Target 2014 Annual Report Download - page 10

Item 1A. Risk Factors
Our business is subject to many risks. Set forth below are the most significant risks that we face. For the convenience
of the reader, the risks are listed in the categories where those risks primarily apply, but they may also apply to other
categories.
Competitive and Reputational Risks
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, our team members choose Target as a place
of employment and our vendors choose to do business with us is the reputation we have built over many years for
serving our four primary constituencies: guests, team members, shareholders, and the communities in which we
operate. 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 and technology development opportunities, or team member retention and recruiting difficulties. For example,
we experienced weaker than expected sales immediately following the announcement of the Data Breach that occurred
in the fourth quarter of 2013, and while we now believe the incident will not have a long-term impact to our relationship
with our guests, it is an example of an incident that affected our reputation and negatively impacted our sales for a
period of time. In addition, the long-term reputational impact of discontinuing our Canadian operations on our guests,
team members, vendors and other constituencies is unknown, and we may need to take actions that could increase
our expenses and adversely affect the results of our operations.
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 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 and determine real-time product availability using digital tools, which can lead to decisions based solely on price,
the functionality of the digital tools or a combination of those and other factors. We must compete by offering a consistent
and convenient shopping experience for our guests regardless of the ultimate sales channel; providing and maintaining
digital tools for our guests and team members that have the right features and are reliable and easy to use; working
with our vendors to offer unique and distinctive merchandise; and encouraging 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, content and technology systems could hurt our
ability to differentiate ourselves from other retailers and, as a result, have an adverse effect on sales, gross margins,
and expenses.
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