Target's Revenue Has Stagnated: How Strong Positioning Can't Save You From Everything

Today, I'm looking at Target (TGT). The retail giant who's brand positioning maybe have turned into a liability.

The not-so-pretty numbers:

• Revenue peaked at $109B in 2022, now down to $106B (3% decline)

• Four straight quarters of comparable sales declines

• 2022 inventory disaster cost them 87% of operating profits in one quarter

• Discretionary spending down as inflation-pinched customers choose experiences over stuff

But here's what caught my attention:

• The positioning play: Even while bleeding revenue, "affordable style" remains a defensible $100B+ strategy

• Inventory lessons: Their $1.1B overstocking nightmare in 2022 offers brutal lessons in demand forecasting

• Consumer shift insight: Target's pain reveals how customers now prioritize services over goods post-pandemic

• The data goldmine: Their Roundel advertising business still pulls $2B annually by monetizing customer insights

Why this matters for your business: Target's recent struggles prove that even strong positioning can't save you from macro headwinds and inventory missteps. But their recovery playbook - aggressive markdowns, supply chain flexibility, and doubling down on core strengths - shows how to navigate through tough periods.

With that, I'll talk to you tomorrow.

Nick

TL;DR

• Business Model: Target operates 1,900+ stores generating $106 billion annually through "affordable style" positioning

• Sweet Spot: Carved defensible niche between Walmart's low prices and department store luxury via designer partnerships

• Secret Sauce: 175+ designer collaborations over 20 years plus $31 billion private label portfolio creates differentiated experience

• Key Insight: Proves you don't need to be biggest or cheapest to win—own a specific customer position and execute relentlessly

• Entrepreneur Lesson: Strategic partnerships and consistent brand positioning can create competitive moats even against larger rivals

The 30,000-Foot View

Business Model: Retail merchandise sales across 1,900+ stores and digital channels, supplemented by Roundel advertising platform and credit card revenue.

Revenue Sources (FY2024):

• Beauty & Household Essentials: 29.2% (~$31.3B)

• Food & Beverage: 22.3% (~$23.9B)

• Home Furnishings & Décor: 18.2% (~$19.5B)

• Hardlines: 16.5% (~$17.7B)

• Apparel & Accessories: 15.4% (~$16.5B)

Key Stats: $48.10B market cap, $105.88B TTM revenue, 28.1% gross margin, $4.07B net income, 400,000+ employees

Company History

1902: George Dayton founded Goodfellow Dry Goods in Minneapolis with quality and community values

1962: First Target discount store opened, designed for better aesthetics than competitors

1990s: Pioneered "cheap chic" strategy with designer partnerships for differentiation

2013: Massive data breach affecting 110 million customers forced security overhaul and CEO departure

2015: Shuttered all Canadian stores after $5.4 billion loss, learning painful international expansion lessons

2020s: Accelerated digital transformation with AI implementation and Target Plus marketplace expansion

Show Me the Money

Stand-out Features:

• Business has stabilized but growth has stalled

• Margin recovery from 24.6% to 28%+

• Debt reduction shows financial discipline

Financial Data

The N.O.O.B. Nine — Competitive Powers

The Nerd Out on Business Nine is made up of Hamliton Helmer's famous "7 Powers" of competitive advantage (Scale Economies, Network Economies, Counter-Positioning, Switching Costs, Branding, Cornered Resource, and Process Power) combined with two of my own (Data Flywheel and Distribution Advantage).

Average Score: 3.3/5 - Moderately strong but vulnerable position. Differentiated brand and partnerships provide advantages, but lacks decisive scale or network effects.

Memorable Marketing

"That Target Feeling" (2024): User-generated content campaign featuring reimagined Michelle Branch song leveraged 50,000+ daily social mentions. Channels: Digital, streaming, social. Takeaway: Transform genuine customer enthusiasm into campaign content.

"Kris from Target" Holiday Campaign (2024): "Weirdly hot" muscular Santa became viral sensation with Jimmy Fallon coverage. Channels: TV, social media. Takeaway: Create cultural moments people want to share, not just product ads.

Target Circle Week: Kristen Wiig's SNL "Target Lady" character drove 36 million new enrollments. Channels: 12 TV spots. Takeaway: Leverage existing cultural equity strategically.

Tactical Takeaways:

• Mine your brand mentions for authentic marketing material

• Master "accessible premium" positioning through smart partnerships

• Design campaigns for virality and shareability

• Build long-term platforms that compound over decades

• Use nostalgia strategically while staying modern

AI Uses & Opportunities

Current Implementation:

• Inventory System: 360,000 transactions/second processing with ML identifying "unknown out-of-stocks"

• Store Companion GenAI: Deployed to all 2,000 stores in 6 months for employee assistance

• Roundel Precision Plus: AI ad optimization delivering 35% sales growth for brands

Future Value Creation:

• Computer vision for automated shelf management

• Predictive analytics reducing inventory costs

• Roundel expansion from $2B to $4B by 2030

• Target Plus marketplace growth to $5B using AI curation

• Premium AI services for Circle 360 members

Bumps in the Road

2013 Data Breach: 110 million records compromised, costing $162M+ and CEO job. Lesson: Third-party vendors create massive security vulnerabilities.

Canada Failure (2015): $5.4 billion loss from rushed expansion with empty shelves and IT failures. Lesson: Infrastructure must scale before stores.

Pride Backlash (2023): Conservative protests over Pride merchandise led to 5%+ Q2 sales drop. Lesson: Culture war positions have no safe middle ground.

Organized Retail Theft: $500M additional losses in 2023 forced 9 store closures. Lesson: Macro trends require industry-wide solutions.

Your Swipe File

1. Own a Specific Position: Target proves you don't need to be biggest or most convenient. By owning "affordable style" for 20+ years, they built a $100B business between Walmart and Amazon.

2. Turn Constraints into Features: Unable to match competitors on price or selection, Target made curation and design their differentiator. Your limitations often point to biggest opportunities.

3. Platform Beats Campaign: While individual campaigns go viral, Target's real power comes from consistent platforms like designer collaborations that compound value over decades.

4. Data is Your Second Product: Roundel generates $2B by monetizing customer insights. Every business should ask: "What valuable data do we create, and who would pay for it?"

5. Be Nimble: In fast-changing markets, quick iteration often beats perfection. Did Target drop the ball as customer sentiment become more cost-conscious? I tend to think they’ve carved out a long-term attractive niche but time will tell!