Inside This Issue - Opinion
Retail is its own worst enemy
June 9th, 2014
by David Pinto, Editor
Whatever else transpires in the outside world, retailing insists on drawing unwanted — and often unmerited — attention to itself. Thus, it remains the primary story — and its own worst enemy.
Target is the most recent example of this exercise in self-flagellation. Not a day goes by that a Target story doesn’t lead the business section of every major American newspaper. The business press, meanwhile, can’t wait to divulge that latest Target misstep — the most recent dismissal, the details of the latest board room spat, the precipitous decline in customer traffic, the disheartening financial news. It’s the same old story — Americans can’t wait to tear down that which time and consistently superior performance have elevated.
Name the 10 most impressive retail performers of the past decade or two and Target is sure to be on that list. More significant, Target has often found its way to the very top of that list during that period. In terms of consistency, innovation, leadership, excitement — whatever the yardstick, Target has consistently represented the best in American retailing. Moreover, the company’s performance figures support that assessment.
At the turn of the present century, Target recorded $29.3 billion in sales out of 977 stores, all in the United States. The retailer’s operating income was $2.2 billion.
Fast-forward a dozen years. In the fiscal year that ended at the start of 2013, Target’s sales totaled $71.96 billion out of 1,778 stores, all in the United States. Its net income reached $3 billion. That performance placed it fourth among U.S. retailers in sales.
Since then, Target has stumbled — badly, by some estimates. Its entry into Canada has been a serious disappointment. Inexplicably, a retailer that has learned to roll out stores, concepts, markets and innovations seamlessly has made mistakes in Canada that no serious retailer should make. The result, already amply documented, has been a loss, thus far, of almost $1 billion. Indeed, even a recap of Target’s Canadian excursion defies explanation. Who, for example, doesn’t get pricing right? Who loses, overnight, the gains that have been made with Canadian shoppers by operating appealing stores just over the U.S. border? Who so carelessly squanders the opportunity to enter a market that presents so little in the way of serious competition? The answer, stunningly: Target.
Then came the hacking scandal — and its aftermath. That it should have been allowed to happen at all is inconceivable. That it was allowed to fester while Target executives apparently chose to ignore or downplay it is unfathomable.
Now comes the blame game. Several senior executives, foremost among them the chief executive, have been allowed — encouraged? — to walk away. The senior executive in Canada is no longer on the payroll. Several other key people have left the company. Incredibly, questions are being raised about several of the retailer’s board members and whether they are qualified to remain on Target’s board.
Amid all these shenanigans, Target is conducting a very public search for a new CEO, looking both inside and outside the company. The names thus far mentioned, especially those currently working for other retailers, don’t measure up to Target’s in-house talent. Nonetheless, they remain in contention.
Meanwhile, all manner of personnel shifts keep Target in the news. Yesterday’s director is today’s vice president. Yesterday’s vice president is today’s senior vice president. The person who recently ran human resources now oversees strategic thinking, or vice versa.
Finally, Target released its performance figures. Earnings for the fiscal year, it turns out, were off by 34.3%.
The point in all this is that Target has made some mistakes. A few have been serious mistakes. Perhaps the retailer has misplaced its focus. Perhaps it began to take itself too seriously — or not seriously enough. But one thing hasn’t changed. Target remains one of the very best retailers America has to offer. Bashing the company at this date won’t change that. More significant, the likelihood is that in a year or two Target will be back on track — and the unfortunate mistakes of 2013-2014 will be largely forgotten.
Retailing, however, will remain what it has long been: Its own worst enemy.