MINNEAPOLIS — Target Corp. is hitting the bullseye.
Target headed into the 2018 holiday season bolstered by a strong third quarter performance that included a 5.1% increase in comparable sales, a 49% gain in digital channel sales and a 5.3% increase in customer traffic. Total revenue for the three months ended November 3 was $17.8 billion, an increase of 5.6% over the comparable prior-year period. Net earnings for the quarter were $622 million, up 30.2%.
Those results validate the work that Target is doing to reinvent its business. The company is in the midst of a multiyear, multibillion-dollar investment agenda to grow sales faster, gain market share, and adapt to changing consumer tastes and shopping preferences.
“We have so much confidence in our strategy because no single element alone is driving our success,” says Target chairman and chief executive officer Brian Cornell. “It’s the sum of the parts. And what we’ve seen, quarter after quarter, is that each part is working and all the parts are working together.”
For Target’s success in developing that winning strategy, and delivering on it, the editors of Mass Market Retailers have named the company the publication’s Retailer of the Year.
“During the last 20 months, we’ve been incredibly aggressive in pursuit of our investment agenda,” Cornell says. “We’ve remodeled hundreds of stores and opened dozens more. We’re reimagining our supply chain. We’re reinventing our owned-brand portfolio — we’ve introduced more than 20 new brands, and we’re still going strong. We’ve made industry-leading investments in our team. And we’ve done all of this in service to our purpose: helping all families discover the joy in everyday life.
“At the end of the day, for us to continue to be successful in bringing our strategy to life, our guests need to feel welcome at Target, inspired by the shopping experience and rewarded for their loyalty. And of course, we need to ensure that every time they shop, it’s really, really easy.”
One of Target’s strategic priorities has been to enhance its digital infrastructure, allowing customers to shop however they like with plenty of options about how they receive the items they buy.
“The vast majority of our guests are shopping for their busy families,” Cornell says. “Time is their most valuable resource, and they want to spend it wisely. So when our guests think about shopping, they want the experience to be easy and convenient and — more and more — available entirely on their own terms. During the last 20 months, we’ve built the most comprehensive suite of fulfillment services in retail, and it’s all centered on our network of more than 1,800 stores. Today we’re using our stores to ship online orders and close the “last mile” gap more efficiently and effectively than we ever could if we were to rely exclusively on our network of warehouses and distribution centers. We’re the first retailer in America to offer same-day delivery, coast to coast, with our personal shopping service called Shipt. We’re also the first to offer Drive Up nationwide. You can place an order on your phone and pick it up within an hour in a store. These services consistently earn high marks from our guests. And while these services are designed to engender greater loyalty over time, we also see great traffic-driving potential as adoption increases. For example, one out of every three guests who come to a store to pick up a digital order ends up shopping the store and making a second transaction.”
Target executive vice president and chief operating officer John Mulligan says that the company is reimagining its stores as part of the remodeling process, enhancing the guest experience while also expanding fulfillment areas for processing online orders, pickups and deliveries.
“Our stores have been at the center of how we serve our guests since the very beginning, and it’s still true today,” Mulligan says. “With most American families just miles from a Target, we have a unique opportunity to deliver inspiration and convenience — all from the store down the street. Whether guests want a locally relevant in-store experience, or delivery in minutes, our neighborhood stores across the country make shopping at Target really easy. And by using our more than 1,800 stores as hubs for fulfillment, we’ve been able to quickly scale a host of delivery, pickup or shipping options across the country to meet every need — whether guests want their orders in hours or minutes.”
Cornell notes products used to flow through Target’s system in just one way: Trucks would pull up to a store’s loading dock and products would be unloaded and moved into the backroom and then onto store shelves. Shoppers would buy what they wanted and carry their purchases out through the front door.
“Today, that’s still the path, but it’s just one of many,” Cornell says. “We’ve repositioned our stores from serving exclusively as receiving centers to functioning as 1,400-plus distribution points across our network.”
Technology is changing the experience of Target’s guests, and its team members, in the retailer’s physical stores as well as on its web site and in its apps.
“My team’s focus first and foremost is building great technology for our guests to use,” says Mike McNamara, Target’s chief information officer. (In a move announced on January 10, McNamara now leads the retailer’s Enterprise Data Analytics and Business Intelligence team, in addition to his leadership of Target’s Technology Services.) “In terms of integrating in-store and online experiences, the Target app is guests’ one stop for things like in-store navigation, store-specific search, Cartwheel digital coupons, Wallet for faster checkout and Drive Up. And these are all services that our teams were able to build quickly, and that Target guests are loving. Our next priority is ensuring store teams have technology that makes their jobs easier and allows them to spend more time serving guest on the sales floor — because that’s where we do the great majority of our sales. For store teams, we’ve emphasized building ‘consumer grade’ technology that’s every bit and intuitive and reliable as the mobile phones we all carry in our pockets. And we’re equipping store team members with the right tools and the on-demand data they need to serve guests and enhance their operations.”
In almost any of Target’s stores, a significant amount of the traffic is people coming in to pick up products that they’ve ordered online. Meanwhile, Target team members are picking and packing and shipping items right off the sales floor.
