﻿When you walk into a store, you’re probably not planning to leave with a shopping bag full
of shoddy, low-quality items. Nobody wants to have to pay through the nose on a single shopping trip,
but when shops try to make as much profit as they possibly can, you may have to choose between
buying affordable items or buying good quality ones. Or if you happen to have a store like Target
close by, you can enjoy the best of both worlds. Target was formed with a mission to offer the best
quality of everything – from groceries to fashion – but at discount prices.
The store was an instant hit and within the first decade, it went from running at a loss to earning
over $100 million in annual sales. Now, it is one of the largest retailers in the United States,
is worth billions of dollars, and has transformed the shopping and consumption culture of America.
This is the story of how Target came to be. Welcome to Planet Biz.
The Westminster Church The history of Target runs all the way back
to 1902, over a century ago. It all started with a store named Dayton’s Dry Goods Company. The owner,
George Dayton was born on March 6, 1857 at Clifford Springs, New York. Growing up,
Dayton had dreams of one day becoming a minister, but this plan would never become a reality, mostly
because he had to start working at an early age. During an economic crisis in 1873, when George
Dayton was just 16 years old, he set off to earn some extra money for himself and his family
by working in a coal and lumber yard. During this time, his interests shifted away from ministry and
towards business. Over the years, Dayton learned more and more about business and investments.
He and some other investors began buying farm mortgages and his wealth began to grow. He became
a banker and eventually, the president of the Bank of Worthington and founder of the Minnesota Loan
and Investment Company. During this time, he was a committed Presbyterian and an active parishioner
at the Westminster Presbyterian Church. In 1893, the church building burned down and
insurance couldn’t cover the cost of rebuilding it. The only other potential source of income that
the church had was to sell a corner lot that they owned. But because of the poor economic situation
at the time, it was difficult to find a buyer. Dayton, who was incredibly wealthy at the time,
agreed to buy the lot so that the church could use the money to begin construction.
In 1902, he built a six-story building on the property and convinced the Reuben
Simon Goodfellows Company to move its department store in. The store’s owner
ended up choosing to retire instead, so he sold the entire store to Dayton who renamed it Dayton
Dry Goods Company in 1903 and eventually shortened it to Dayton Company in 1910.
The company flourished. By 1920, it had grown into a multi-million-dollar business
and occupied all six stories of George Dayton’s building. The store’s success was admirable,
but it was nothing compared to the success it would experience a couple of decades later.
Unfortunately though, the company would have to go through some very tough times first.
In War and Depression In view of its success, the Dayton Company decided
that it was ready to expand. It bought over a Minneapolis based Jeweler, J.B Hudson & Son. The
timing of this deal turned out to be incredibly unlucky because just about two months later,
the infamous stock market crash of 1929 occurred and the Great Depression began to set in.
In a show of resilience, the Dayton Company was able to survive the Great Depression,
but their newly acquired jewelry store operated at a loss throughout the period.
George Dayton died in 1938, but before then, he had handed over the store to
his son Nelson Dayton. Nelson maintained the strict Presbyterian guidelines that his father
used to run the store before his death. For instance, the store didn’t sell alcohol and
no business activity was carried out on Sundays. Dayton Company had survived the Great Depression,
but they weren’t completely out of the woods yet. Not too long after George Dayton’s death,
the store would have to survive World War II. A smart manager that he was, Nelson Dayton chose
to see the war as an asset to the business. He focused on keeping the shelves of the store
stocked with the right items. Consumer goods were so scarce during the war that customers
didn’t need to be persuaded to buy what was available. Thanks to Dayton’s managers who
were able to obtain items to keep the shelves stocked, the store turned a huge profit. In 1944,
it became one of the first stores in the United States to offer its workers retirement benefits
and in 1950, it began offering employees a comprehensive insurance policy.
After Nelson died, his son Donald Dayton took over as the company’s president. He and four
of his cousins ran the company and completely put aside all the Presbyterian traditions that their
grandfather instituted. The store began selling alcohol and opening on Sundays, breaking the
tradition that the previous two generations had followed and giving the store a different image.
The company opened a two-level shopping mall named Southdale Center, just outside Minneapolis.
