Corporate America retreated from its commitments to diversity, equity and inclusion over fears of a backlash and legal attacks from the Trump administration and the political right.
There are signs that it should have paid more attention to the left.
In January, Target Corp. rolled back its DEI initiatives, including ending its diversity goals and “evolving” its supplier diversity team to supplier engagement. The retailer had long capitalised on its image as a progressive and inclusive company, so to some consumers the backtracking felt like a betrayal.
Now that frustration may be starting to show up in the numbers. Early reads from data providers Placer.ai and Numerator show that Target’s store traffic fell in the aftermath of its DEI exit, with Numerator showing Hispanic and Black households cutting back their visits to the retailer at the highest rates amid calls for boycotts.
Target’s traffic declines are part of a broader story in retail that tells the diverging tales of three of the sector’s biggest companies, each of which has a distinct brand position and handled the DEI backlash differently: Target, Walmart Inc. and Costco Wholesale Corp. Data from Placer.ai shows that Target’s overall foot traffic has fallen every week since its DEI reversal on Jan. 24. Walmart’s estimated visits have fallen over the same period, but not as steeply as Target’s. In contrast, the number of shoppers visiting Costco continued to grow.
How the companies have responded to the politicisation of DEI reveals something deeper about the leadership and operations of each. But the data also signals that we may be entering a new era of consumer boycotts, which until recently have been dismissed as ineffective. “Usually, a boycott will fizzle out because there’s not enough energy around it,” says Wharton marketing professor Americus Reed. “But we’re in a new world order where these kinds of things have broken through the national consciousness.” The relentlessness of the news cycle is constantly reminding people of what and why they’re protesting. “They’re not given a chance to forget about it,” he says.
Meanwhile, Costco seems to be benefitting from what’s known as a “buy-cott.” As much of the rest of the business world backed away from public commitments to DEI, Costco took a strong stand against a shareholder proposal meant to undermine its diversity programs. Unlike Target, the warehouse retailer had never used DEI as a differentiating factor in attracting consumers, but its position appears to have compelled some of Costco’s members to shift more of their dollars to the company.
Costco’s decision to stick with its DEI position is very on brand. The company rarely strays from its well-defined strategy. When analysts have taken issue with Costco’s unusually high wages and generous employee benefits, the retailer has ignored the criticism. Tuning out the noise has paid off; its shares have outperformed Walmart and Target.
Over at Walmart, the MO is to stick to its carefully cultivated image of being apolitical so as not to provoke a customer base that leans neither clearly left nor right. When right-wing activist Robby Starbuck came after the company’s DEI efforts, Walmart walked a fine line by letting Starbuck take credit for some of the changes it made to its policies, while not going as far as some other retailers in its rollback. The data show the company may have been somewhat successful in neutralising the message.
To be sure, there may be other dynamics at play. Target’s customer base is slightly wealthier than Walmart’s, according to Numerator data, so its shoppers may have the financial wherewithal to prioritise personal values over value for money. Target also sells more nice-to-have items than Walmart. It generates about just under 50 percent of sales from discretionary items, such as clothing, compared with about 40 percent at Walmart, according to GlobalData. These goods are easier to cut back on than essentials, particularly as consumers have become more cautious.
But turning off any customer is simply the last thing Target needs right now. It has suffered from a series of missteps over the past three years, ranging from a poorly timed mountain of inventory in 2022, to a bungled response to customers angry about its Pride Month collection that ended up alienating shoppers on both the left and the right. Just when it appeared to be approaching calmer waters last year, it added extra costs by stocking up ahead of the East and Gulf Coast port strike.
Target said it doesn’t comment on external data sources. However, the company said earlier this month that its February sales were hurt by cold weather and declining consumer confidence (though it did enjoy a record performance around Valentine’s Day). And the broader economic environment certainly isn’t helping: Overall US retail sales rose by less than forecast in February, and January numbers were revised down to mark the biggest drop since 2021. Meanwhile, all retailers have had to grapple with having one less trading day because of the leap year in 2024.
The company has set out plans to bring back the “Tarjay” magic, including ensuring fuller shelves, beefing up its private labels and having more of the cheap chic fashion it’s known for. But to get its sales — and share price — moving in the right direction, what it really needs is a period of stability. That doesn’t appear to be in the cards: Last month the company was sued by the state of Florida, alleging the “company knowingly misled and defrauded investors by concealing the financial risks of its radical LGBTQ activism.”
Even as the country became more divided, Walmart or Target were places where all could be united in their love of a bargain or an eye-catching sweater that didn’t break the bank. It’s clear that customers are noticing that that’s no longer the case — and that some retailers have handled the upheaval better than others.
By Beth Kowitt and Andrea Felsted
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