retail news in context, analysis with attitude

Responding to yesterday's breaking news story about Gregg Steinhafel being out from the chairman/CEO job at Target, one MNB user wrote:

It was time for Gregg to leave Target.  We’ll soon learn if the delay was caused by finalizing a buy-out package or just simply waiting until the firestorm was over (i.e. the same departure plan for Kathleen Sebelius, when she departed the Cabinet post over the flawed ACA rollout debacle). Or, figuring out if Bob Ulrich wants to come back…

Most in the MNB community like Target because readers shop in / identify so well with their stores, which are more focused on higher income guests (shoppers). We all want TGT to win. However, there are at least eight challenges that lie ahead for the new CEO:

• Inventory leadership – TGT has admired the inventory problem far too long and needs to deal with the in-stock issues and metrics they use. Even internals inside TGT know the metrics aren’t legit.

• Culture – TGT doesn’t take enough risks. There isn’t enough being done in certain categories (like men’s softlines, seasonal, sporting goods and others). What is both a strength and a weakness at TGT is the willingness to innovate, risking that the TGT brand might feel some impact.  Men’s softlines have been horrible for years – even Costco is innovating in this space faster than TGT. “Exclusive at TGT” items are managed horribly – pumpkin M&M’s being the bellcow here since they are a couple years into this program and still can’t get inventory right.

• Canada – Counter to my point above (where in fact risk was taken) Canada needs a re-think. I was recently in a couple of their stores and counted more teammates than guests on a payweek Friday. They made the same mistake as many global retailers who venture into their first international market by trying to recreate their home market stores. That works near the border – but it doesn’t work the further you get away from the border. They may need to retreat (I hope not) but for certain they need to “get local”.  John Morioka, Head of Merchandising for Canada, who’s considered a fast-track leader, seems to have his hands tied. John’s a better merchant than what the Canadian stores show right now.  The “A” team in Canada isn’t getting the job done. I don’t believe it’s their capability nor capacity….

• Role of Private / Captive Brands – Gregg has been heavily focused on driving private brands which is not a bad thing unless your core shopper decides to shop elsewhere, which, is exactly what is going on right now. This is the time for Brands to play a major role in helping TGT regain their core shoppers. (But, there’s only so much soda TGT guests will buy, so running another “5/$10 12 pack offer” isn’t going into home but rather every caterer…hardly the core guest.)

• Start paying attention to Vendors which aren’t the Top 20 but can innovate too – The “bigs” get preferential treatment at TGT. No one admits it but the reality is that when TGT HO teammates are stretched, it’s easier to leverage the large vendors  than to have to see the second / third tier of vendors (for something other than a “create my Private Label” discussion).

• TGT Online – Pitiful doesn’t even begin to describe the current offer and alignment with stores. Gregg gets his panties in a wad around how one large vendor is managing Amazon vs. TGT – but candidly he didn’t make online a priority. Someone needs too. Quick.

• Formats – “city” is an interesting idea in Minneapolis but not in many other cities. The new CEO needs to “fix the core” and worry less about small box TGT. It doesn’t seem likely the economics will work anytime soon. However, given the growth of small box retail, this is a focus area but the core needs to be sustainable first.

• Credit – I’ll shamelessly repeat myself: Gregg could have prevented this problem by issuing TGT Chip cards long ago. (Like the rest of world uses….) In this case, differentiation would have saved his job. I guarantee you that other retailer leaders can thank Gregg for making IT a stronger focus in their company.

The new CEO begins with some strengths, namely that they have a smart, young, hard-working culture inside Minneapolis HO, which are data-driven and brand-centric.  Core guests want a reason to go (back to) Target; they really don’t want to shop WMT. For the most part, the real estate is well situated. TGT have some good marketing vehicles, even if over-priced. Their enterprise can easily “sell more” and sweat the existing assets easily.  It’s a good time for a new CEO to make the right changes. (S)he should find it easy to quickly implement a change culture.

I fear the Board will pick Ulrich to come back, under the heading of “stability with a leader we have history with, who got us here and will help us with succession”. I think it’s a better idea to get someone from an international market who’s dealt with much of the above. I can think of a couple of names (as you can, Kevin).


I commented yesterday:

I happened to be in a Connecticut Target store over the weekend, and I will tell you this - it was one of the crappiest big stores I've ever been in. The workers were ineffectual and lacked any sort of inventory knowledge, the shelves were only intermittently stocked, the displays lackadaisical, and the general experience was enough to make my skin crawl. I'm sure that every store is not this bad, but I'm equally sure that this store is not an outlier - there probably are plenty of stores in equally lousy shape.

I walked away from that store thinking that somebody needed to be fired. I didn't necessarily think it would be the CEO.


From another reader:

I have visited several Target Stores in NJ, as both a shopper, and a CPG professional, and I must say that your CT store experience is certainly not “an outlier”.

I’ve been awestruck at the amount of O-O-S in the HBC area, OTC’s most notably, to the point that my family no longer considers Target as a destination for our OTC needs.

While the pricing of OTC’s is great compared to chain Drug, wasting the time and gas to get to the store only to find the items needed as unavailable is a huge sales deterrent. Sales Prevention 101.

Whomever replaces Steinhafel as CEO hopefully has the foresight and vision to “get it right at the shelf” as a prime focus area.


And another:

KC, I read your Target review and I must say the two stores near us in Austin TX are rather impressive. They are always clean and presentable, with fully stocked shelves most days of the weeks. As good as any other store in this area including the high priced Whole Foods. What is most impressive about Target is their line of private label brands....exceptional ! Cannot speak for other areas and/or how management functions overall, but if these stores are an example of what could be...the foundation is strong.

We'll see.
KC's View: