Consumer behavior has shifted in recent years as inflation and high interest rates continue to wreak havoc.
An astounding 76% of Americans are slashing their spending this year, according to the second annual Wells Fargo Money Study, with 79% of millennials and 82% of Gen Z adults cutting back.
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Just as significant is that 60% of teenage consumers are reducing their spending. And these behaviors could explain why so many retailers are struggling.
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Joann, the iconic fabrics and crafts supplier, filed for bankruptcy in early 2025 and has since announced plans to shutter 800 stores. And home decor and housewares giant Kirkland announced store closure plans a few weeks ago in an effort to unload its least profitable locations.
Big-box stores have long managed to survive periods of economic uncertainty. Their vast selection of inventory under one roof is a draw for customers who appreciate the convenience and competitive prices.
But even big-box stores aren’t immune to consumer pullbacks. As it is, Walmart is projecting weaker sales growth in the coming year due to uncertainties related to consumer behavior. And this isn’t the time for big-box stores to grow complacent.
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There’s not a lot of room for error in big-box retail at a time when margins are tight and consumer loyalty is questionable. Major retailers need to get creative if they want to remain competitive.
Target has long maintained a consistent customer base. The retailer’s fans love the store’s home decor and clothing, not to mention the convenience of being able to grab a Starbucks latte as they roam the aisles.
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But it’s hard to overlook that Target is trading close to its 52-week low. That may have investors concerned ahead of its Q4 earnings report later in March.
Still, what Target has going for it is its hip, young audience appeal. Whereas shopping at Walmart is often regarded as a chore, shopping at Target is an experience. And the big-box giant is aiming to capitalize on that sentiment and grow sales by expanding one key product line.
Target has struggled over the past year.
Image source: Helen H. Richardson/The Denver Post via Getty
Target goes all-in on beauty
Target is expanding its in-store and online beauty product assortment, introducing 2,000 new products across 50 new brands. But unlike its shop-in-shop Ulta partnership, this time Target is focusing on affordability.
“We know consumers love shopping beauty at Target because it’s Tarzhay at its best: the combination of amazing products and prices you can’t find anywhere else,” said Amanda Nusz, Target’s SVP of essentials and beauty, in a statement.
Last year, beauty outperformed other categories at Target, with same-store sales in beauty growing 6% in the third quarter. Broadly, beauty sales grew by 3% across retailers, according to Circana.
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Expanding its beauty line is an optimal strategy for Target given its inherent competition with Walmart. That said, Walmart is no fool and has hopped aboard the beauty bandwagon, too, as evidenced by its shop-in-shop partnership with Space NK.
Target’s new beauty products will start at the very palatable price point of $1.29, with 90% of new arrivals coming in at under $20. It’s a strategic hedge given Ulta’s higher price points, and given consumers’ more generally cautious outlook in today’s economic environment.
Expanding its beauty line isn’t the only strategic move Target is making. The big-box giant just announced plans to partner with eyewear giant Warby Parker.
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Once again, Target will use its proven shop-in-shop model to offer customers affordable glasses, eye exams, and vision tests. The first five Warby Parker locations at Target are slated to open in the second half of 2025.
The introduction of a notably hip brand like Warby Parker aligns with Target’s strategy to capture and capitalize on a younger shopping audience. But Target still has some key weaknesses to address, such as disorganization within its physical stores.
The big-box giant also didn’t do itself any favors by rolling back its DEI promises. Alienating a potentially large portion of its customer base is far from wise at a time when retailers – even the ones who seem to dominate – are still vying for consumers’ money. The hope is that this expansion of budget-friendly beauty products will help Target get back in customers’ good graces.Â
Maurie Backman owns shares of Target.
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