Target Adapts Sales Strategy Amid Evolving Market Trends

Target is presently suffering from major economic losses and public outcry due to decision-making in its diversity, equity, and inclusion (DEI) policies and continued impacts of coerced trade tariffs implemented during the Trump administration. Target has been hit with a drastic decline in sales, organized boycott, and increasing operational expenses attributed to its international supply chain.

Target saw its same-store sales dip by 3.8% in the most recent quarter. The layoffs followed the firm's decision to slash its DEI programs, such as scrubbing minority hiring targets and disbanding its executive DEI board. This followed shortly after a Trump-era executive order to constrain corporate DEI activities was revived. The policy reversal disappointed sections of Target's clientele who had earlier been taken in by the brand's liberal image, especially after its public display during the 2020 George Floyd crisis.

The policy reversal led to a 40-day countrywide boycott during the Lent period led by religious and civil rights organizations. The boycott mobilized wider outrage by customers who felt Target was dropping its diversity and social responsibility slogan. The reported action engaged more than 200,000 people and was said to have a quantifiable effect on store traffic. Store traffic fell 9% in February, according to data analytics company Placer.ai, and subsequently dropped a further 6.5% in March when the protest was peaking.

As both sales and traffic at Target went down, the boycott had unforeseen implications for Black-owned businesses that are firm partners. Several such enterprises depend on Target's wholesale network and retail locations to sell into wider markets. With fewer consumer visits, exposure for these minority-owned labels lessened. Some public figures and businessmen reacted by pushing for a "buycott," encouraging customers to purchase Black-owned products within Target but not to boycott entirely.

At the same time, Target is under intense supply chain pressure linked to trade tariffs originally imposed by President Trump. Imposition and expansion of tariffs on Chinese and Mexican imports have cost Target about half of its product base, considering its dependency on foreign suppliers. Chinese imports now already have tariffs of up to 40%, while Mexican imports already have tariffs of up to 25%. The store has recognized the cost effect induced by those policies, as the added costs are not so easy to absorb or to pass onto the consumer without impacting sales. 

Target's higher percentage of discretionary-category items, including clothing, electronics, and home goods, is most exposed to price adjustments. Relative to others like Walmart, which have more stable demand for staples and groceries, Target has experienced a larger decline in shopper expenditures in price uncertainty times. Accordingly, the firm has started to introduce cost-containment measures like diversification of vendors and changing priorities in merchandise, though whose impacts take some time before they are realized.

In order to overcome the internal and external challenges, Target has created an Enterprise Acceleration Office and reorganized some of its leadership. It has reaffirmed its social responsibility pledge in keeping a $2 billion pledge for backing Black-owned businesses. But recovery of consumer trust and stabilization of financial performance continues to be a major challenge.

Other retailers have bifurcated in approach. For example, Costco has just rejected a shareholder proposal to scale back its DEI commitments, continuing its open approach. The retailer experienced a 22% increase in web traffic during the Target boycott, indicating that some consumers are bringing their dollars to brands that they view as socially conscious.

Target events illustrate the changing consumer expectations toward corporate social responsibility. Policy changes, and particularly those viewed as political or retrograde, can elicit immediate and concrete responses in customer loyalty and firm reputation. The Target case illustrates the growing role of consumer activism and the delicate balancing between business performance, politics, and social obligations.

As Target seeks to reposition both in the marketplace and in consumers' minds, the next several months will be a make-or-break period. The retailer will have to walk on thin ice at the nexus of economic constraint and reputational hazard, as it reacts to a more politicized and socially aware consumer. 

Source: Mixvale