3 major challenges for Target’s new CEO

May 5, 2014, 9:43 PM UTC

FORTUNE — It takes a lot to unseat a chief executive officer who has spent his entire career — 35 years — with his company. But the exposure of 110 million customers’ personal and payment data does the trick, apparently.

Following an attack by hackers who captured customer information this past holiday season, Target Corp.  CEO Gregg Steinhafel is out after resigning Monday. The retailer’s current chief financial officer John Mulligan will temporarily replace Steinhafel. While the data breach was likely the main impetus for Steinhafel’s ouster, Mulligan and whoever comes in as Target’s permanent CEO have a lot more than cybersecurity issues to worry about.

1. Losing cheap chic 

Amazon has encroached on every brick-and-mortar store’s sales, but it has put especially fierce pressure on Target. When it comes to price, Amazon undercuts Target more than it does rival Wal-Mart , according to William Blair analyst Mark Miller. And Amazon’s cutting-edge reputation poses a direct threat to Target, which cultivated its “cheap chic” aesthetic through high-profile design partnerships, namely in its apparel department. (No one has ever credited Wal-Mart with being cool.) Last year, customers made 2.7% fewer transactions at Target compared to 2012, including a 5.5% drop in the fourth quarter — the worst result since the retailer began to disclose such metrics in 2008.

2. Stand-off at the grocery

Under Steinhafel, Target jumped into the grocery business, and earlier this month it announced that it plans to expand its selection of natural, organic, and sustainable products, with new products from 17 brands including Seventh Generation, Kashi, and Chobani. But the grocery business is a fiercely competitive space with notoriously low margins. Target was already dealing with the arduous task of stealing business from Wal-Mart, the country’s largest grocer, where food prices are typically 3.2% lower than Target’s. Capturing grocery sales is going to be even tougher in the near future as Amazon rolls out its online grocery business AmazonFresh.

3. Oh, Canada

Last year, Target opened 120 stores in Canada, all at once, in a massive launch, that it massively bungled. The retail chain did a poor job of replicating its American shopping experience in Canada, on account of its higher prices due to transportation and tariff costs, the smaller stores it acquired from retailer Zeller’s, and its failure to get well-known American brands into its new stores. During Target’s latest earnings call, Steinhafel said the company is focusing on “optimizing” its business in Canada, ensuring that it has “the right quantity of each item in the right place at the right time.” It sounds like a fair goal, but that $1 billion loss that Target’s Canadian operations posted last year won’t be easy to erase.

Subscribe to Well Adjusted, our newsletter full of simple strategies to work smarter and live better, from the Fortune Well team. Sign up today.