Sink or Swim Season is Here! (With Zero Margin for Error)

Carol's back with another Retail Heat Map episode as we head into sink or swim season, and the riptides are relentless. From tariff tremors exposing who’s agile (and who’s adrift) to Target's continuing identity crisis and chaos to Lululemon finding that "special" isn't a permanent condition, these are more than random retail headlines — they're proof that the margin for error has evaporated.

Drawing from her latest media commentary and client conversations, Carol Spieckerman, president of Spieckerman Retail, reveals what's separating the swimmers from the sinkers. Walmart's visionary tech investments and masterful high-low game that’s keeping everyone happy. Target's leadership transition and ongoing execution disasters. Macy's surprising turnaround showing signs of life. And Lululemon's premium squeeze as competitors grab their piece of the premium pie.

Retailers can't afford to tread water anymore. Those coasting on past success are getting swept away, while others are building muscle swimming against the current.

Key takeaways:

• Tariff arbitrage is a thing – Mid-sized companies are proving surprisingly scrappy, while shrewd players like TJX can pivot to whatever's profitable and securely sourced.
• Walmart's high/low game is unmatched – From SNAP strategy to tech investments to business model diversification, Walmart's proving there's Amazon, Walmart, and everyone else.
• Target's crisis is cascading – Ulta’s exit, (still) long checkout queues, and hot mess brand boutiques are eroding brand cachet, retail media mojo, and ultimately customer loyalty.
• The pedestal problem is real – Lululemon's spiral proves that imitation may be the sincerest form of flattery, but it can kill the bottom line.
• Macy's bold new chapter is a page turner – Clean, curated stores with knowledgeable associates and efficient checkout? Macy’s holistic reinvention is making headway.

In sink or swim season, waiting for calmer waters is a losing bet. Have the agility to navigate choppy waters and the humility to admit when your old playbook isn't working (or send an SOS).

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Transcript

Hey everyone, and welcome to Spieckerman Speaks Retail with me, Carol Spieckerman. I help retail companies sharpen their market positioning so they can get credit for the great stuff they're already doing and accelerate growth. Through my workshops, advisory services, and thought leadership platforms, we'll bridge the gap between where retail's headed next and how you fit into that future.

Here on the podcast, I curate fresh takes on where retail's going next through my latest retail trajectories and interviews with experts who help us chart the course. Welcome back to another retail heat map episode where I connect the dots between the seemingly rando retail headlines that are hitting your inbox and your earbuds.

We're already careening into what I call "sink or swim" season, and as usual, I've been right in the thick of it, fielding calls from reporters around the globe. I'm weighing in on everything from how tariffs are forcing everyone to show their cards to why longstanding retail hierarchies are getting flipped on their heads, and how some brands that we thought were untouchable are getting knocked right off their pedestals.

Make no mistake, powerful rip currents are exposing weaknesses in companies that, in some cases, have been coasting on their past success. Some retailers find themselves looking back at how far they are from shore and trying to figure out how in the world to get back. Retailers like Target that are grappling with leadership transitions and scrambling for a new vision, and even premium players like Lululemon discovering that being special isn't a permanent condition. But these same riptides are creating opportunities for retailers like Walmart that are building muscles as they swim against the tide, even as others get swept away.

Let's start with something that's still top of mind for every retailer and a whole bunch of brands right now, and probably for some time to come: tariffs.

But here's what's surprising me in the best of ways. Initially, I thought this might be a bloodbath for some smaller companies. I thought those bigger players with diverse supply chains might just crush everyone else. But I've been genuinely shocked in a good way with how scrappy and agile these small and mid-size companies have proven to be, including several of my clients, which I'm very proud to say, but the smart ones saw the writing on the wall early on.

When those tariff rumblings first started, they recruited sourcing experts and diversified their supply chains, and in many cases, they were able to do it without compromising quality. Speaking with several of my clients over the past couple of months, they've got a real fighting spirit. They're not gonna let tariffs take them down after surviving the pandemic. No, sir, not gonna happen. 

Here's the thing about tariffs that everyone's missing. They're not just a cost problem. They're creating a whole new competitive landscape. The real winners will be opportunistic buyers like TJX that aren't locked into consistent assortments. They can pivot to whatever's profitable and easy to source.

So I'm seeing tariff arbitrage become a legitimate competitive advantage. Companies that can move and groove, even as the tariff landscape is completely unpredictable. Here's where it gets dodgy. Tariffs are also making any missteps a lot more glaring and leaving very little room for error. The margins of victory and success are razor thin and it goes without saying that the same holds true for actual profit margins. It's easy to pile onto retailers for their various unforced errors, but that has always come with the territory. Tariffs are making everything more visible and more consequential. The retailers that are winning right now [00:04:00] are using machine learning and AI to model scenarios and pivot faster than their competitors that are still scrolling spreadsheets.

