Analysis: Target needs to copy Starbucks to win customers back

Target keeps booking new musicians to play on the deck of its sinking ship without actually fixing the hole in the hull.

The chain has battled slowing sales and has seen same-store sales drop for each of the past three quarters. That has been blamed on its "woke" political stances, its DEI policies, and various boycotts.

The results were not better in its most recent quarter.

Target Q3 highlights

• Net sales of $25.3 billion in the third quarter were 1.5% lower than last year, reflecting a merchandise sales decrease of 1.9 percent, partially offset by a 17.7% increase in non-merchandise sales.

• Third-quarter GAAP EPS was $1.51 compared with $1.85 last year. Adjusted EPS, which excludes non-recurring severance and asset-related charges, was $1.78.

• Comparable sales decreased 2.7% in the third quarter, reflecting a comparable store sales decline of 3.8%, partially offset by comparable digital sales growth of 2.4%.

• Third-quarter operating income, which includes the impact of non-recurring items, was $0.9 billion, 18.9% lower than last year.

These aren't disastrous numbers, but the current weak economy should push consumers to Target.

Instead, the chain has worked hard to push its customers away.

"Target used to get this rep that it was the fancier, nicer Walmart," one of the chain's regular customers told Business Insider. Suddenly, she said, "it wasn't this nice, magical place anymore."

That's the problem facing Target. It didn't lose customers because it made moves that supported inclusivity. Instead, the chain lost its "Tah-zhay" magic, the thing that made the third-cheapest major retailer a place consumers sought out.

Walmart and Amazon had lower prices, but Target was special, a place to walk around, have a coffee, buy some things you needed, and maybe some things you didn't.

Starbucks set the blueprint

For a few years, Starbucks was caught up in "woke" talk on one side and a labor battle on the other. Visiting the chain was, to some, a political statement, and that's not good for business.

New CEO Brian Niccol made a concerted effort to change the narrative and remind people why they liked the coffee chain in the first place. He called it "Back to Starbucks," and its pillars are relatively simple.

Back to Starbucks basics

• Focus on customer experience: Faster service, better staffing, and welcoming stores.

• Investing in menu innovation: Protein cold foam, customizable drinks, refreshed baked goods, and health-forward options.

• Digital improvements: Revamped Starbucks app, enhanced Order & Pay, and updated Rewards program.

• Store renovations: Nearly 70 completed, 1,000+ planned, and more “coffeehouse” formats vs. pickup-only.

• Operational streamlining: Cutting 30% of food/beverage items to simplify menu.

• Q4 FY25 saw global comparable store sales rise 1%, the chain's first growth in seven quarters. Source: Letter from Starbucks CEO Brian Niccol

Niccol shared some of the logic behind his plan in the letter.

"Starbucks is a beloved brand with wonderful people. We are woven into the fabric of people’s lives and the communities we serve. Second, there’s a shared sense that we have drifted from our core. We have an opportunity to make the store experience better for our partners and, in turn, for our customers," he wrote.

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It took about a year, but Niccol turned the focus away from politics and back to coffee while highlighting the value of people.

"Starbucks was founded on a love for high-quality coffee — handcrafted by our outstanding green apron partners and enjoyed with intention. Coffee is our heart," he wrote.

AI is a tool, not Target's answer

Starbucks has been using AI behind the scenes to help with inventory and other tasks, but it has pushed its baristas to interact more with consumers. That has included greeting customers as they enter and writing personal messages on cups.

The chain is using AI, but it's being very clear that the technology is a tool, not a solution.

Target recently partnered with OpenAI for a new Target app and improved customer experiences. The rollout of those efforts shows that the chain still does not really understand how to repair its broken relationship with customers.

GlobalData Managing Director Neil Saunders does not think working with OpenAI/ChatGPT will help fix Target's problems.

"No, it won’t improve Target’s fortunes. And why would it? First, Target’s current problems stem from operational sloppiness and a lack of a clear position; they do not stem from a lack of AI-enabled commerce," he wrote on RetailWire.

He sees the move as a sort of sideline to fixing its real issues.

"While it will become more significant and is an important channel for the future, AI-driven commerce is currently a very small proportion of overall sales. So, this is not a bad thing for Target to do, but it’s not the solution to their woes," he added.

His RetailWire Brain Trust colleague Doug Garnett, a retail consultant, agrees with Saunders.

"No. There is nothing in this idea that can make a significant difference in Target’s fortunes. Instead, it is very, very concerning. Rather than focus on doing what matters in their business, they are wasting time distracted by the shiny bauble of AI. I think we’ve seen this before in the years Macy’s wasted, distracted by Amazon competition and failing to build strength in their stores. This is an incredibly sad and disappointing story," he wrote.

David Biernbaum, who has over 45 years of retail team-building experience, thinks Target is spending its money in the wrong places.

"It is possible to overinvest in technology at the expense of other crucial areas such as customer service and product quality. In addition, if the technology investments do not yield the expected returns, they could place a strain on the company’s financial resources and affect its overall profitability. In addition, rapid technological changes might make certain investments obsolete quickly, leading to a waste of resources," he posted.

Related: Discount retail chain has closed nearly 700 stores

This story was originally reported by TheStreet on Nov 23, 2025, where it first appeared in the Retail section. Add TheStreet as a Preferred Source by clicking here.