Target overhauls baby shop to compete with Walmart, Amazon

CLIFTON, New Jersey — Along with aisles of diapers and colorful onesies, Target shoppers in some of the retailer’s big-box stores can now find baby brands typically carried by specialty boutiques.

Shoppers can see, feel and test strollers, car seats and high chairs outside of cardboard boxes at about 200 stores, or roughly 10% of the retailer’s footprint. They can find merchandise from high-end brands, including a $1,000 UPPAbaby stroller. And customers can browse nearly 2,000 new baby items, which are available across all of the retailer’s stores and online.

Target’s “baby boutiques,” which have rolled out over the past two months, are just one piece of a broader push to refresh stores and woo a crucial customer base: busy families, who have increasingly turned to rivals like Walmart.

Whether Target makes progress with those shoppers will help determine whether CEO Michael Fiddelke, who stepped into the company’s top role in early February, can follow through on his pledge to end the company’s three-year sales slump. The retailer is scheduled to report its first-quarter earnings on May 20, its first three-month period under the new CEO.

In an interview with CNBC, Chief Merchandising Officer Cara Sylvester said families with children ages 5 and under spend two times as much, and families with children across age groups visit stores twice as much as the average Target shopper.

She said Target recognized it had a large share of sales from young families when it took a hard look at its business after Fiddelke got tapped to lead its turnaround efforts. She said the realization inspired Target to lean more into that competitive edge.

“We see an incredible opportunity at Target to really deepen our relationships with busy families and become their first choice for even more of life’s everyday needs,” Sylvester said.

That strategy, which hinges in part on improving the quality of its offerings, stepping up its store experience, and expanding convenient options like same-day pickup and delivery, is critical to boosting 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 anticipates net sales will rise about 2% year over year and will grow in every quarter of the year compared with the year-ago periods.

While customer traffic across Target’s stores and website has dropped for the past four quarters in a row, there are some promising signs that store traffic is growing again, according to Placer.ai, an analytics firm that uses anonymized data from mobile devices to estimate visits to locations. 

Even so, Target faces challenges to its turnaround plan. Among them, it must overcome stiffer competition from rivals, a fresh threat of a boycott from a major teachers’ union as it heads into back-to-school season and the risk of higher gas prices dampening consumer spending.

Those rising gas prices could exacerbate the “K-shaped economy,” the widening gap in spending between lower- and higher-income Americans, said Simeon Gutman, a Morgan Stanley retail analyst. At retail competitor Walmart, gains among wealthier households have helped offset losses of sales among cash-strapped customers, he said.

“I don’t think Target is in as good a position as others in that regard,” he said.

Still, he said he’s encouraged by changes Target has made to sharpen its stores and refresh merchandise categories and believes that will drive more customer traffic.

Target’s revamp of the baby department, its largest investment in that category in more than a decade, may surprise some who have checked the U.S.’ latest birth rate.

Births in the U.S. have tumbled from a peak of 4.32 million in 2007 to 3.61 million in 2025, according to preliminary data from the Centers for Disease Control and Prevention’s National Center for Health Statistics. That represents a roughly 16% drop over the past 18 years, which researchers have attributed to a variety of factors including a decline in teen pregnancies and a rise in women delaying having children until later in life.

Sylvester, however, said even with the lower birth rate, Target needed to shake up the way it appeals to families, beginning with the baby aisles. She said Target’s research shows that when consumers become parents, they tend to consolidate the number of places where they shop because they have less time. That means if Target can win those customers, it can sell not only more diapers and wipes, but also more groceries and clothing, she said.

Sylvester added Target is prioritizing the baby department because it’s a way to earn trust with first-time parents who have a large lifetime value across all of the retailer’s categories.

Target is the third-largest retailer in the U.S. for the baby sector in terms of market share, but has lost ground with competitors in recent years, according to market researcher Numerator. The firm includes baby gear such as strollers, diapers, formula and baby food in its category definition, but excludes baby apparel.

Walmart captured the largest share with 27% of the category, followed by Amazon with 24.4% and Target with 17.6% in the 12-month period that ran through the end of February, the most recent data available.

However, Target has declined from 18.6% market share in the past two years, compared with Walmart, which has seen its market share grow from 25.4%. Amazon’s market share has remained roughly flat, according to Numerator.

Target declined to say how much it is spending to turn some of its baby departments into boutiques, but the retailer has increased investments to help drive its turnaround. The company said in March that it will 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 toward store openings and remodels.

Sylvester said Target plans to add baby boutiques to more stores, but said it hasn’t yet decided the timetable.

By the retailer’s own admission, Target has lost the loyalty of some families. At an investor presentation at Target’s headquarters in early March, Sylvester delivered a blunt assessment.

“Our performance over the last few years has not met expectations. And that is on us,” she said. “We lost the clarity and the discipline that make Target a place loved by busy families.”

It is unclear how much of the decline in store and website traffic has specifically come from families, but Morgan Stanley’s Gutman said he sees the baby category as “inextricably linked to Target’s success” because it is an “on-ramp to greater sales and then to multiple years of higher wallet share.”

“It’s one of these categories where I think they have a right to win, and they ought to,” he said.

Target’s baby boutiques go a step further than its previous offerings, Sylvester said. She said the baby department now feels more like a curated shop to try to simplify a dizzying decision process. Target added popular premium brands, including UPPAbaby, Stokke, Bugaboo and Doona. And it’s bulked up the items from its own baby brand, Cloud Island, which includes clothing, bibs and crib sheets, among other items.

At Target’s baby boutiques, customers can also now push, fold and lift items like strollers before they make a big purchase — an in-store experience that’s become rare because of the closure of specialty baby retailers. Buybuy Baby and Babies R Us shuttered their doors after bankruptcies, though Babies R Us has returned as a pop-up shop in some Kohl’s stores.

The retailer is also piloting a baby concierge service through Tot Squad, which offers free guidance to shoppers who are comparing products or putting together a baby registry. It is offered in person at the baby boutiques and online.

Secondhand markets, such as Facebook marketplace, are a competitive threat to all retailers, too, since families can find high-end brands at deep discount. Yet those markets can also justify a big purchase since well-known brands still have value a year or two later.

WildBird, a brand that makes baby carriers, debuted on Target’s shelves in March. It marked the direct-to-consumer company’s first major foray into brick and mortar, co-founder and CEO Nate Gunn said.

With the rise of social media, many more brands have launched and grown. Yet he said that’s led to confusion and overwhelm, particularly in the baby category.

“Customers are more frustrated to shop, though it’s easier than ever,” he said. “The fatigue is ‘What do I buy?’ And that whole idea is compounded in the baby scene because parents are buying hundreds of products in the span of a few months.”

Compared with other parts of Target, the chain’s baby aisles “feel stale” and “a bit commoditized,” said Gunn, who is a father of three and has shopped in the big-box retailer’s baby section.

With the baby boutiques, Target may be able to better connect with the many parents who come to stores, grab a Starbucks coffee and stroll around with their toddler or baby, he said.

“I would like to see Target lean into what differentiates them from a Walmart,” he said. “Walmart, I’m going in there and looking for the best price possible. Target, I am looking for a more premium experience, but still accessible.”