Earlier this week, Target reported some disappointing news to its investors: The retailer missed sales and earnings expectations at the end of 2016. Perhaps most worrisome is that fact that same-store sales were down 1.5 percent—something Brian Cornell, Target’s CEO, called “unexpected” and attributed to “rapidly changing consumer behavior.” Moreover, the company’s 2017 projections weren’t promising, with a low-to-mid single-digit decline in sales expected this year. The result of this bevy of bad news led to the largest ever one-day decline for the company’s stock.
One reason Target’s store sales are declining is that, like many big-box stores, the company is locked in competition with Amazon. As online retailers and shipping companies became more aggressive about shipping large and bulk items in recent years, retailers such as Target lost one of the few remaining competitive advantages they had. According to Target’s 2015 annual report, the company’s most lucrative sales category has been household essentials, which accounted for 26 percent, or $19 billion, of its $73 billion in annual sales. But those sales too are threatened by online retail. Since Amazon Pantry launched in 2014, an estimated 60 million Prime members can now get their toilet paper and groceries delivered for a small fee. And that’s not to mention Target’s other major competitor in this area: Walmart, which boasted a 1.8 percent increase in sales and increased traffic in its grocery-focused Neighborhood Market stores.