Last week, The Home Depot posted some of its best results in years… rising 4.9 percent, albeit merely 1 percent on a comp-store basis.
And Lowe’s boosted its full year revenue outlook. As well as announcing the acquisition of Foundation Building Materials.
While each “big box” reported mixed – yet encouraging second-quarter financial results – both giants continue to dominate the homebuilding and remodeling channel with well aligned momentum in capturing the contractor and professional market.
In the very same news cycle, Target announced this week that longtime CEO Brian Cornell will step down, with current COO Michael Fiddelke to take the reins. The leadership change might have been intended as a show of stability for the challenger brand… but instead the market was disappointed. And Target’s stock fell more than 10%.
Why? Investors worried that an inside leadership appointment would mean “more of the same strategy” that has left the retailer trailing its competitors: Amazon and Walmart.
When Challenger Brands Lose Their Edge
Target’s situation illustrates a classic concern for companies seeking a strong #3 spot in their category.
Once celebrated as “Tar-Jay”, the cheeky nickname captured a blend of affordable style. And aspirational branding. Target built an identity that separated it from the low cost, value proposition of Walmart. And a differentiated experience from the online delivery of Amazon.
Yet in recent years, Target has drifted away from its distinctive positioning. Instead of owning a unique-brand-promise in audiences’ minds, it has leaned heavily into direct price competition with the category captains. But chasing Walmart’s low prices – or Amazon’s delivery speed – is clearly an unsustainable strategy.
Just ask The Home Depot and Lowe’s.
For challenger brands the lesson is simple: you cannot win by imitation.
To thrive, you must become a “category of one” – with such distinct value – that comparisons to the leading duopoly no longer make sense.
A Cautionary Tale in Brand Trust
Target’s brand troubles were compounded not so long ago when it scaled back its diversity, equity and inclusion initiatives. That decision sparked an audience segment boycott that reportedly erased billions in market value. For those customers who had associated Target with progressive values, the retreat felt like a betrayal that highlights yet another truth about challenger brands: loyalty is fragile. Prospects choose products and solutions because they believe in what a brand stands for.
Waver on expectations or promises – a brand risks alienating a passionate base – at the exact moment it may need them most.
The Contrast: Home Depot and Lowe’s
The recent earnings season has provided a stark contrast. The Home Depot and Lowe’s both posted results that boosted investor confidence, sending their stocks higher. Both continue to benefit from strong professional contractor sales.
And resilient margins.
While narrowing gaps with operational improvements and sharper executions.
Their performance illustrates how focusing on core strengths and building scale advantages can reward customers and investors alike. For building product manufacturers and suppliers watching these reports, the takeaway is clear: brands that play their own game – and own it – find themselves rewarded.
While those chasing competitors without a differentiated promise, lose ground.
Target’s Missed Opportunity
Target once thrived because it promised something no one else offered as clearly.
Affordable solutions presented with a unique promise. And a curated assortment that felt elevated.
That positioning let it punch above its weight… against bigger rivals.
The current strategy, however, seems to ignore that heritage. By prioritizing cost-cutting – chasing scale and hedging identity – Target has diluted the very essence of what allowed it to stand apart. The appointment of an insider successor only reinforces the perception that nothing fundamentally new may be changing.
What Challenger Brands Must Do Differently
When seeking to carve opportunity in a market crowded by giants, consider these four challenger brand strategies:
- Rediscover your unique promise.
Just as Target once “leaned into” forward style and curated assortments… building product brands should seek their own differentiators. For example, artisan craftsmanship – or sustainability – can stand apart from mass-produced and commoditized, traditional channel solutions. - Create a “category of one.”
It’s a race to the bottom to outprice leaders. In selling decking, for instance, position the brand regionally as solutions designed for changing climates. Or products promising to age beautifully with limited maintenance. These claims remove brands from direct comparison. And allow for a unique selling proposition in an owned lane. - Stand firm on your values.
Challenger Brand manufacturers thrive because they stand for something larger than the product itself… like eco-conscious production. Or support for local jobs. Walking away from those commitments can erode trust. Just as Target learned the hard way. - Innovate visibly.
Challenger Brands often win by taking calculated and prudent risks. Consider faucet companies that introduced touchless technology long before health and wellness grew mainstream. Innovation made them memorable and distinct… even in a market dominated by leading decorative plumbing fixture manufacturers.
Target’s leadership shuffle – earnings challenges – and brand missteps underscore a larger truth: challengers can’t succeed effectively by blending in.
For building product manufacturers facing leading competitors… the path forward lies not in imitation.
Rather, in distinction.
That is how to transform from a competitor.
Into a category of one.
If you’d like to explore what a challenger brand mindset can do for your brand, send an email to Steve at sk@kleberandassociates.com and let’s get the conversation started.
