Even as the COVID-19 pandemic roils the retail industry, Target and Walmart look like they’re doing just fine. In fact, at the moment, they’re thriving. The two retail giants announced quarterly earnings the week of August 17, and the numbers are undeniably positive:


  • Crushed investor expectations for its fiscal second quarter, with quarterly profits increasing by 80 percent to $1.7 billion.
  •  CEO Brian Cornell said Target picked up $5 billion in market share in the first half of 2020.
  •  Target’s sales online and at stores open for at least a year climbed by 24.3 percent during the quarter ended August 1, an all-time high for the company.
  •  E-commerce services saw dramatic growth, with Target’s curbside pickup service jumping by more than 700%.
  •  Shares were trading at $154.69, a 52-week high.


  • Also blew past investor expectations, with operating profits rising to $6.1 billion, an 8.5 percent increase year-over-year.
  •  Its eCommerce business exploded 97 percent year over year, reflecting a surge in popularity of curbside pick-up services.
  •  Shares were also trading at 52-week high of $137.63

 The obvious question: why are they succeeding?

Building Moats

The answer: they’ve protected their businesses by creating nearly unassailable moats. As David George and Alex Immerman with A16Z state in Moats Before (Gross) Margins, a business’s value comes from defensibility, and defensibility comes from moats. Companies can establish moats through economies of scale, differentiated technology, network effects, and direct brand power. Target and Walmart have brought many of these aspects together to thrive during the pandemic.

While their competitors tweaked their merchandise offerings or expanded by building more stores, Target and Walmart thought bigger: they started to own the customer journey from order to pick-up. They didn’t just ask how they could make their stores better. They:

Figured out how to connect the in-store shopping experience to a broader ecosystem of experiences connecting online and offline commerce

For example, in 2016, Walmart began rolling out its pick-up-and-fuel model, which laid the groundwork for its current network of stores offering curbside delivery. Target did the same in 2018. These decisions would prove to be crucial. During the pandemic, obviously curbside delivery caters to shoppers reluctant to step foot in physical stores where they become exposed to other shoppers. As a result, curbside is credited for fueling both companies’ astounding eCommerce growth.

Launched new direct-to-consumer (DTC) products and services that gave them more ways to own the experience

Target launched its Good & Gather DTC product in 2019. As Jason Goldberg of Publicis pointed out, no consumer packaged goods business has built a $1 billion brand in last five years, and no new DTC brand has generated $1 billion in annual sales. Target’s Good & Gather has already surpassed $1 billion in sales.

Successful DTC Strategies

Earlier in 2020, research firm PSFK assessed nine DTC strategies that would help retailers succeed as the shopping experience continues to change during the pandemic. Those strategies fall under three categories:

  • Own the infrastructure.
  • Own the experience.
  • Own the relationship.

It strikes me that both Target and Walmart owned their infrastructure a long time ago, leading to the numbers they’re achieving in 2020. PSFK cited Target as an example of owning the relationship, too, with its Studio Connect program that allows customers to contribute to the co-creation of products. Even so, I’d argue that owning the experience and relationship remain frontiers for both Target and Walmart to conquer. Like every retailer, they’ve lost (for now) a major card to play in owning the experience – the store itself, as shoppers spend less time browsing. Some compelling questions loom, for example:

  • How might they own the relationship with more imaginative loyalty programs?
  • How might they level up their online/offline experience, on mobile, the desktop, and at the point of curbside pick-up?

You can be sure they’re both working on answers now. That’s what businesses need to do to build moats: think ahead while everyone else is catching up to the playing field you’ve defined already.

Mike Edmonds

Mike Edmonds

Managing Director, VP Product