Target 2013 Annual Report Download - page 10

5
Item 1A. Risk Factors
Our business is subject to many risks. Set forth below are the most significant risks that we face.
If we are unable to positively differentiate ourselves from other retailers, our results of operations could be
adversely affected.
The retail business is highly competitive. In the past we have been able to compete successfully by differentiating our
guests’ shopping experience by creating an attractive value proposition through a careful combination of price,
merchandise assortment, convenience, guest service, loyalty programs and marketing efforts. Our ability to create a
personalized guest experience through the collection and use of guest data is increasingly important to our ability to
differentiate from other retailers. Guest perceptions regarding the cleanliness and safety of our stores, the functionality
and reliability of our digital channels, our in-stock levels and other factors also affect our ability to compete. No single
competitive factor is dominant, and actions by our competitors on any of these factors could have an adverse effect
on our sales, gross margins and expenses.
We sell many products under our owned and exclusive brands. These brands are an important part of our business
because they differentiate us from other retailers, generally carry higher margins than equivalent national brand products
and represent a significant portion of our overall sales. If one or more of these brands experiences a loss of consumer
acceptance or confidence, our sales and gross margins could be adversely affected.
The continuing migration and evolution of retailing to online and mobile channels has increased our challenges in
differentiating ourselves from other retailers. In particular, consumers are able to quickly and conveniently comparison
shop with digital tools, which can lead to decisions based solely on price. We work with our vendors to offer unique
and distinctive merchandise, and encourage our guests to shop with confidence with our price match policy. Failure
to effectively execute in these efforts, actions by our competitors in response to these efforts or failures of our vendors
to manage their own channels and content could hurt our ability to differentiate ourselves from other retailers and, as
a result, have an adverse effect on sales, gross margins and expenses.
Our continued success is substantially dependent on positive perceptions of Target which, if eroded, could
adversely affect our business and our relationships with our guests and team members.
We believe that one of the reasons our guests prefer to shop at Target and our team members choose Target as a
place of employment is the reputation we have built over many years for serving our four primary constituencies:
guests, team members, the communities in which we operate, and shareholders. To be successful in the future, we
must continue to preserve, grow and leverage the value of Target's reputation. Reputational value is based in large
part on perceptions. While reputations may take decades to build, any negative incidents can quickly erode trust and
confidence, particularly if they result in adverse mainstream and social media publicity, governmental investigations
or litigation. Those types of incidents could have an adverse impact on perceptions and lead to tangible adverse effects
on our business, including consumer boycotts, lost sales, loss of new store development opportunities, or team member
retention and recruiting difficulties. For example, we experienced weaker than expected U.S. Segment sales following
the announcement of the Data Breach and are unable to determine whether there will be a long-term impact to our
relationship with our guests and whether we will need to engage in significant promotional or other activities to regain
their trust.
If we are unable to successfully develop and maintain a relevant and reliable multichannel experience for our
guests, our sales, results of operations and reputation could be adversely affected.
Our business has evolved from an in-store experience to interaction with guests across multiple channels (in-store,
online, mobile and social media, among others). Our guests are using computers, tablets, mobile phones and other
devices to shop in our stores and online and provide feedback and public commentary about all aspects of our business.
We currently provide full and mobile versions of our website (Target.com), applications for mobile phones and tablets
and interact with our guests through social media. Multichannel retailing is rapidly evolving and we must keep pace
with changing guest expectations and new developments and technology investments by our competitors. If we are
unable to attract and retain team members or contract with third parties having the specialized skills needed to support
our multichannel efforts, implement improvements to our guest-facing technology in a timely manner, or provide a
convenient and consistent experience for our guests regardless of the ultimate sales channel, our ability to compete
and our results of operations could be adversely affected. In addition, if Target.com and our other guest-facing
technology systems do not appeal to our guests or reliably function as designed, we may experience a loss of guest