Bullseye Blues

Gregg Steinhafel is out at Target:

In a statement Monday, the company’s board said that “after extensive discussions,” its members and Steinhafel “have decided that now is the right time for new leadership.” In addition to the breach fallout, the Minneapolis-based retailer has been racing to turn around a weak rollout in Canada, trying to catch up with rivals digitally and working to rebuild excitement among U.S. shoppers.

Target has hired a search firm to help find the next CEO, who will become only the fourth person in the job since 1984 and potentially the first outsider. Whoever it is will face a formidable fix-it list, even without the enormous bills coming due for the data breach.

“How do you reinvent Target in a highly competitive U.S. market in which you have retail competitors that provide maybe the same goods at lower prices, and you have online competitors who have a wider assortment and the convenience of online shopping?” said Mark Miller, equity research analyst at William Blair & Co.

As regular readers of this feature know, I worked for Target for about a decade; I left in 2003. Much has changed in those 11 years. At the time I left, Target was still in the department store business and online shopping was in its infancy. Eleven years on, Target still isn't very good at online shopping and competitors like Amazon are eating Target's lunch. Target's expansion into Canada has not gone particularly well. Meanwhile, Walmart has just put up a huge new store in Roseville, the birthplace of Target. And Target is still trying to recover from a data breach that put its customers at risk during the height of the holiday shopping season.

From my perch on the outside, a few things seem clear:

• The Star Tribune article points out what I see as the key problem at Target -- insularity. It quotes a retail analyst named Burt Flickinger, who sees what I see: “They’ve been operating with the loose air of superiority for far too long,” Flickinger said, adding that between the breach and Canada: “Target’s been giving Wal-Mart the biggest gift it can give.” This is spot-on. Target's corporate culture is exceptionally insular, even cult-like at times. Once you leave Target these things become clear.
• There are a number of potential internal candidates, and in a separate article the Strib identifies some of them, along with several other outsiders. I'd like to see someone from outside the company take over. The most interesting outsider name on the short list is Greg Sandfort, who is currently at the helm of Tractor Supply, a retailer that barely competes against Target at all, since its primary customers are farmers and ranchers. You wouldn't necessarily know it unless you pay attention, but TSC has become hugely successful over the last decade and now has well over 1000 stores, with locations in 48 states. If you wanted a fresh set of eyes to look at the business, Sandfort would certainly provide that. If it were me, I'd be looking at getting someone in who understands online retailing, though.
• Why an online expert? The data breach hurt Target's reputation, but the larger long-term problem for Target is Amazon. The type of customer ("guest," in Target parlance) that Target has long sought is tech savvy and is unafraid of using a website to buy goods. While there will always be people who prefer shopping in a brick-and-mortar environment, that demographic is increasingly a mismatch with the people Target would prefer to serve. Target's prototypical customer has always been a suburban mom with younger children. While we're not likely to run out of such folks, they have more options now than they did a decade ago and Target has been slow to recognize those changes.