Walmart's early investments in cutting-edge tech and business model diversification look downright visionary these days. Walmart can track a shipment from factory floor to store shelf, and reroute it on the fly when tariff situations shift. They can rework pricing strategies with surgical precision and offset those product-based margin crunches with revenue from their online marketplace, advertising platform, fulfillment services, and more.

Walmart isn't just a retailer anymore. It's a massive technology platform that happens to sell groceries and general merchandise, and that's making all the difference. But here's something else that's really lifted my spirits throughout these tariff tremors. I've seen vendor relationships strengthen rather than fracture.

Once again, crisis is breeding collaboration. Smart retailers know that burning bridges over tariff headaches is shortsighted. The loyalty that retailers have shown to struggling suppliers has been remarkable in some cases, and especially retailers propping up those smaller brands that they know spice up their assortments and bring established fan bases to their platforms.

So this is no time for shortsighted thinking. We're all in this together.

Speaking of Walmart, let's talk some more about what they're doing right. I recently weighed in on how SNAP program changes might affect Walmart. On the surface, you could assume that reducing SNAP benefits would ding Walmart, when actually it's illustrating how Walmart has perfected its high, low game.

Walmart will likely benefit from SNAP reductions, mainly because it's easy for Walmart to identify and Target items for price competitiveness. But the big takeaway is that they're keeping prices sharp for those value-oriented shoppers and those impacted by SNAP changes, but they're doing it while continuing to onboard higher-income shoppers.

With killer convenience options and an ever-expanding online marketplace, the SNAP changes also present a tremendous loyalty-building opportunity for Walmart. By taking a leadership role and demonstrating they take care of their more vulnerable customers, Walmart's solidifying its standing across all income levels.

It's not enough just to win against traditional grocery stores. Walmart's playing a completely different game. That's why when people ask me about retail hierarchies, I tell them, there's Amazon, there's Walmart, and then everybody else. Walmart's left competitors in the dust by making big bets on technology, pursuing business model diversification, and yes, playing that masterful high-low game that keeps everyone happy.

Which brings us to Target, and guys, I hate to pile on, but we need to talk about what keeps happening here. The end of Target's partnership with Ulta was the next shoe I saw dropping, and it just landed with a loud thud. It's exactly the kind of cascading effect I've been warning about. A few months ago, I forecasted that Targets various travails wouldn't just compromise customer loyalty and store experience, they'll make Target less attractive to brand partners. Back in March, I picked up the first hints that Ulta might be fulfilling that prophecy and heading for the exits at Target. When Alter reported its Q4 results, its CEO confirmed that the company lost market share in the beauty category for the first time in 2024, and she went on to outline elements of its Ulta Unleashed turnaround strategy.

Target wasn't even mentioned, so I took it. that Ulta would snap the leash back on Target shortly and scout out new places to roam. And here we are. But this isn't just some fly-by-night. temporary exclusive. Ulta brought instant beauty credibility and a noticeable high-impact visual upgrade to Target's in-store environments.

So much so that Ulta's shop in shops in some stores felt like upscale islands floating in a sea of big box flotsam and jetsam. They were unintentionally throwing shade on the rest of the store. When you lose a partnership like Ulta, it trickles down to ad spend, retail media, and the ability to forge new brand collaborations. That creates a compounding effect that's really difficult to reverse.

I've talked about how more brands, including retailers, are plugging into ready-made environments to expand their reach exponentially without the headaches and the investments required to open standalone stores. This has been going on for a while, but it's heating up now. Here's the thing. When a marquee brand like Ulta deigns to hook up with a big box retailer, they're making a mini flagship move with all the high expectations that go with it.

Top-notch customer service, pristine environments, fastidious housekeeping, nothing less will do. Ulta's CEO said the company would lean in where it has immediate opportunities to improve execution, all through the lens of protecting and nurturing the culture that they believe makes Ulta so special.

Improved execution, protecting and nurturing culture, securing that special sauce. Clearly. Ulta didn't think Target lived up to these tenets, or maybe they even thought Target violated them. In my last Heat Map episode, I talked about my conversation with the Daily Mail about Target's apparel sections turning into disaster zones with merchandise scattered on floors, clothing racks that look like they've been hit by a tornado.

When they asked for my take, I had to be blunt. Target's apparel, merchandising, and maintenance issues have been a problem for years. I think Target's actually been getting a pass on it. When shoppers are literally shopping off the floor, it craters Target's private brand investments and brand partnerships, both of which have always been central to Target's value proposition, but even more so now because these initiatives are still at the top of Target's list to drive $15 billion in sales growth by 2030.

