Target’s CEO announced last week that investors should expect tough 2017 returns as the company invests in stores and more competitive pricing. Here’s my recent comment from RetailWire:
Walmart was criticized a couple of years ago for investment spending on its stores because it was likely to put a dent into short-term results. But the long-term view for WMT is brighter because of this decision, and Target is aiming for the same kind of outcome.
But Target has some specific challenges ahead that a store revamp won’t fix on its own:
1. The longstanding conflict between “cheap” and “chic”: Target needs to be more price competitive but has built its brand promise on more aspirational goods;
2. The continuing lack of traction in the grocery business, especially to drive more frequent visits;
3. The head start on e-commerce (and omnichannel) that its biggest competitors already have;
4. The company’s longstanding inability to keep its shelves and pegs filled.
I can’t overstate the importance of the last point. A trip to Target where a third of the shopping list can’t be filled is a waste of time, no matter how compelling or competitive the merchandise might appear.