Most investors have written off Target. Its stock is down 31% over the past year while Walmart hits record highs. The storyline is bleak, middle-class shoppers have abandoned the “Tarzhay” ideal, Wall Street sees slipping market share in 20 of 35 categories, and the company recently missed earnings by $0.35 per share. But there’s more to the story.
Instead of pulling back, Target is quietly executing one of the boldest contrarian strategies in retail. While rivals race to the bottom, Target is building out infrastructure to compete directly with Dollar General’s value-driven model.
A 36% surge in same-day delivery, paired with streamlined inventory and resilient supply chains, hints at a deeper shift. Here’s why Target’s perceived weakness may be its biggest strategic weapon.
Target’s “Dead” Customer Base Is Actually Growing
Many assume Target’s middle-class customers have disappeared, but the reality is more nuanced. Dollar General’s CEO recently confirmed that around 60% of their shoppers earn under $35,000, yet the chain is also attracting more middle- and higher-income consumers seeking value, a trend echoed across retail as economic pressures persist.
Meanwhile, Target has faced declining sales and lost market share in several categories during 2024 and early 2025, with comparable sales down 3.8% in the latest quarter. Still, Target’s digital services, like same-day delivery and drive-up, continue to grow, and membership in Target Circle has surged.
The real question isn’t just whether middle-class spending will return, but whether Target’s evolving mix of value and convenience can recapture loyalty as consumer confidence rebounds.
Same-Day Delivery Kills the Dollar Store Convenience Model
Dollar General has long thrived on convenience, its stores are often the closest option when something’s needed fast. But Target’s digital transformation is fundamentally changing that equation.
In the first quarter of 2025, same-day delivery through Target Circle 360 surged 36%, allowing customers to get a wider range of products delivered quickly, often without leaving home. Target fulfills about 80% of digital orders from in-store inventory, a model that cuts fulfillment costs by up to 90% compared to warehouses and 45% compared to traditional shipping.
Meanwhile, Dollar General is rolling back self-checkout in 12,000 stores to combat rising theft, a costly operational challenge. Target, by contrast, continues to grow its loyalty base, with nearly 6.5 million new Circle members added in 2024. As Target expands its digital services and fulfillment speed, it’s reshaping discount retail into a smarter, faster, and more competitive landscape.
The Tariff Crisis Reveals Target’s Hidden Strengths
As retailers brace for the impact of tariffs, Target stands out with a long-term play. Yes, the company expects profit pressure, but it’s spent years building supply chain resilience—diversifying suppliers, managing inventory with discipline, and strengthening foreign trade zone usage. Dollar General, in contrast, leans heavily on cheap imports and has less flexibility to adapt. While others reactively raise prices, Target maintains its value image through operational efficiency. Their contrarian approach—absorbing short-term pain in favor of long-term strength—creates a moat Dollar General can’t easily cross. This moment doesn’t just test supply chains, it highlights which retailers are built to withstand volatility and emerge stronger when the dust settles.
Less Stuff, More Profit—Exactly When Competitors Expand
Target’s inventory strategy challenges retail norms. While Dollar General plans to open 575 new stores in 2025, Target is prioritizing inventory discipline, using technology and AI to optimize stock and ensure shelves are filled with products customers actually want. This approach, while less flashy than expansion, has helped Target stabilize operating margins despite declining sales.
After a $500 million hit from shrinkage last year, Target has now largely stabilized this issue, even as Dollar General continues to battle persistent theft and shrink. Research shows that customers value curated, reliable assortments over endless choice. By pairing smarter inventory management with robust digital fulfillment, Target is building a hybrid retail model that emphasizes value and dependability, even if its prices remain above Dollar General’s.
While some retailers chase aggressive growth, Target’s strategic restraint is helping it weather volatility and maintain operational strength in a tough market.
Target Solves What Dollar General Cannot
Retail theft is exposing major cracks in store operations. Target has managed to stabilize its shrinkage problem with tighter security, better training, and store closures in high-risk areas. Dollar General, however, is still struggling, calling theft a “21-point headwind” to margins. Their fix? Ditching self-checkout at 12,000 stores, a costly, manual solution. But this goes deeper than security. It’s about whether a business model can adapt.
Target’s stores now feel safer and more organized, reinforcing the perception of quality even with competitive pricing. Dollar General’s challenges highlight structural limitations that Target has already addressed. In a head-to-head battle for value-driven customers, that operational edge matters.
Circle 360: The Membership Model That Changes Everything
Target Circle 360 is more than a perks program—it’s a loyalty engine. In 2024 alone, 13 million people joined Target Circle programs, which include both free and paid tiers. The $99 annual Circle 360 membership is designed to deepen customer commitment: Target reports that loyalty members shop more frequently and spend more per visit, especially when using same-day delivery services.
Store-based fulfillment, which handles about 80% of Target’s digital orders, keeps delivery efficient and cost-effective. While Dollar General has introduced digital rewards and cash-back programs, it lacks a paid membership model or comparable digital infrastructure. By building deeper relationships and offering convenience, Target is locking in repeat business from shoppers who might otherwise choose the nearest discount store.
Target Loses Share to Win the War
On paper, Target’s losing streak, market share drops in 20 of 35 tracked categories, looks grim. But beneath the headline numbers, Target is making strategic moves for the long haul. Its April 2025 Kate Spade collaboration was the company’s largest designer launch in more than a decade, breaking records for both digital and in-store sales.
Meanwhile, Target’s Roundel retail media business grew revenue by 25% last year, reaching $649 million and delivering nearly $2 billion in value for the company. These initiatives reflect a deliberate shift from chasing pure sales volume to building brand equity and new revenue streams.
While Dollar General continues to serve immediate, price-driven demand, Target is investing in infrastructure, exclusive partnerships, and digital capabilities—betting these will pay off as consumer confidence and middle-class spending eventually recover.
The Psychology of Contrarian Retail Strategy
Target’s apparent downturn may be setting up its biggest opportunity yet. A 31% stock drop in 2025 has created what analysts widely describe as “oversold conditions,” attracting patient investors seeking underpriced assets with solid fundamentals. In response, Target has launched a multi-year Enterprise Acceleration Office to speed up strategic decisions and streamline operations.
Decades of behavioral finance research show that companies with improving operations and low market expectations can deliver outsized returns for contrarian investors. Target’s current combination of undervaluation, digital growth, and strategic investment fits this classic profile.
With expectations at historic lows, even modest operational wins could shift sentiment. If middle-class spending rebounds as management hopes, Target’s groundwork could turn today’s weakness into tomorrow’s competitive strength.
The Contrarian Payoff Arrives When No One Expects It
Target’s strategy isn’t built for quick wins, it’s a patient bet on recovery. While rivals optimize for immediate survival, Target is preparing for the return of middle-class spending with infrastructure designed to scale. From digital delivery and supply chain resilience to loyalty programs and operational agility, Target is building defenses Dollar General can’t easily match.
The emotional component is key, Target maintains its premium identity while delivering value, giving it an edge when confidence returns. Low market expectations make this the perfect contrarian moment.
When the economy turns, Target won’t just compete with Dollar General, it will likely outpace them, winning over shoppers who demand both value and experience.
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