But what's the point of creating all these brands if they lose their distinct identities right after they hit the floor? Often, literally. Well, fast forward a couple of days ago, I popped into a Target store looking for a ray of light, something that would be a counterbalance to what we're talking about right now.

No such luck. There it was, front and center, the Champion brand boutique, Target's latest big brand hookup. There were really nice looking ball caps on rods shooting out of a shelf, but with a tangle of other products thrown on top. Soft, sturdy, logoed fleece was on the floor and wadded up on shelves.

There was just no attention to actually maintaining the presentation. Maybe that's done later in the day or thing on some mornings, but when you're competing against specialty retailers with armies of associates continually folding and zhuzhing product, that just won't cut it. Champion's owned by Authentic Brands, a brand portfolio company I have a lot of respect for. I know a lot of folks over there, and they have a great team. I've worked with a lot of these types of companies, and it's always such a buzzkill to see gorgeous digital merchandising mockups at HQ morph into a hot mess after they hit stores, and especially when you don't control those stores.

Anyway, while I was at Target, I picked up a couple of things that would save me a trip to the grocery store, and then that familiar anxiety started to creep in. Will the self-checkout line make me just drop and leave again? Do I really need bananas and chips right now? I did really like that Boots and Barkley elevated cat dish that I grabbed on impulse for one of my fur babies, so I decided to check out the checkout.

Well, sure enough, the self-checkout line was all the way down the aisle again, 26 people deep. I handed my stuff to a Target associate apologetically and headed out empty-handed, and I have to say, it's not the first time that's happened. What a bummer. Nothing's changed. There's no break in the clouds, which brings me to Target's leadership transition.

A few months ago, I forecasted that Brian Cornell probably wasn't long for the Target world and that he likely wouldn't go quietly. The three-year contract extension he got in 2022 is at a close, presenting a perfect permission slip for Cornell to bow out gracefully.

Well, he won't be CEO any longer. That job's going to Michael Fidelki, a 20-year insider. But Cornell is trying to hang in there as chairman. Shareholder activists are having none of it, so much so that they've demanded that Target revise its laws to require an independent chair. So all of this will get very interesting, but hopefully not too distracting because Target just can't afford it.

Now, Target said to have looked outside for candidates for the top job, but they decided to go with Fidelki, saying that they needed someone who "knows why Target is special". Gosh, there's that word again. But it raises an uncomfortable question. Does that mean that Brian Cornell didn't know why Target's special?

And this "knows why Target is special" criteria reinforces Target's ongoing exceptionalist view. Not only that Target is special, but that it will stay that way if it just keeps doing things the Target way. Maybe just with more intensity and longer. Hmm. Overall, I'm concerned that Target keeps leaning into back to the future positioning and personnel even against the backdrop we just talked about. I've summed up their challenge in three words. Lack of vision. Target needs a completely new vision, not a rehash of "Tarzhay", not more splashy brand partnerships half-heartedly executed, but a real strategy for how they'll survive this time of unprecedented challenge and change.

Maybe Fidelki will cast that vision when he takes the helm in February. I really hope that he does. I think there's a real opening here. Target's twofold brand promise, "expect more pay less" has served it well, and I think it's still relevant, but now Target should be seizing the opportunity to lean into that "expect more" side, especially as middle to upper soft lines retailers like Kohl's and JC Penney continue to struggle. Attempting to win the value war against Walmart, Shein, and dollar stores on the "pay less" side is futile. And by the way, Shein just started opening shop in shop locations in France as a test.

Target says it wants to bring elevated customer experiences. Well, if that's the case, they should be looking at mobile checkout and other big moves that will separate them from discount competitors and ease those checkout jams. But in light of all the dynamics I've been tracking, true elevation is a heavier lift for Target than it should be.

Speaking of brands learning that they're not as special as they thought. Let's talk about Lululemon. They're getting pinched from all sides. You've got Walmart converting grocery shoppers to athleisure on the low end while brands like Alo Yoga and Vuori are stealing market share on the premium side. Vuori's last round of private equity funding brought its valuation up to 55.5 billion.

That's one of the largest valuations ever for a private apparel company. So even though Lululemon's revenue dwarfs Vuori, it's an uncomfortable place for Lululemon to be when their stock is down 55%. The American Express Platinum tie-in that Lululemon just announced is smart brand alignment, but only in terms of reinforcing their premium positioning with those high-spending consumers who have always liked Lululemon.

But let's be honest, loyalty partnerships don't fix fundamental business challenges. So this one is a nice-to-have, not a needle mover. Lululemon built its empire on uber high-quality yoga pants at a premium price. The problem is, competitors are making really good yoga pants right now, and some cost half as much or even less in today's market when consumers are so selective.

