In Exclusives, Insight, Retail

Something happened in the 2000s that relegated “Tar-jay” to the position of just another big-box retailer. It is no secret brick and mortar has been struggling. Stores are closing, retailers are filing bankruptcy, and some CEOs continue to fall back on excuses and finger-pointing. In the midst of this retail turmoil, visionary Target CEO Brian Cornell made a commitment two years ago to invest $7 billion in stores and technology to modernize operations to be competitive in our digital age. Wall Street did not respond kindly to the strategy, dealing the retailer a swift blow of the worst one-day decline in nine years, which took the retailer ten months to recover from. Fast-forward, on the heels of a 5.7% increase in comp sales during the holiday shopping period, Target is positioned to deliver its best fourth-quarter finish since 2005.

The Evolution:

  • Shopping aisles at more than 400 locations have gotten a facelift.
  • Created backroom shipping and packaging centers to get merchandise to customers quickly and at little-to-no cost.
  • Upgrades have been made to the website and shopping apps.
  • Money has been sunk into supply-chain logistics.
  • Nearly two-dozen private-label brands have been developed in apparel and home decor.
  • This year Target will open more small-format stores, and move near more college campuses and upscale tourist sites.

Competing with Amazon Prime:

  • Same-day service with a $99 subscription to Shipt, an acquisition Target made for $550 million in 2017.
  • Next-day delivery for bulky items for $2.99.
  • Urban customers can pay $7 to have items brought to their homes.
  • Free in-store pickup and curbside delivery along with two-day shipping on most items.

Digital Transformation:

  • Target has embraced and embedded the innovation of DTC brands into their merchandising strategy. Target is selling brands like Harry’s, Native, Quip, and many more online and in-store, leveraging their positioning to get their cutting-edge image back.
  • They are executing platform-specific strategies that are all about engagement.
  • They are retooling the store for digital consumers with two entrances—one focused on experiential discovery and the other for quick in-and-out trips.

Beauty Category:

  • Sephora-like open-floor plan upgrade.
  • Better lighting, low shelving, and counters staffed by associates.
  • Making a larger commitment to clean, green and natural brands.
  • Incorporation of beauty-centric wellness into their merchandising assortment.
  • Partnerships with DTC beauty disrupters like Harry’s, Flamingo, and Bevel.

Target is in a very different position today because Cornell had the vision to look to the future and develop a long-term rather than short-term strategy to fix the business. “The reason we’re doing this is not to move the needle for the next three years,” Cornell said. “Back then, we said we were going to play the long game and make the right investments to ensure that this is a viable and thriving business, and that the Target brand is one of the winners in retail. It won’t stop in 2020. We’ve got a lot more work to do.”

The changes that are moving the retailer forward are coming at the expense of profits at the moment, so we’ll have to see if investors have the patience for this long-term strategy to pay off. “There’s a lot of complexity and costs associated with doing some of these services,” Steve Dennis, former Neiman Marcus executive and owner of the strategic-advisory firm SageBerry Consulting in Dallas, said to the Star Tribune. “They deserve credit for fixing some areas where they were weak and stepping on the gas. Whether they’ll be able to sustain it, time will tell.”

Photo: via Target

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