The fact is that being an engineer at Target is very likely a boring, bureaucratic drag. The best engineers are overwhelmingly the best engineers because they love what they do and hone their craft. Someone who takes so much pride in what they do is not likely to get much satisfaction out of developing a website that helps people buy a mop. It's a fine thing to do; people need mops. But it's not a particularly interesting problem to be solving.
So, I think places like Target will always have this problem unless they're willing to pony up the cash and offer more money than the interesting jobs. After all, there's no reason that some behemoth like Target can't compete with some SV startup in salary.
I agree with everything you say, but think it should be emphasized that tech people at (for instance) Amazon are fundamentally in the same 'buy a mop' situation, except that Amazon believes that it is/can be so much more.
Fundamentally, it's clear that Target will never be a company that holds its tech people in awe - whereas at Amazon, you 'just' know that a single mop supplier is lower on the totem pole than a single DBA, for example.
Basic e-commerce for such things as mop-buying is a solved problem in 2011. Not sure why you would even need a large team of top-notch developers at a place like Target. A few good sysadmins and DBAs, and maybe some graphics/front-end types.
Edit: Upon thinking about this a moment longer, I think that actually there would be (or could be) interesting work at Target, simply because of the scale of the operation. Though sadly you are still probably hitting the mark in the "bureaucratic drag" assessment.
Target is the third largest brick and mortar retailer in the US. Running a computer network nationally for Target is not a solved problem. Sure, it's a solved problem for #1 WalMart, using entirely custom software that WalMart developed in house. But it's not like WalMart is selling that software to Target.
Eh I work at a place that is arguably "boring" (we're not in the buy-a-mop business, but it's definitely not sexy) but the culture & freedom I have to operate make it exciting. I get to call some shots on what I make, which is a huge perk for me.
So, I think places like Target will always have this problem unless they're willing to pony up the cash and offer more money than the interesting jobs. After all, there's no reason that some behemoth like Target can't compete with some SV startup in salary.