Company honored as MMR Retailer of the Year

MINNEAPOLIS — Target is one of a select group of retailers that have been able to respond effectively to the extraordinary challenges that 2020 presented to the industry and go on to perform at a level far beyond expectations. It is also one of a smaller and more select group of companies that reacted immediately and meaningfully to the crisis of social justice that exploded in the United States during the spring of 2020.

Target’s achievement is the product of a bold and unique strategy that called for major investments in its stores and its teams to create a seamless omnichannel experience for the retailer’s customers — always referred to as “guests” in Target parlance — at a time when many retailers were shuttering stores and downsizing their workforces. It was a strategy that was viewed with skepticism by many investors and analysts when it was unveiled in early 2017, but which results have since vindicated with continuing growth in sales, profits and market share.

In recognition both of its stunning success in surmounting the multiple challenges of the COVID-19 pandemic and of what can only be described as its inspiring moral leadership, the editors of Mass Market Retailers have named Target the publication’s Retailer of the Year for 2020.

The story of Target’s present success really begins in August 2014, when Brian Cornell arrived to take the reins as chairman and chief executive officer, succeeding Gregg Steinhafel. At that time, Target was struggling with the aftermath of a major customer data breach and a failed entry into the Canadian market. More seriously, the retailer’s core business in the United States was losing momentum and relevance.

Target’s board of directors clearly saw the need for a fresh vision; Cornell was the first CEO to be appointed from outside the organization. What he brought was not only a new pair of eyes, but also a sense of urgency and intensity that had been lacking.

Five months later, after an exhaustive review of the Canadian operation with his leadership team, Cornell made what he has said was probably the most difficult decision of his career, to pull out of Canada.

Also during those early months, Cornell defined the enterprise priorities that would guide its turnaround. They included such key objectives as achieving leadership in omnichannel; further developing the chain’s smaller formats that could be deployed in urban environments or on college campuses; and simplifying the company’s organization and processes to eliminate complexity, increase agility and control costs.

More change was not long in coming. The leadership team received an infusion of new blood through several hires that helped reenergize the organization.

In addition, Target had moved hesitantly into e-commerce up to that point, and management made a critical decision to invest in a thoroughgoing overhaul of the company’s information technology platforms that would enable its digital ambitions.

Despite rapid progress, Target’s results for 2016 were disappointing. Rather than hunker down and follow the prevailing industry trend of closing stores and laying off employees, though, Target’s leadership responded in early 2017 with an audacious plan to ramp up its investments in reimagining and remodeling stores to serve as e-commerce fulfillment hubs, in technology to drive its omnichannel capabilities, and in compensation and training for its team members.

As Cornell reminded analysts last March, there was no playbook to follow in building out and executing this strategy, so Target essentially wrote its own.

Wall Street initially was not convinced, but by 2018, the company could point to financial results that far exceeded forecasts. After another banner year in 2019, everyone in Target could look back with pride and satisfaction at what had been ­accomplished.

But the real test, and one that could not have been foreseen, came last spring when the COVID-19 pandemic broke out, transforming shopping patterns as demand for certain product categories skyrocketed, comp store traffic slipped 1.5% and e-commerce volume exploded.

Target’s recent financial results for the third quarter of fiscal 2020 resoundingly validated the new strategic direction the company announced in 2017: Comparable sales soared 20.7% while comparable-store sales rose 9.9% and digital comparable sales skyrocketed 155%. Throughout the quarter, Target continued to gain market share across its five core categories. And Target has gained more than $6 billion in market share year to date and has made more than $10 billion in incremental sales through the first three quarters of 2020.

“For several years now, my challenge to our organization has been, how do we make Target the easiest place to shop in America?” Cornell said recently in an exclusive interview. “In that time, we’ve created the most complete suite of same-day fulfillment services in retail, offering our guests unmatched convenience. This was part of our broader goal of building a durable business model that would perform well in any business environment. That work has certainly served us well in 2020, as we’ve all navigated the business and economic uncertainties of the pandemic. We were able to do that in large part because of the strategic focus we place on our stores and the investments we make in our team.”

As Cornell indicated, two of the most critical pieces of the Target response were the decision to use its stores as fulfillment centers for its e-commerce business, a path that required changes to the layout and configuration of the stores and changes in store processes, and the decision to invest in the store team members, whose roles would change significantly as Target moved away from its traditional self-service discount business model.

