Welcome to The Business Buying Academy with Sieva Kozinsky.

🔑 How to diversify and keep a retail empire alive

Nobody realized it at the time, but a $70 billion retail empire was quietly born on a summer day in Minneapolis all the way back in 1902.

Enter real estate investor George Draper Dayton.

He bought a stake in a local department store called Goodfellow’s Dry Goods Company.

The year earlier, he paid just $30,000 to purchase the real estate Goodfellow's leased.

Dayton got to work rebuilding it soon bought out the remaining partners, renamed it Dayton Dry Goods Company (later shortened to the Dayton Company, commonly known as Dayton’s), and built it into a leading regional department-store chain in the Upper Midwest.⁠​

Dayton’s became known for quality merchandise and excellent customer service.

Dayton's even pioneered the concept of the fully enclosed shopping mall, opening the country's first one in 1956 (the Southdale Center in Edina, Minnesota).

The Dayton family, including George’s sons and later grandsons, guided the business for decades.

By 1950 the company generated $60 million in revenue

By 1960 sales eclipsed $80 million.

Dayton's became an icon in the Midwest and one of Minnesota's largest companies.

But the most notable fact about Dayton's isn't the department store success.

Dayton's launched a new business that eventually surpassed the parent company thousands of times over.

Dayton's stores slowly disappeared and no longer exist today.

But the company is worth about $70 billion.

The company?

Target.

Launch of Target (1962)

In 1962, Dayton's launched a new retail concept called Target.

It was an upscale discount chain.

The 1960s, and 1962 especially, would become the golden age for this new type of retail concept.

Target launched on May 1, 1962.

Walmart launched just two months later, on July 2, 1962.

And get this: Kmart launched on March 1, 1962.

Something was in the air in 1962.

A few other notable retail concepts that launched that year: Kohl's, Rite-Aid, Woolco, Shopko, and Crate & Barrel.

"Major discount retailers like Walmart, Kmart, Target, and Woolco all launched or tested their first stores in 1962 because a combination of post-WWII economic shifts, suburban growth, and changing laws made the self-service, low-margin, high-volume "big-box" model suddenly viable and profitable."​
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- NPR

Target's concept aimed to combine department-store quality, fashion, and service with lower prices and self-service convenience.

The first store opened in a Minneapolis suburb and three more followed in Minnesota that year.

Target expanded steadily.

By the mid-1970s it had become the parent company’s largest revenue generator.

The company went public in 1967 as the Dayton Corporation. In 1969 it merged with the larger Detroit-based J.L. Hudson Company (another respected department-store chain) to form Dayton-Hudson Corporation.

They later acquired discount store chain Mervyn’s (1978).

By the late 1970s, Dayton-Hudson was generating about $3 billion in annual revenue.

Over $1 billion of that was from Target alone.

Target Overtakes the Parent Business

Target grew far faster than the traditional department stores over the coming decades.

By the late 1990s it accounted for the large majority of sales and profits (around 80%).

In January 2000, Dayton-Hudson Corporation officially renamed itself Target Corporation (ticker TGT) to reflect this reality.

The Dayton’s and Hudson’s department stores were rebranded as Marshall Field’s (another business they acquired) in 2001 to create a single, more nationally recognizable department-store nameplate.⁠​

In 2004, Target Corporation sold its entire department-store division (Marshall Field’s, which included the former Dayton’s and Hudson’s stores) and most of its Mervyn’s stores.

This allowed the company to focus exclusively on the Target discount format.

The department stores passed to May Department Stores, which later merged with Federated Department Stores (owner of Macy’s).

In 2006 the remaining Marshall Field’s locations were rebranded as Macy’s.

The original downtown Minneapolis Dayton’s flagship eventually closed as a Macy’s in 2017.

The Dayton’s department-store chain and name no longer exist as an operating retail business.

Meanwhile, Target generates over $100 billion in annual revenue and has a market cap of $70 billion.⁠​

Target as a Major Retailer

With the department-store businesses divested, Target concentrated on expanding and refining its stores.

It developed formats such as SuperTarget (with groceries), CityTarget, and smaller urban stores, and built a strong private-label assortment. It has roughly 2,000 stores across the United States.

More than a century of consumer habits can be told through the lens of Dayton's.

Department stores emerged as the premier retail shopping option in the first half of the 1900s.

Later, during the post-WWII boom, Americans moved out to the suburbs and demanded a more casual shopping experience that offered a greater range of inventory.

Dayton's and later Target positioned themselves perfectly for both.

Just as Dayton's core business began to recede, the new retail concept picked up the slack.

Dayton's/Target is one of my favorite stories about diversification and using your resources to pivot when the core business becomes threatened.

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Sieva

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