What: Target is struggling to recover from backslash against socially committed merchandise.

Why it is important: Customers are fickle, they call for retailers to commit themselves in social fights, but cancel them when they go too far

Target is grappling with sales declines and a damaged brand image following a backlash against its LGBT+ themed merchandise, while its main competitor, Walmart, is successfully attracting affluent customers, which are vital for Target's business model. During the 1990s, Target gained popularity with its stylish in-house brands, seeing a significant revenue boost post-Covid-19 as consumers preferred shopping in fewer locations. However, inflation and a shift in consumer spending habits have reduced sales, leading to a stark contrast in performance compared to Walmart.

Recently, Target initiated several strategic moves to revive growth under CEO Brian Cornell's guidance. These include searching for a new chief marketing officer, integrating third-party merchants via Shopify, and employing a generative AI chatbot to enhance store efficiency. In response to declining sales, which fell by 5.4% in Q2 2023—the largest drop since the global financial crisis—Target has adjusted its strategy for selling Pride merchandise amid ongoing controversies and significant backlash in 2023.

To strengthen its market position, Target is planning to expand its store network by over 300 locations and launch new private-label brands, aiming to restore a 6% operating profit margin and increase sales by $15bn over the next decade. Despite these efforts, analysts  suggest that Target's reliance on discretionary items makes it vulnerable in economic downturns. In contrast, Walmart's broader grocery offerings and effective ecommerce strategies have enabled it to outperform Target, highlighting a significant shift in consumer preferences and competitive dynamics.

Target loses cachet with shoppers as inflation and competition bite