Target’s Decline: Customers Losing Faith Amid Stumbles

As Mary Molina prepared for a road trip in early 2024, she noted a shift in her perception of Target.

The Westchester, New York resident, who juggles life as a mother of five and running a business, observed that her weekly visits to Target were no longer as enjoyable as they had been prior to the Covid pandemic. She began to notice frequent shortages of popular items like national brand laundry detergents and shampoos, while the demeanor of store employees seemed less inviting as they focused more on fulfilling online orders than engaging with customers. In her search for trendy seasonal items, such as swimsuits and sandals, she described the selection as “a sea of generic.”

“It was a small evolution, and then one day, my husband said, ‘Let’s stop at Target and then we’ll go to Rhode Island,'” she recounted. “And I said, ‘What for?'”

Molina’s experiences reflect a broader trend of diminishing customer loyalty towards Target, challenging its business model and contributing to slow sales growth.

Once celebrated for its distinctive and stylish approach to big-box retail, Target now finds itself grappling with declining foot traffic, inventory mismanagement, and customer dissatisfaction. Since peaking in late 2021, Target’s shares have plummeted approximately 61%. This downturn follows a significant surge in sales during the pandemic, which saw Target’s revenue increase by over $15 billion in the fiscal year following the onset of Covid. However, the company’s annual revenue has stagnated over the past four years, leading Target to project further sales declines this year.

Target executives characterize the current downturn as a temporary setback, attributing it to external factors such as rising inflation. They express optimism about the company’s long-term vision. In May, Target attributed slower sales to decreased discretionary spending, uncertainties related to tariffs from the Trump administration, and backlash against recent reductions in its diversity and inclusion initiatives.

However, feedback from customers, former employees, vendors, and analysts highlights deeper issues at Target, suggesting the retailer’s unique characteristics have eroded. Observations included a decline in the appealing merchandise, attentive customer service, well-maintained stores, and a commitment to diversity.

Several former employees, speaking on condition of anonymity, cited a decline in store standards as Target adjusted its workforce to accommodate a growing online retail operation, resulting in frequent stock shortages and diminished customer service. They also commented on how cutbacks in diversity initiatives, alongside cost reductions, have negatively impacted employee morale and workplace culture.

“They have kind of lost their identity,” remarked one former employee, who left the company after nearly a decade for a competing retailer.

The responsibility for revitalizing Target will largely fall to its new chief executive. Current CEO Brian Cornell, aged 66, extended his tenure for three additional years as of September 2022, although the company has not announced when his contract concludes or who will take over his role.

Speculation looms among investors regarding Cornell’s successor and the potential impact of this decision on the company’s direction.

Assuming the leadership position in 2014 during another challenging period for the retailer, Cornell succeeded ex-CEO Gregg Steinhafel, who resigned following a substantial data breach affecting millions of customers.

Target remains optimistic about its potential for recovery, investing in store refurbishments and planning to open 300 locations over the next decade. Though the company declined to provide interviews for this piece, Cornell communicated through a statement that Target is built for sustainable, profitable growth, leveraging both its physical locations and digital advancements.

“Backed by strong assets, proven capabilities, and a talented team, we’re confident in our ability to accelerate near-term performance while continuing to innovate and serve our guests—today and in the years ahead,” he stated.

In an effort to revitalize the brand, Target recently announced the establishment of an Enterprise Acceleration Office, aimed at fostering innovation and boosting sales. They appointed Chief Operating Officer Michael Fiddelke, a veteran employee with over two decades at the company, to spearhead this initiative, with Fiddelke also viewed as a possible candidate for Cornell’s eventual succession.

This adjustment coincided with the exit of two key executives: Chief Growth Officer Christina Hennington, who is often mentioned as a CEO candidate, and Chief Legal and Compliance Officer Amy Tu, who had been with Target for less than a year.

Target became known through organic word-of-mouth and social media as the go-to destination for trendy, affordable fashion. Its innovative merchandise strategy, featuring exclusive brands and designer collaborations, often resulted in shoppers leaving with far more than they had originally planned to purchase.

The retailer’s appealing aesthetic led to playful nicknames like “Tarzhay,” suggesting an air of sophistication reminiscent of French fashion.

Target transformed its expansive stores into vibrant shopping experiences, offering amenities like Starbucks cafes, allowing customers to leisurely browse for everything from home decor to clothing. Additionally, its user-friendly curbside pickup helped busy consumers easily grab essentials without leaving their vehicles.

At its market cap peak in July 2021, Target was valued at approximately $129 billion, fueled by retail therapy during the pandemic as consumers spent their stimulus checks. However, that market cap has since plummeted to about $47 billion.

As a retailer primarily known for discretionary goods, Target has felt the impact of high inflation and economic uncertainties more acutely than competitors. Walmart, as the nation’s top grocer, derives only 40% of its sales from discretionary categories, in contrast to about 50% at Target, according to GlobalData Retail estimates.

