Target overhauls baby shop to compete with Walmart, Amazon
CLIFTON, New Jersey — With aisles full of diapers and colorful onesies, Aim Shoppers at some of the retailer’s larger stores can now find baby brands typically sold by specialty boutiques.
Shoppers can see, feel and test strollers, car seats and high chairs outside of cardboard boxes at nearly 200 stores, roughly 10% of the retailer’s footprint. They can find products from high-end brands, including a $1,000 UPPAbaby stroller. Customers can browse nearly 2,000 new baby products available in all of the retailer’s stores and online.
Target’s “baby boutiques,” which have launched over the past two months, are just one piece of a broader push to revamp stores and woo a crucial customer base: busy families who are increasingly turning to competitors. Walmart.
Whether Target makes progress with those customers will help determine whether CEO Michael Fiddelke, who stepped into the company’s top job in early February, can deliver on his promise to end the company’s three-year sales slump. The retailer is scheduled to report first-quarter earnings on May 20, its first quarter under the new CEO.
Target has moved “baby boutiques” into nearly 200 stores, where customers can touch, feel and test items like car seats and strollers. Premium brands such as UPPAbaby and Stokke have also been added.
Melissa Repko | CNBC
In an interview with CNBC, Chief Merchandising Officer Cara Sylvester said families with children ages 5 and under spend twice as much as the average Target shopper, and families with children in different age groups visit stores twice as much.
Target said it took a hard look at its business after Fiddelke was tapped to lead the turnaround effort and realized a large share of sales were coming from young families. He said this realization inspired Target to lean more into that competitive advantage.
“We see an incredible opportunity at Target to truly deepen our relationships with busy families and become their first choice for more daily life needs,” said Sylvester.
This strategy, based in part on improving the quality of its offerings, enhancing the store experience and expanding convenient options such as same-day pickup and delivery, is critical to growing sales and fending off Walmart and Amazon.
The big box retailer said in March that it expects to return to annual sales growth this year. It said it forecasts net sales will increase about 2% year over year and will grow in each quarter of the year compared to prior year periods.
While customer traffic at Target’s stores and website has fallen for the past four consecutive quarters, there are some hopeful signs that store traffic is growing again, according to Placer.ai, an analytics firm that uses anonymized data from mobile devices to predict visits to locations.
Even so, Target faces challenges in its turnaround plan. These include stiff competition from rivals, a new boycott threat from a major teachers union heading into back-to-school season and the risk that higher gas prices will dampen consumer spending.
Morgan Stanley retail analyst Simeon Gutman said rising gas prices could worsen the “K-shaped economy,” the spending gap between low- and high-income Americans. At retail rival Walmart, it said gains in affluent households helped offset sales losses at cash-strapped customers.
“I don’t think Target is as well positioned as others in that regard,” he said.
Still, he said he’s encouraged by the changes Target is making to expand its stores and revamp its product categories, which he believes will generate more customer traffic.
Target already sells a lot of baby products, including diapers and clothing. Still, it’s trying to revamp its baby department to get more sales from busy families.
Melissa Repko | CNBC
Why is Target revamping its baby section?
Target’s revamp of its baby department, its biggest investment in the category in more than a decade, may surprise those checking the latest U.S. birth rate.
Births in the USA fell from the peak 4.32 million in 2007 3.61 million in 2025, according to preliminary data from the Centers for Disease Control and Prevention’s National Center for Health Statistics. This represents a decline of roughly 16 percent over the past 18 years; Researchers attribute this to several factors, including a decline in teenage pregnancies and an increase in the number of women postponing having children until later in life.
But despite the low birth rate, Target needs to change the way it appeals to families, starting with the baby aisles, Sylvester said. He said Target’s research shows that consumers tend to combine the number of places they shop because they have less time when they become parents. That means if Target wins over those customers, it can sell not only more diapers and wipes, but also more food and clothing, he said.
