NEW YORK — The past year was a good one for the retail industry, and a really good one for Target Corp.
Speaking at the National Retail Federation’s recent Big Show convention here, Target chairman and chief executive officer Brian Cornell noted that during the recent holiday season his company posted its best sales in more than a decade. Which prompted him to muse, what has changed in the past 10 years?
“I think the short answer is, ‘Everything,’ ” Cornell said. “If we go back to 2009, the Millennial was a big mystery, iPhones were just being introduced, and I can tell you that nobody ever shopped from their Blackberry. And in 2009 for companies like ours, digital was still a rounding error, not a growth engine.”
Cornell, who took the reins at Target in 2014, argued that what has happened in the past 10 years reflects the way the world and the retail industry are in a perpetual state of change.
“Consumer demographics, expectations, advances in technology — they’re only going to continue to evolve,” Cornell said.
To keep up, he said, retailers need to embrace that change, while keeping four ideas in mind. First, they need to start with the consumer in every decision they make. Second, they have to be willing to invest in both their current business and the business they expect to have tomorrow. They also have to be willing to reinvest — in their stores, in their digital businesses, in technology, in fulfillment and in their teams. And finally, retailers have to be willing to disrupt themselves.
That may mean building on existing strengths. Cornell noted that back in 2009, Target was still running its online operation as a completely separate business, with different buyers, different inventories and a half-dozen fulfillment centers around the country trying to serve the entire country.
“And as digital moved from a rounding error to an essential part of what consumers expected from us, we knew we couldn’t build distribution centers fast enough to go head to head with Amazon,” Cornell said. “But when we stepped back and thought about it a little harder, it was clear we already had a coast-to-coast network, with more than 1,800 potential distribution points. But until that moment, we only thought about them as stores. It turns out they had a lot more potential. So we’ve been aggressively investing in reimagining our physical stores and making them work even harder. Today, we consider our stores our single biggest competitive advantage. They function as service centers, fulfillment hubs, and they’re incredible showrooms for inspiration.”
Cornell credits Target’s stores with helping the company’s digital business outperform the industry by more than 50%.
“That’s largely because three out of every four digital orders was fulfilled by a store,” he said.
Cornell also pointed to the report from Mastercard that said retail sales in the November/December Holiday season advanced 5.1% — the best performance in six years.
“What really stands out is, stores grew, and they accounted for the majority of growth during the November and December season,” he said. “Proof that consumers still love to shop great stores.”
Cornell said that when Target acquired the same-day delivery platform Shipt, it was the company’s emphasis on personal service that sealed the deal. Would a mom rather receive a package delivery from a drone that drops the box off on her doorstep, he asked, or from a real person who knows to knock softly rather than ring the doorbell, to avoid waking a sleeping baby.
“Many of you, I’m sure, say that your teams are your greatest advantage,” he said. “We believe it’s the key to Target’s success.”
Summing up, Cornell argued that the strategy for retailers should largely be the same, whatever the state of the economy.
“There’s always going to be a next generation of consumers,” he said. “And their preferences, their behaviors, they’re going to continue to evolve. Technology is only going to go one way, and that’s fast forward. And if you want to stay ahead, you’ve always got to be putting the consumer in the middle of every decision you make. You’ve got to invest. You have to be willing to reinvest, and you have to constantly be disrupting yourself. It’s not easy, but I will tell you I think it’s essential.”