Shocked to discover that there were only 113 good shopping days per year in Minneapolis,
the architect ingeniously decided to build the mall under a cover, making it the world’s
first fully enclosed shopping mall. With a new store in Southdale Center, the Dayton
company was officially a retail chain. But the company’s best years were still in its future
and the success would come as a surprise to even the Dayton cousins. All except one, that is.
The Birth of Target Douglas Dayton, one of the company’s vice
presidents watched the rise of Kmart, a discount store. Douglas believed that this discount store
model could be a big part of the company’s future. This idea wasn’t exactly welcomed
with open arms by others. Industry experts saw it as a risky move because the company was already
established as a suburban department store. John Francis Geisse, a retail genius who
was a friend and long-time business consultant to Sam Walton, founder of Walmart,
came up with the idea of an upscale discount store. His idea was to take the class and quality
of the Dayton Company department stores and blend it with the discount store model. The new hybrid
store would “combine the best of the fashion world with the best of the discount world” and according
to Douglas Dayton, would be “a quality store with quality merchandise at discount prices.”
In Minnesota, 1962, the Dayton Company opened the first unit of this hybrid store which they chose
to call Target so that customers won’t associate the new discount store with the department store
chain. The store was run using Geisse’s concepts and Douglas Dayton was the first vice president.
Target was an instant hit and within just one year of operation, it had opened four
different locations within Minnesota. Even with its popularity and rapid growth, Target operated
at a loss within the first few years of business. Despite this, Douglas maintained hope in the
store and boasted to his brothers that the store would one day reach $100 million in annual sales.
His brothers of course saw his predictions as overly ambitious and didn’t believe him.
Target turned its first profit in 1965, with $39 million in sales and before long,
Douglas Dayton’s dream became a reality, with the discount store chain earning a sales revenue of
$100 million in 1968. That same year, John Geisse left Target and was hired by a different company
to build another discount department store chain which ended up being successful as well.
After this, he went on to turn yet another retail chain around and in 1982, he founded
The Wholesale Club which inspired his friend Sam Walton to create Sam’s Club division of Walmart.
The two warehouse clubs eventually merged under the “Sam’s Club” name.
Meanwhile, the first discount department store chain he had helped to create was flourishing.
Target had expanded into other states outside of Minnesota. By 1970, the store chain had 24
units spread across Wisconsin, Texas, Minnesota, Oklahoma and Colorado and
was earning over $200 million in sales. By 1971, Target’s parent company which had
since gone public and merged with the J.L Hudson company to become Dayton-Hudson Corporation,
had grown significantly. It had become the 14th largest retailer in the United States
and owned major department store chains, pulling in over $1 billion in annual sales.
Even with its immense success, Target was contributing just a fraction to the
revenue of its parent company. In the early 1970s, Target experienced rapid growth,
but this isn’t always a good thing and Target would learn this the hard way.
The Fall and Rise of Target In 1972, fourteen new Target
stores were opened simultaneously. The aim of this rapid expansion backfired because of the
lack of experience of the top executive in discount retailing. Stores were overstocked
and goods were carried over multiple years, regardless of storage and inventory costs.
That year, Target experienced its first decrease in profits and things got
so bad that the Dayton-Hudson Corporation considered selling off the entire retail chain.
Fortunately, they decided not to sell. Instead, they brought in new executives. The new management
quickly identified and dealt with the issues the discount chain was facing. They sold items at
larger discounts in order to clean out overstock and that year, only one new unit opened up.
Things quickly turned around for Target and in 1975, they had a total of 49 units spread
across nine states. That same year, Target became Dayton-Hudson’s top revenue producer
with over half a billion dollars in sales. No doubt they must have been relieved that
they had decided not to sell out. Target began to expand, but this time,
they did so wisely. Different retail formats opened up such as Target Greatland and
the hypermarket which was called SuperTarget. They also opened up “small-format” stores named
CityTarget and TargetExpress but eventually merged them with the Target brand. By the beginning of
the 21st century, the discount department store chain had grown to almost 900 units,
gaining over $23 billion in revenue. In January 2000, Target was doing so well
that its parent company changed its name from Dayton-Hudson to Target Corporation.
Today, Target has over 1900 locations and is the eighth largest retailer in the United States. It
employs over 360,000 people and has an annual revenue of over $70 billion. That’s a lot of
progress for a company that wasn’t even expected to get up to $100 million in yearly sales.
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