Target's biggest problem isn't a customer boycott
Associated Press
The retailer recently revealed that shopper traffic is declining for the first time in years.
The decline immediately followed the start of a boycott against Target for its policy welcoming transgender customers to use any bathroom or fitting room that matches their gender identity.
But Cowen & Co. analysts say the real reason shoppers are abandoning Target is because they can find better prices and more convenience elsewhere.
According to the analysts, Target is losing the business of shoppers who visited the retailer for "fill-in" trips - or quick stops to get a small amount of items between larger "stock-up" trips.
Shoppers are cutting down on these "fill-in" trips to Target because they are finding cheaper prices at Walmart and more convenience with Amazon Prime, according to data compiled by Cowen & Co.
"Amazon is seeing explosive growth in several categories most notably grocery and consumables, which accounts for 45-50% of Target's business and are likely the categories feeling pressure from the 'fill-in' trip dynamics," the analysts wrote in a research note published Monday. "In our view, Walmart can use its scale to compete on price to regain or maintain market share vs. Amazon... but Target cannot compete as easily."
Joe Raedle / Getty
"In the second quarter, our No. 1 challenge was traffic, which affected sales in all of our merchandise categories," Target CEO Brian Cornell said last week on a call with analysts.
Target is planning to overhaul its grocery department to better compete with its rivals, but analysts say the changes will take too long to accomplish.
"The food section is facing increasing competition from Walmart's price investments as well as added convenience features at some competitors, such as online grocery pickup and expanded service offerings."
Walmart, Kroger, Harris Teeter, Giant Food, and other chains have started offering online grocery pickup, meaning customers can order their groceries online and pick them up at a nearby store.
Analysts said Target will have to drop prices in its grocery department to stop losing customers to Walmart.
Disclosure: Jeff Bezos is an investor in Business Insider through hispersonal investment company Bezos Expeditions.
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