Target Just Had Its Best Season in More Than a Decade — What’s Changed?
Target just experienced its best sales in more than a decade. December went gangbusters. Those numbers aren't out yet, but Q3 2018 results, covering the period from September through November 2018, show comparable sales up 5.1 percent and comp store sales up 3.2 percent, with comp traffic up 5.3 percent and comp digital channel sales up 49 percent.
So, what’s changed? The short answer is “everything.”
That’s according to Brian Cornell, chairman and CEO of Target, who spoke earlier this week at the NRF Big Show in New York City.
“Go back to 2009. The Millennial was a big mystery, iPhones were just being introduced, and I can tell you nobody ever shopped from their Blackberry,” Cornell quipped.
“All of these changes feel pretty profound. Our world is in a perpetual state of change,” he said.
That’s true. At any given moment, you can feel as if you’ve arrived at a culmination of what’s come before, but that’s just a flash in time. Demographics and technology and everything else will continue to evolve.
Timeless rules for growth
And while keeping in mind that nothing will stay the way it is, there are some core steps that a retailer can and should follow at any time, whether a big retailer or small, to grow and continue to move forward, he says.
1. You must always start with the consumer.
2. You must invest.*
3. You must reinvest.*
4. You must be willing to disrupt yourselves.
*in stores, in digital, in technology in fulfillment, in your teams, etc.
Here’s another bit of advice: You can’t win if you’re playing someone else’s game.
Several years back, Target was running its stores and Target.com as separate businesses, which right off the bat is a recipe for low visibility into inventory and an incomplete view of the consumer. As e-comm escalated, the company realized it couldn’t build distribution centers fast enough to keep up with growth.
Then, the Eureka moment: the $71.9 billion company already had a comprehensive distribution network in the form of 1,850 stores nationwide, and more than 350,000 employees. “Today, we consider our stores our single biggest advantage,” says Cornell. Take that, pure-play e-comm. Target locations serve as traditional stores, as fulfillment centers and as showrooms chock full of information. They can take the credit for the fact that the company’s digital sales outperformed the industry’s by 50 percent this past holiday season. Why? “Because three out of four orders were fulfilled by a store.”
Digital and physical are “not either/or,” says Cornell. “It’s an ‘and’ environment.”
Giving the customers what they want
It’s not just the smooth omnichannel operations that are drawing customers, of course. It’s the product. “Long before I came to Target, the company was known for building great brands,” says Cornell. Home-grown billion dollar brands included Merona, Circo, Mossimo, Market Pantry and Room Essentials. “But somewhere along the way, we lost our way, trying to grow our brands without meeting the needs of consumers.”
Target was trying to push its brands past their natural thresholds, say, striving to get that $2 billion brand to $2.1 billion. But a brand can’t be everything to everyone. A better strategy, it realized, was not to dilute its brands but to introduce others.
Enter 20 new brands including Opalhouse, Hearth & Hand, Project 62 and Made By Design that are appealing to new customers and spurring growth across the company. And these brands — “our guests couldn’t name them; they really don’t care. They care about design, newness and the surprise we try to offer every day.”
People first, robots second
Behind the scenes, Target is keeping its proverbial finger on the pulse of technology, thinking about how technology will disrupt work by humans, and it might be sooner than we think, says Cornell. “At Target, we’re exploring AR [augmented reality], VR [virtual reality] and AI [artificial intelligence].”
Yet even as we draw closer to living in a world of self-driving cars, it’s clear that there is no substitute for people, he says. And, understanding that, Target is “investing in wages and training to build the very best talent.”
Even the most advanced technologies require a human touch. When Target acquired same-day delivery platform Shipt Inc. in December 2017, it was the company’s focus on customer service that sealed the deal, says Cornell. “Ask yourself, if you’re a mom expecting a package, would you like a drone delivery, or a human that knows not to ring the doorbell and wake the baby?”
In sum, whether we’re in an upmarket or slightly down market, whether the consumer market is strong or soft, whether you’re part of a big company or small, it doesn’t matter. “You need to make sure you’re focused on these really important things. There’s always going to be a next generation of consumers. Their preferences are always going to evolve, technology is always going to go fast forward. You have to put consumer at the center. Invest, reinvest, be willing to disrupt yourself,” he concluded.
Jordan K. Speer is editor in chief of Apparel. She can be reached at [email protected].
Editor's Note: Look for more NRF 2019 coverage in the coming days and weeks.