free-spending shoppers, said Kantar’s Koo.
“Target is saying: We don’t care about the low-income shopper, we’re going to focus on the people who can spend more money,” said Koo. As a result, the styles and prices at Target were “suddenly not in line with many shoppers. It’s no longer tailored to meet the mass audience.”
Lately, Target has been undergoing some soul searching. One Target location in Minnesota was turned into a test store for trying out new products and services to get the reactions of customers. A new CEO, Brian Cornell, was hired, and his first promise was to listen and learn rather than make any sudden dramatic moves. This week, the company announced some stores would stay open until midnight on a trial basis through the holiday season to woo night owls and people working odd hours.
Extending store hours will help Target make the case that it’s more convenient, and more in tune with what shoppers need today. It just appears unlikely that any of Target’s tweaks will prove to be game changers and turn things around quickly for the struggling retailer. It also appears pretty much an impossibility that the “Tarjhay” nickname will resurface anytime soon.