The Real Reason Target Is Failing While Walmart Prospers

Forbes

5 hours ago

The Real Reason Target is Failing While Walmart Prospers
The history of modern retail is often the history of the people who founded the companies that became household names.
As such, you might say that many legendary, successful brands have souls or a set of basic principles that somehow outlast their founders. It also follows that there is often a price to pay when companies lose or sell their souls or stray from their principles.
For example, Ray Kroc gets credit for growing McDonald's into a global phenomenon but it was the founders—McDonald brothers Richard and Maurice—who came up with the Golden Arches design and whose obsession with operational efficiency remains the North Star of the company's management today. When McDonald's tried to introduce salads and gourmet sandwiches in the early 2000s, customers balked and the stock price cratered. It took three years of getting back to its principles for the price to recover.
Target, the struggling discount department store, is the latest example of a brand that has lost its soul.
The principal behind the 1962 launch was co-founder Douglas Dayton, grandson of the founder of Dayton's, a popular up-scale chain of department stores in the Midwest. Target began as a discount store that aimed to 'combine the best of the fashion world with the best of the discount world.'
The logo represented 'hitting the mark'—the quality/value sweet spot.
The approach worked so well that by the 1990s customers had conferred on it the Frenchified sobriquet 'Tar-jay' which, according to one industry observer, signaled, 'It's cheap but attractive, it's common but somehow chic, it feels easy and guilt-free.'
In 1995, to compete with Walmart's growing fleet of supercenters, Target began adding grocery sections to its big box stores. The case could be made that it was the moment the company began to stray from its roots.
Target had no DNA in the food business. Grocery stores operate on the thinnest of margins and chic or attractive has nothing to do with marketing commodities like eggs and bread. Target was trying to be Walmart and Target at the same time.
Walmart—also launched in 1962—began as a general merchandise discount store in rural Arkansas, at the time possibly the least-chic place in America. The company's motto: "Everyday Low Prices,' or 'Always.' The first Walmart Supercenter opened in 1988 and included the now-ubiquitous full-scale grocery section.
Walmart, which is today still significantly owned by descendants of founder Sam Walton, did not try to be Target by, for example, up-scaling its general merchandise. Instead, it built its grocery business into a juggernaut of sales—nearly 60% of its 2025 revenue of $681 billion. Although general merchandise is where Walmart generates the bulk of its profits, the grocery aisles drive foot traffic.
Examples of consumer-facing companies that have lost their way abound. As we noted last year, Starbucks founder Howard Schultz came out of retirement twice—in 2008 and again in 2022—to rescue the company after it had drifted away from its community-centric marketing and store culture.
You also don't have to look far to find examples of companies that have managed to nurture a good idea or business model for the long term. In many cases, what helps sustain a brand are significant shareholders who are members of the founding family, as in the case of Walmart. Target shares are widely-held, mostly by institutional investors, and there apparently are no Dayton descendants around to influence how the company is run who keep it true to its heritage.