“During the holidays, 80% of our digital orders were fulfilled by our stores,” Cornell says. “But that’s only half the story. We’ve also reimagined our stores as showrooms designed to inspire. During the past 20 months, we’ve reimagined the in-store shopping experience and rolled it out to more than 400 stores — and you can expect hundreds more next year. And within each remodel you’ll see a completely different Target store. We’re telling stories brought to life through visual merchandising; we’re cross merchandising product like we’ve never done before. We’re reallocating space and emphasizing the categories that matter most within each market. And our store design team is being more intentional than ever in using materials and architectural details that fit each neighborhood.”
Target’s investment in its store base has also included a focus on opening smaller stores in dense urban neighborhoods and on college campuses. These are places where many of Target’s most loyal guests live, but they also are places where the retailer’s traditional formats do not fit.
“College markets are especially attractive in that they help us establish relationships at a key life moment for an important consumer segment,” Cornell says. “And we work to deepen those relationships as these guests move into other important life stages. Today we have roughly 80 small-format stores — from Long Island to Long Beach — and they pack a lot of punch, leading the company in terms of productivity per square foot.”
Cornell notes that another change at the stores involves the people who work there. Target has been evolving the role of the team members in its stores, shifting from a task-based model to one that is far more guest-centric.
“By finding efficiency in our more operational work, we’ve been able to add millions of hours of payroll to more guest-facing service in parts of the store where guests want it most,” he says. “For example, we have a team of experts who offer a concierge service in beauty, who help guests find new products, make recommendations and encourage trial. And it’s this human interaction that guests appreciate more and more in an increasingly digital world.”
To help it get the best team members, Target recently increased its minimum hourly wage to $12, and it has committed to boosting the wage to $15 by the end of 2020.
“Investing in your workforce isn’t only about pay, but it starts there,” says Stephanie Lundquist, who until January 10 was Target’s executive vice president and chief human resources officer. “Like any team, ours is made up of real people with bills to pay and families to take care of. Target has always offered competitive wages, but when we made the commitment to raise wages for our team members, it was one of the proudest moments of my career. We’ve also seen a great response from our candidates and prospective team members.”
Lundquist, who has served as Target’s Chief HR Officer since 2016, has been named president of food and beverage.
Target has also upped its game in the merchandising arena, which has long been one of the retailer’s strengths.
“Target’s emphasis on great design has always been a hallmark of our brand,” Cornell says. “If I am placing bets, I would put our merchant, product design, sourcing and marketing teams up against anyone when it comes to creating amazing products and building amazing brands. We also pioneered a design partnership model that’s inspired legions of competitors to follow suit.”
Target did become a little complacent at one point, focusing on incremental improvements within its existing brands. That changed in 2016 with the creation of Cat & Jack, which has become a blockbuster brand with billions in annual sales.
“With the success of Cat & Jack as motivation, we embarked on a brand reinvention journey on a scale we’d never dreamed of before,” Cornell says. “In the last 20 months, we’ve launched more than 20 new brands — from apparel and home to electronics and seasonal. And not only has the team unlocked billions in new sales, we’ve reached market segments and grown share in places where we hadn’t been competitive in the past, like Men’s apparel, youth culture and Gen Z.”
Target also strives to make sure all of its merchandise offerings deliver on the retailer’s “Expect More. Pay Less” brand promise.
“That is inherent in everything we do, and it’s what guests have always loved about shopping at Target,” says executive vice president and chief merchandising officer Mark Tritton. “Of course, we’re focused on style and quality, but we know ease and affordability are equally important. Our goal is to bring joy to our guests’ everyday lives by developing products that solve problems, make their lives more convenient or simply make them smile, regardless of when, where or how they choose to shop.”
The beauty department is one of many that have gotten a makeover. Target introduced updated beauty departments to more than 400 stores in 2018 and is bringing the concept to 1,000 stores in the next three years.
“When it comes to beauty at Target, it’s the sweet spot between fashion and frequency, and all about the joy of discovery and finding products that work best for the individual,” said Christina Hennington, senior vice president of merchandising, Essentials and Beauty, who also took on new responsibilities that were announced on January 10. Hennington has been named SVP, General Merchandise Manager, Essentials, Beauty, Hardlines, and Services.
Speaking of Target’s beauty department, Hennington notes: “It also seamlessly provides exceptional value and ease, and therefore has become a destination for our guests as they shop for their beauty needs. Our guests are incredibly diverse, including age, ethnicity and preferences. Our goal is to cater to this wide range of guests by offering the right curated options, relevant newness and experiences that help our guests choose what’s right for them.”
The upgrades to the beauty department are one component of a next generation of store design intended to elevate the Target shopping experience via more satisfying product presentations and time-saving features. Target’s apparel and home departments have received similar enhancements.
In the end, Cornell believes that delivering on promises is the key to Target’s success.
“The best loyalty play we can make in this environment is to ensure that our teams execute our strategy with great consistency and care,” he says. “Put another way, every service we offer needs to work and work as advertised, every time. So that when we say we’ll have it ready in an hour, it is. That when a guest rolls into our parking lot our team member is ready — rain or shine — order in hand.”