Bob's Gutsy Leadership Blog

Target: Another Example of Ignoring the Obvious

Over the years it’s surprising to see large successful companies, like Kodak and Blockbuster, stare into the reality of important new business trends, like digital photography and the evolution of VHS tapes to CD’s to streaming, and then do nothing.  These companies get wiped out because they are tightly wed to their current business model while the world passes them by.

While it’s happening on a much slower time scale, retail shopping is going through a similar evolution.  The emergence of online shopping has been very clear for the last 10 years.  Smart retailers, such as Best Buy, saw their business beginning to suffer and quickly and dramatically changed their business model.  In the case of Best Buy, it’s a combination of stores where you can check out the products, in combination with a terrific website for online selection and ordering with extremely fast delivery.  Cleverly, they are using local stores as warehouses as well as retail outlets, resulting in a high percentage of delivery times of two days.  The stock price of Best Buy over the last three years has gone up 52%.

For the last ten years, the low to mid-tier retailer Target has virtually ignored online shopping.  In fact, it continues to focus primarily on stores, very recently announcing a multi-billion dollar program to modernize 600 of its 1,800 locations and open more than 100 small format stores.  In recent years, they initiated an intensive online shopping effort, and are attempting to employ the Best Buy model of using stores as online distribution centers, but it’s late; Target is even behind Walmart.  Up until about 2 years ago, their bricks-and-mortar focus was serving them well.  More recently, things have gone downhill.  Specifically, Target stock is off 29% versus 12 months ago and is now below its stock price of 10 years ago.

There is no question that bricks-and-mortar retailers are suffering as fewer consumers are stepping foot into actual stores; more and more they are opting to shop online.  Department store sales in January fell 3.2% from a year earlier, continuing a downward trend for much of the past two years according to the U.S. Commerce Department.  Conversely, sales at non-store retailers, a category that includes online shopping and is dominated by, rose 12%.

Stepping back, the lesson is very clear.  Human beings are wired to sit back and enjoy any kind of success they achieve.  Success generates pride which can become a crippling mentality.  It often causes the individual to ignore the reality of what’s coming at them.  Target is simply the latest victim.

As a leader, your challenge is to realize that as soon as you achieve any level of success, it is time to start all over and begin to look for the next mountain to climb!

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