Perceived value matters more than perfect product. But if you're in the business of making near-perfect products, customers don't always feel the need to refresh their wardrobes as often. It's kind of the Patagonia problem, only with midriff tops. But unlike what Patagonia pulled in 2011, I don't see Lululemon encouraging customers to back off purchases to save the planet.

Lululemon's renewed focus on innovation highlights its ultimate challenge. Core customers want their favorite yoga pants to stay the same forever, but you need constant newness to drive traffic and attract new shoppers. It's really hard to thread that needle. And when you layer on those headwinds we keep talking about, tariffs and supply chain pressures, they just couldn't have come at a worse time.

When you're already fighting an uphill battle, the last thing you need is cost pressures, and on top of that, discretionary spending is soft across the board, and apparel is particularly brutal right now. Lululemon's not broken, but it's no longer special in a category they help create. They're learning what every luxury brand individually discovers. Exclusivity is hard to maintain when everyone wants a piece of your pie, and not everyone remembers or even cares if you're the one who broke through and created the template.

But it's not all gloom and doom out there. Let's talk about some bright spots, starting with Macy's. You heard that right, Macy's. I recently visited a couple of their stores and found them clean and curated for the first time in a very long time. Gone were those tight racks and stacks of clothes that previously suffocated stores and sight lines. Sales associates were available and knowledgeable, and checkout was efficient.

Macy's really seems to be walking the talk with their Bold New Chapter plan, and it's obviously starting to pay off. They're not just attempting to prune their way into relevance or spot treat problems. They're taking a thoughtful, holistic approach that incorporates needed fixes and proactive future seeking updates.

It's still early in the game, but Macy's has a real opportunity to emerge, or should I say reemerge, as a better player in every sense of the word.

Let's talk about the emerging innovation ecosystems that are supposed to enlighten and inspire companies that are grappling with everything we've talked about.

I recently commented on the Retail Innovation Week event that was held in Bentonville. And it got me thinking about what it takes to build real innovation credibility. The question of whether Northwest Arkansas could become the stealth South By Southwest of retail tech comes up more and more, and for good reason.

When you've got Walmart, JB Hunt, and Tyson as anchor tenants, plus a constant stream of consulting and tech companies making pilgrimages here, you've got all the ingredients for a major innovation ecosystem. So it's no wonder Bentonville is being added as a stop for all kinds of high-tech road shows and trade show satellite events.

But here's the key. These days, the best innovation events bring genuine, agnostic thought leadership that challenges even the most impressive talent benches, especially when you're dealing with the level of sophistication that companies like Walmart have. And it can't just be about pandering to local businesses or thinly veiled pitches from the podium.

With all the advances in AI and the democratization of so many powerful [00:20:00] tools, the bar for true thought leadership has been raised sky high, and I think that's why I'm seeing more companies backing away from some of these big pay-to-play events. But on the positive side, it's been so fun working with companies that earnestly want to elevate the dialogue.

Ones that are hosting events for their clients and bringing in agnostic experts. I love to see that, because as counterintuitive as it seems, it takes real confidence to take that position, to step back and resist the temptation to turn user conferences and confabs into pitch sessions to your clients. And instead, curate programming that's truly for them. And to have the confidence to invest in your own thought leadership instead of thinking you have to set up a booth and be a bit player at everyone else's show.

A couple of my clients are in their third and fifth years hosting user conferences that have more than tripled in size. They started out dabbling and seeing how things go, but then they started to reprise these events year after year, literally based on popular demand, and now these conferences are something their clients truly look forward to. People always know when they're getting the goods, and they appreciate it.

So as sink or swim season rushes toward us, retailers like Macy's are doing the hard work of reinvention, casting a clear vision and executing against it across the enterprise. Others are stubbornly denying they even have a problem or struggling to define their place in a world where staying special requires constant vigilance.

The retailers that are fighting the undercurrents and emerging stronger see disruption as opportunity. They're tracking these changing tides and seizing opportunities right when they surface, whether that's tariff arbitrage, investments in technology and talent, or simply having the humility to admit when your old playbook just isn't working anymore and asking for help.

As I always tell my keynote audiences and consulting clients, in retail, standing still is moving backward. The current environment is making that truth more obvious, more quickly, and more consequentially than ever before.

So that's our heat map to kick off. October. Thank you for listening in today. I hope you enjoyed the episode, and if you did, please like, share, and subscribe.

You can also invite me to your organization or event to bring conversations like this to life in your spaces. That's what I do. B2B coaching, training, and executive consulting. If it has to do with retail thought leadership, B2B, market positioning, and business development, it's probably something I can help you with.

If you'd like to learn more about how we can work together to get your 2026 off to an awesome start, reach out to me at Spieckermanretail.com or email team@Spieckermanretail.com to book a discovery call. Until next time, keep speaking retail.