Moreover, the performance of the store team members has proven to be an invaluable part of the new Target experience, Cornell emphasizes.

“They’ve been a calming presence and a friendly face to our guests, who are craving normalcy at a time when very little is normal,” he said. “And our team’s dedication and flexibility is at the heart of providing a safe and easy holiday shopping experience. It’s their extraordinary efforts — backed by ongoing innovation and investment — that are driving our exceptional results.”

Target recognized the contribution of the store teams by investing hundreds of millions of dollars in extra pay and benefits, and by fulfilling its 2017 promise to raise the starting wage of U.S. team members to $15 per hour — more than 20% higher than the U.S. industry average.

“I’m incredibly proud of how we’ve accelerated the investments in our team as they’re taking care of our guests during this pandemic,” Cornell remarked. “Investing a billion dollars in increased wages and benefits, in premium pay, in paid leave for anyone who was over 65 or had a preexisting condition — this was right in line with how we care for each other as a team.”

Last spring the Target teams, along with those of many other retailers, were faced with another unprecedented challenge when the killings of three African Americans, including one in Minneapolis, ignited a wave of protest demonstrations that resulted in the destruction of many businesses in several different cities. Target was significantly affected, with some 200 of its 1,900-plus stores sustaining damage.

“Our immediate reaction was to rally as a team, first making sure that our team members were safe and fully supported as protests spread to communities across the country,” Cornell observed. “We also provided space for our team to process the pain of what was happening and to listen, learn and lean on each other.”

But the company also immediately tackled the core issue of social justice, committing, along with the Target Foundation, $10 million and ongoing resources to advance racial equity and social justice as well as support rebuilding and recovery efforts in local communities. That included repairing, rebuilding and reopening stores that were heavily damaged. Target’s Lake Street store in Minneapolis and its Buckhead South store in Atlanta, which were closed after sustaining damage, were rebuilt from the ground up in just five months, making them two of the fastest rebuilds in Target history.

Those efforts, as well as Target’s commitment to use its size, scale and resources to help the country heal — and to create lasting change — were consistent with Target’s core culture and its long-standing dedication to diversity and inclusion.

“We’ve had ambitious diversity and inclusion (D&I) goals in place for several years now,” Cornell said. “And we’d made very good progress with those goals, recruiting and retaining more diverse team members, offering more products from diverse suppliers and directing more philanthropic spending to communities of color.”

Last summer, Target took its D&I efforts to a new level, establishing a Racial Equity Action and Change (REACH) committee.

“REACH will focus specifically on how we can drive lasting impact for our Black team members and guests,” Cornell and the REACJ committee stated in a letter to the Target team back in August. “To determine where to focus, we’ve spent time with many of you, spoken with our guests, reviewed research and tapped into our partners to align around four areas of focus: Team, Guests, Communities and Civic Engagement and Public Policy.”

The company also publicly released its internal diversity data, Cornell pointed out, adding that it was the most transparent view Target has ever provided into the racial and gender diversity of its workforce. That step enabled the company to make more specific commitments and hold itself accountable for progress — including a pledge to increase representation of Black team members by 20% in the next three years.

Last month, Target was one of the founding members of OneTen, a new coalition of 37 companies combining forces to train, hire and advance over the next 10 years 1 million Black Americans without four-year college degrees into jobs that can sustain their families and provide opportunities for advancement.

It is probably not common for most retail executives to talk about empathy within the context of business discussions. But in a conversation with Michael Milken of the Milken Institute, Cornell emphasized the importance of empathy in dealing with the unprecedented conditions that characterized 2020 and continue to the present.

“I look at my leadership team today at Target; I’ve got 12 direct reports, half are women, 25% of the team is diverse, many of them have children who are now being educated at home,” he said. “How do we make sure that we have the empathy to understand that we’re working remotely? We’ve all had to work with Zoom … So we’ve had to be much more empathetic and understand the challenges that our teams are facing at headquarters, in our stores … We still put a focus on making sure we communicate with our teams regularly, put a focus on resilience and energy management. But I think, as an organization, we’ve become more empathetic. I think we’ve become more approachable, more authentic.”

And on a level very different from that of financial results and other performance metrics, that may well be Brian Cornell’s greatest contribution thus far to Target and to the human beings who are part of it.