Target Sales Are Down And Here’s Why
If you're a Target loyalist, it may be hard to believe that the retailer's sales are in decline.
This is hard for me to write, but news is news. Target is having some trouble. Even a Target loyalist such as myself can’t argue with the issues facing the big red bullseye.
According to an article on Money, foot traffic in stores is down over 2 percent.
And Target says the bleeding is not over. The company is projecting their sales will dip as much as 2 percent during the third and fourth quarters of 2016 too—which include the key back-to-school and holiday shopping seasons.
This is all according to the earnings report released by Target on Wednesday for sales ending July 30 that showed, among other findings, that second-quarter earnings fell 9.7% to $680 million. As such, shareholders of Target stock have been feeling the pain.
So the big question: Why are shoppers turning away from Target?
As much as I’d like to blame their too big double carts, here are five more likely reasons shoppers are turning away:
Target has long tried to enter the grocery space, with flailing success. Their selection is typically slimmer than Whole Foods or Kroger and more expensive than Walmart. Consumers aren’t convinced Target will have what they need, especially in the perishable department, and so what little stock Target does carry risks spoilage.
This leaves Target “sitting in the middle of no man’s land” with its groceries, as COO John Mulligan openly admitted in early 2015. Shoppers who happen to be in Target for other reasons might run through the grocery section to pick up a gallon of milk or a box of mac ‘n’ cheese, but few seek out Target as a grocery-shopping destination. You may shop there if you happen to be there, but it’s not your first option.
The bad news for Target: If you aren’t there to buy groceries, you also aren’t going to buy pillows or coloring books on impulse.
2. Prescription Medications
Target recently handed over the reins of their in-store pharmacies to CVS. Target CEO Brian Cornell told the (Minneapolis) Star Tribune this may be one of the reasons for the decline in store foot traffic.
Consumer advocates worried that Target’s decision to let CVS run its pharmacy operations and in-store clinics would hurt competition in the marketplace and perhaps result in higher drug prices for consumers. If consumers aren’t coming in to fill prescriptions, Target is missing out on trickle-down sales, too.
Apple sales are down everywhere, so naturally Apple sales are down in Target stores—to the tune of roughly 20 percent last quarter. And, on the whole, electronic sales are down as consumers are turning elsewhere to purchase these pricey goods.
Once thought of as a fashion destination promoting haute designers like Lily Pulitzer and Missoni, Target has struggled recently in an area of the store that has in the past been a big winner for them.
More recent collaborations have not shared the wild success of past fashion partnerships. TIME called the Target-Neiman Marcus collection an “epic retail fail.” Target introduced a collaboration with the Finnish designer Marimekko in the spring of 2016. The response from shoppers was lukewarm, as evidenced by the Marimekko-filled clearance sections.
5. Amazon and Wal-Mart
Who needs stores when you can order something online and have it delivered to your door that very day, as Amazon Prime Now does (in certain parts of the country)? Long thought to be a mom and pop problem, big dogs like Target are feeling the struggle from the e-commerce giant.
Target online sales are up, but so are their competitors.“Target being in line is not good enough,” JP Morgan analyst Chris Horvers said on CNBC, discussing how Target’s online sales growth is just keeping pace with competitors. “They’re playing catch up so they should be outperforming the market at this point.”
Wal-Mart’s attempts to spruce up their stores and get aggressive on grocery pricing may be paying off, too, as the retailer’s second-quarter sales rose 1.6 percent.
Do you still shop at Target? Tell us what you think.
Update 8/26/16: As several readers have pointed out, we may have missed an important point in our reporting on this story. Last spring, Target released a statement about its transgender-inclusive policy, noting that it would allow patrons to use the bathroom of the gender they identify with. In response, the American Family Association, a self-described “pro-family” nonprofit organization, launched a boycott against the retailer; an online petition it launched to support the boycott has nearly 1.5 million signatures to date. While Target has not pointed to the boycott as a factor in its drop in sales, the retailer is spending an additional $20 million this year to install private, single-stall bathrooms in locations around the country in response to backlash against its transgender policy.
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