News of Target CEO Gregg Steinhafel's abrupt resignation has rocked the retail world, and while much of the focus is rightly on Target's data breach as the reason why, it's by no means the only reason. Target, it seems, is in need of a turnaround.
It's a bit shocking to see "turnaround" and "Target" in the same sentence. This is a retailer that rarely misfires. Sure there have been some misses (Target + Neiman Marcus?) and a bad quarter here and there, but Target has mostly been a very steady retail performer.
But it has been a brutal year for the chain and Steinhafel's departure has some wondering if the next hire will be a turnaround specialist, because it's becoming clear that a turnaround is needed.
How did Target get here? For years, it's been slowly and steadily walking a well-designed path. It was founded in 1962 as an offshoot of the Dayton department store chain, the same year that Walmart and Kmart each opened their first store. Each was a discount department store but with distinctly different visions and growth trajectories.
Kmart grew the quickest, but developed its own set of problems. Today, it's rare to mention that once powerful discounter in the same breath as Walmart and Target, or at all. Target and Walmart are still powerhouses today, appealing to different types of shoppers and often operating in different markets.
Walmart stuck to rural areas and developed the everyday low price (EDLP) operational practice, while Target remained true to its department store roots and focused on developing an upscale image at low prices. Walmart expanded quickly in both the U.S. and foreign markets, but Target took its time. Today, Walmart operates nearly 11,000 stores globally compared to Target's nearly 1,800 U.S. locations and 124 Canadian units.
And while Walmart ventured outside the U.S. in 1991 with a first store in Mexico, Target waited until 2013 to enter Canada.
And blew it, big time. Empty shelves and inventory issues added up to nearly a $1 billion loss last year.
Target is in need of some new and exciting merchandising initiatives, and a more cohesive online experience. Offering click and collect is a great move toward omnichannel excellence, but it's not enough. Not now, when Walmart is opening drive-through grocery pickup and Amazon promises same-day delivery in an increasing number of markets.
For decades, Target's slow and steady pace made it a favorite among shoppers and investors, but slow and steady isn't cutting it. Not anymore.
Steinhafel's tenure saw plenty of positives and the suddenness of his departure took many by surprise. But if it's any indication as to how swiftly the board is willing to move, it won't be difficult to put Target back on course. –Laura