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Target Brand Is Off Target

05/06/2014

UnknownRight now the Target brand hangs in the balance.

It’s almost hard to believe that the $72 billion dollar a year retailer has performed as poorly as it has.

Since 2010 sales have increased 11%. At the same time gross profit limped to an 8.4% improvement.

What the heck happened to Target? The recent diminution of the Target brand won’t be as easily fixed as just showing the door to former CEO Gregg Steinhafel.

Not long ago the Target brand carried a strongly innovative vibe that differentiated it from Walmart and other dowdier retailers, relying on a strong stable of private-label designers, featured designers like Isaac Mizrahi, clean store layouts and hip and clever marketing to achieve the cut above its rivals. And results showed this success. Steinhafel, CEO of Target since 2008, presided over much of it.

There’s no need to go into the chinks of failure using 20/20 hindsight. The data breach of last holiday season, two website crashes in 2011, combined with hemorrhaging $950 million on the Canadian expansion along with the tepid financials highlighted above were enough to make the board act. And so they did.

Clearly though the data breach was the straw that broke the back. While it was first reported that as many as 40 million customers were affected, the number quickly grew to include some additional 70 million customers. But a month after the initial hacks were made public and what is hurt Target’s reputation/Steinhafel’s position was how the company managed the aftermath of the breach.

According to an article on the Huffington Post, Target’s “Buzz score”, a measurement of brand popularity developed by polling site YouGov, dropped by 35 points to -9 on Dec. 20. By that Monday, the score had gone down to -19. Looking at the graph above tells an amazing story.

I have been critical of the many retailers who hire non-retailers as CEO’s. It just doesn’t work. In Target’s case the new CEO needs not only to be an astute retailer but a brand builder. That’s a rare but spectacular combination. And the only thing that will move Target out of the quicksand quickly.

I wonder if Mickey Drexler is ready for a new challenge?

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