Analysts, former employees, and even Target’s own executives acknowledge that the challenges facing the company extend beyond economic factors. During an earnings call in the spring, company leaders conceded they were losing customers.

In the first quarter, Target managed to hold or gain market share in just 15 of its 35 merchandise segments, indicating losses in most other categories, according to Chief Commercial Officer Rick Gomez.

The decline in product appeal has driven some consumer losses, noted Stacey Widlitz, president of SW Retail Advisors. “They’re not as edgy as before,” she remarked.

Widlitz also highlighted that recent collaborations with brands have been less exciting than in previous years, with new partnerships featuring brands that lack the allure of earlier collaborations.

For instance, Target’s spring launch with Parachute, a home goods brand facing its own struggles, lacked the appeal of past tie-ins. Additionally, the upcoming line with Champion, formerly dropped from Target’s roster, raises questions about the company’s current brand strategy.

Nonetheless, Target points to successful collaborations as evidence of enduring appeal, citing a recent collection with Kate Spade as its most successful designer partnership in a decade.

Efforts to refresh the brand image are underway, including testing Warby Parker pop-up shops in select locations this year. Gomez expressed optimism about the upcoming Champion collection, describing it as a quintessential representation of the “Tarzhay” identity.

However, even the Kate Spade line faced criticism on social media, where shoppers questioned some items, such as Target-branded garbage bags priced at $10, suggesting a loss of design sensibility.

Some suppliers have indicated that in a bid to enhance profitability, Target is favoring private label and established national brands over more daring emerging products. An executive, who spoke on the condition of anonymity due to the sensitivity of the topic, emphasized that this approach carries the risk of overlooking innovative new brands.

“If people feel like they’re not getting what they expect from Target, then there’s nothing special at Target for them,” the executive stated, questioning customers’ motivations to choose Target over competitors like Aldi.

High inflation has compelled Target to lower prices to attract customers. However, the company faces the challenge of appeasing investors while maintaining profitability, as operating income margins have dipped below usual thresholds since the pandemic.

Widlitz pointed out that Target has entered a cycle of discounting merchandise to stimulate sales, a trend that began in mid-2022 to clear excess inventory that consumers no longer desired. The company noted that roughly half of its goods are imported, complicating profitability amid rising tariffs.

Notably, Target has announced significant price reductions on 10,000 household staples, such as laundry detergent and baby wipes, as part of a strategy to win over cost-conscious shoppers and better compete against Walmart and off-price retailers like T.J. Maxx.

Additionally, Target has sought out new revenue streams with higher profit margins, expanding its advertising platform, Roundel, and its third-party online marketplace, Target Plus. Both segments reported double-digit growth in the fiscal first quarter.

Meanwhile, competitors are intensifying their strategies, learning from Target’s successful playbook. For example, Walmart has rolled out trendy private brands, including a new tween-focused clothing line, which has gained traction among young consumers.

In terms of market share, Walmart has successfully captured customers that previously frequented Target, according to Indagari, a data analytics firm that evaluates consumer behavior through transaction data. Following customer departures from Target, around half shifted their purchasing habits to Walmart, while 30% continued to shop there for subsequent purchases.

Target’s customer base has also increasingly sought alternatives like Costco, Aldi, and Trader Joe’s over the past five years, according to the same analytics.

Furthermore, emerging competitors such as Shein and Temu have begun claiming market share from Target, with the percentage of Target’s customers shopping at Shein rising from 5% in early 2021 to nearly 10% by early 2025.

Many of Target’s struggles can be attributed to its earlier successes.

During the fiscal year 2020, sales surged considerably due to the pandemic, outperforming the company’s total sales growth over the preceding 11 years.

However, this rapid expansion also brought about challenges that continue to hamper Target’s progress. Inventory issues have persisted well above the pandemic era, with the company reporting an 11% year-over-year increase in stock levels during the latest quarter, which negatively impacted profits due to excessive markdowns and canceled orders.

Shoppers have suggested that Target has lost its edge in providing a clean and user-friendly shopping environment. Molina, for example, has turned to Walmart and Amazon for more of her purchases, visiting Target only once every couple of months rather than weekly.

As the founder of a nutrition bar company called Lola Snacks, Molina initially extended goodwill to Target during the pandemic, but she noted that the situation never improved. On a recent visit, she observed empty shelves and a lack of employee assistance.

Frustration has grown among consumers regarding Target’s practice of locking up essential items like deodorants and razors to deter theft. This tactic drew criticism when Cornell claimed shoppers reacted positively to it, stating customers were thankful for product availability.

Barclays retail analyst Seth Sigman recently downgraded Target’s stock, indicating that the company appears to be alienating its most loyal customers. Analyzing transaction data revealed a significant downturn among shoppers who frequented Target more than eight times a year.

On a May earnings call, Cornell emphasized Target’s dedication to basic retail principles, ensuring stock availability for customers. Fiddelke also reassured shareholders that inventory levels had improved compared to the previous year.

