Target Reveals Plan to Cut Down on the Deals

Target would like to thank you for coming back to its stores, after last year’s data breach shook shoppers’ confidence and kept many away. In gratitude, it plans to stop offering so many great deals.

How’s that for a thank you?

Ever since last December’s credit and debit card data theft, Target’s sales and traffic have plummeted, the company fired its CEO and Target began offering near-weekly dollars-off-your-total-purchase coupons in an effort to woo shoppers back. But now, the company says sales and traffic are showing signs of improvement, Target has a new CEO and, when it comes to the discounts and deals – well, all good things must come to an end eventually.

Just take a look at your Target circular this week. You might find a coupon for $10 off a food or beverage purchase of $50 or more. Or you might see a coupon offering a $10 gift card with a $50+ food or beverage purchase. Or you might find no coupon at all. Target’s latest weekly coupon is regional, limited and not available in printable or mobile form. It appears to be the first sign that Target is following through with a pledge to scale back on such offers.

In a call with reporters last week, Target CFO John Mulligan said it was in the company’s best interests to keep the discounts coming, even at the risk of training customers to expect them. But later, in a call with investors, he admitted that the current level of discounting simply isn’t sustainable. “We are working to moderate our promotional intensity to a level we believe is more appropriate in the long run,” he said.

So if the promotions have been working, why start cutting down on them – especially heading into the hotly-contested holiday season? Target executives said returning shoppers are looking for more than just discounts and deals.

“It’s more about product and the newness that we have on the floor,” Target Chief Merchandising Officer Kathee Tesija told investors on the same call. “Certainly, we’ve had promotions,” she went on. But as we head from back-to-school season, to Halloween, then Thanksgiving and Christmas, “the guest right now is more focused on the occasion than they are on the promotion.”

Like this week’s regional offer, many of the weekly coupons have been for the grocery side of the store – $10 off a food purchase, $3 off produce, $5 off meat. But offering endless deep discounts on groceries can be a losing battle, considering the competition. Without Target’s store coupons and discounts, Walmart routinely beats Target on food prices, as evidenced most recently by Kantar Retail’s latest “Walmart vs. Target Pricing Study.”

And Walmart continues to aggressively cut prices to keep pace – the Kantar study reported that Walmart had twice the number of Rollbacks in the June 2014 price survey than in January’s edition of the semiannual survey, which in turn had twice the number as the June 2013 survey.

So Target is trying to focus on what Target has historically done best – offer new and interesting products that you won’t find anywhere else. Target is “devoting resources to drive increased newness and innovation in our merchandise assortments and store presentation,” Mulligan said. “We have about 85,000 items in our assortment and we will have 35,000 new items this fall season,” Tesija added.

Don’t look for the deals to disappear altogether. But don’t look for Target to become a deep discounter like Walmart, either. It’s already experimenting with keeping many of its stores open later, some until midnight – whatever it takes to attract more shoppers without relying solely on coupons and deals.

“A vast majority of guests have come back to us,” Mulligan said, noting that the unprecedented level of promotions certainly helped. While the numbers are still not as good as the company would like, he said, “trust and confidence is returning to Target.”

Trust and confidence aside, plenty of Target shoppers are sure going to miss those coupons whenever they stop coming. So if you got a coupon this week, better stock up on your groceries and gift cards now – just in case this coupon offer turns out to be the last.