Sylvester added that Target is prioritizing the baby department because it’s a way to gain the trust of first-time parents, which has great lifetime value across all of the retailer’s categories.
Target is the third-largest retailer in the U.S. in terms of market share for the baby industry, but it has lost ground to rivals in recent years, according to market researcher Numerator. The company includes baby supplies such as strollers, diapers, formula and baby food in its category definition, but excludes baby clothes.
According to the most recent data available, Walmart had the largest share in the category in the 12 months to the end of February with 27%, followed by Amazon with 24.4% and Target with 17.6%.
However, Target fell from its 18.6% market share compared to Walmart, which increased its market share from 25.4% in the last two years. Amazon’s market share remained roughly the same, according to Numerator.
Target declined to say how much it spent converting some baby departments into boutiques, but the retailer has increased investments to accelerate its turnaround. The company announced in March that it would spend about $5 billion on capital expenditures this fiscal year, an increase of more than $1 billion from last fiscal year. The funds will go towards store openings and renovations.
Target plans to add baby boutiques to more stores, but hasn’t decided on a timetable yet, Sylvester said.
As the retailer admits, Target has lost the loyalty of some families. At an investor presentation at Target’s headquarters in early March, Sylvester made a blunt assessment.
“Our performance in the last few years has not met expectations. This is our responsibility,” he said. “We have lost the clarity and discipline that made Target a beloved destination for busy families.”
It’s unclear how much of the decline in store and website traffic comes from families specifically, but Morgan Stanley’s Gutman said he sees the baby category as “inextricably linked to Target’s success” because it’s an “on-ramp to larger sales and higher share of wallet for several years later.”
“This is one of those categories that I think they have a right to win and should win,” he said.
What do baby boutiques look like
Target’s “baby boutiques” feature more items outside of the cardboard box.
Melissa Repko | CNBC
Target’s baby boutiques go a step further than their previous offerings, Sylvester said. She said the baby department now feels like a curated store trying to simplify a dizzying decision process. Target has added popular premium brands like UPPAbaby, Stokke, Bugaboo and Doona. She also has her own baby brand, Cloud Island, whose products include clothing, bibs and crib sheets, among other items.
At Target’s baby boutiques, customers can now push, fold and put away items like strollers before making a big purchase; it’s an in-store experience that’s become rare due to the closure of specialty baby retailers. Buybuy Baby and Babies R Us closed their doors following bankruptcies, but Babies R Us has returned as temporary stores in some countries. Kohl’s stores.
The retailer is also piloting a baby concierge service through Tot Squad, which offers free guidance to customers comparing products or creating a baby registry. It is offered in person at baby boutiques and online.
Second-hand markets, such as the Facebook marketplace, also pose a competitive threat to all retailers, as families can find high-end brands at deep discounts. But these markets can also justify a big buy, because well-known brands still have value a year or two later.
Some of the new baby brands Target carries come with higher price tags, including a UPPAbaby stroller for nearly $1,000.
Melissa Repko | CNBC
WildBird, a brand that produces baby carriers, hit Target shelves in March. Co-founder and CEO Nate Gunn said this is the direct-to-consumer company’s first major foray into brick-and-mortar.
With the rise of social media, many more brands have emerged and grown. But he said this has led to confusion and overwhelm, especially in the baby category.
“Customers are becoming more frustrated when shopping, but it’s easier than ever,” he said. “Fatigue ‘What do I buy?’ And this whole idea gets even more intense in the baby scene because parents are buying hundreds of products in a matter of months.”
Gunn, a father of three who shops in the department store’s baby aisle, said that compared to other sections of Target, the chain’s baby aisles look “stale” and “a little bit commoditized.”
With baby boutiques, Target said it can better connect with the many parents who come into stores, grab Starbucks coffee and stroll around with their toddlers or babies.
“I would like to see Target focus on what differentiates them from Walmart,” he said. “Walmart, I go there and look for the best price possible. Target, I look for a higher quality but still accessible experience.”