Target’s digital sales soared during the pandemic, creating both opportunities and complications. The e-commerce segment experienced substantial growth, rising from about $6.8 billion in the fiscal year ending in early 2020 to nearly $21 billion in the latest fiscal year, marking a 200% increase. The retailer’s Drive Up curbside pickup service now comprises nearly half of its total digital sales.

In response, Target has introduced additional conveniences, allowing customers to make returns or obtain drinks from Starbucks without leaving their cars.

However, two former employees indicated that Target has struggled to balance the demands of its brick-and-mortar and online businesses, leading to challenges in maintaining adequate stock levels in stores and a decline in customer service quality due to the focus on fulfilling online orders.

As Target faced stagnating sales, cost-cutting measures were introduced, resulting in reduced store staffing and lowering employee morale. Employees reported a decrease in recognition initiatives, including fewer incentives or social gatherings within stores, which have had a detrimental impact on team dynamics.

Employee morale issues have contributed to operational challenges, including an uptick in unfilled shifts caused by absenteeism, hindering the efficiency of in-stock performance and overall shopping experiences.

Alice James, a shopper from Austin, Texas, witnessed these declining store standards firsthand during her recent visit. While searching for bras, she noted disorganized merchandise and clutter scattered throughout the store—indicating a lack of attention to the shopping experience.

“There was once a joy in shopping at Target,” James said, reflecting on her experience. “Now, I don’t feel that excitement anymore.” Additionally, she expressed concern over Target’s decision to rollback various diversity initiatives, as this shift impacted her view of the brand.

James’s fashion consulting firm works with a small brand that lost opportunities when Target pulled its Pride merchandise two years ago. “It made you feel good to shop at Target,” she added, “but I don’t get that feeling anymore.”

This year marked a new precedent for Target, as it did not have a float in the Twin Cities Pride parade for the first time in nearly two decades.

The fallout from Target’s varying commitment to its diversity initiatives has led to diminished loyalty, particularly among customers disenchanted with the company’s stance on its Pride merchandise.

Over the past two years, Target has retracted elements of its diversity and inclusion strategies, pulling back on its Pride offerings after employee safety concerns were raised. Furthermore, it rolled back major initiatives after the Trump administration’s directives earlier this year.

Simultaneously, the retailer has faced frustration from conservative customers concerning its sale of Pride-themed children’s items and tuck-friendly swimsuits for adults, drawing contrasting reactions from differing consumer factions. Further complicating its position, Target recently made headlines for donating $1 million to Trump’s inauguration—its first contributions to a presidential event in over a decade.

Determining the precise impact of these social and political decisions on Target’s sales decline is challenging, especially given that revenue had plateaued before the controversies. Nonetheless, the company’s leadership acknowledged negative customer feedback regarding its diversity policies in the spring.

In response to growing concerns, Cornell has engaged with civil rights leaders, signaling a recognition of potential backlash from boycotting consumers.

Initially, shoppers clearly understood Target’s brand identity, but that clarity has eroded for some in recent times. Twin Cities Pride severed ties with Target following the reduction of its diversity initiatives, a notable shift for a brand once synonymous with support in the community.

For years, Target donated approximately $50,000 annually to the nonprofit organization behind the Twin Cities Pride parade, in addition to providing goods and services for events. Yet disappointment over Target’s recent decisions prompted the nonprofit to withdraw support, prompting fundraising efforts to replace the funding gap.

According to Placer.ai, analytics data shows that Target’s store traffic has generally declined every week year-over-year since January 27, shortly after the company’s DEI announcement. In contrast, the previous month showed increasing customer visits.

Michael Lasser, a retail analyst for UBS, noted the emotional bonds many customers have developed with Target over the years amplify their reactions to the company’s decisions. “Customers hold strong sentiments towards Target,” he said. “That intensity elevates the stakes as divisive issues arise.” 

The employee who departed Target after a decade echoed this sentiment, describing the upheaval surrounding the company’s diversity initiatives as surprising after witnessing progress toward social causes. “We had invested so much time and effort into those programs,” the former employee lamented. “Then it all changed without warning.”

This shift contradicted previous positions emphasizes the retailer’s commitment to progressive stances, such as allowing customers to choose restrooms and changing rooms that align with their gender identities. Following high-profile incidents of racial injustice, Target elevated its commitment to diversity and social equity, proposing greater diversity for its workforce and suppliers while allocating significant funds to social justice organizations.

As Cornell and his team adapt to shifting sentiments, it remains essential for them to understand the complexities of rebuilding trust. The community’s perception of Target has shifted dramatically, with many feeling misled. “If Target wants to reclaim the image it once had, it will take substantial efforts to repair past damage,” stated Otto, a previous frequent shopper who has not visited a Target store since announcing the changes.

— Finance Newso’s Robert Hum, Nick Wells and Natalie Rice contributed to this report.