Photo: Target
Will Target keep its winning streak going for five more years?
Target CEO Brian Cornell is understandably confident — the company he runs is coming off 19 straight quarters of same-store sales gains. He believes Target’s continuing investments in its people, stores, supply chain operations and technology will continue to deliver significant growth over the next five years.
Mr. Cornell and his team saw same-store sales improve 8.9 percent during the fourth quarter, going up against a 20.5 percent comp during the same period in 2020. Same-store traffic to the chain’s stores and website was up 8.5 percent during the quarter against a 6.5 percent gain the year before.
Digital sales now account for 19 percent of Target’s total and the chain managed to improve its operating margin by 150 basis points during the year. “Growth,” Mr. Cornell said on the company’s earnings call yesterday, “was split nearly 50-50 between stores and digital dollars.”
Target’s digital business has nearly tripled over the past two years. Its same-day services (in-store pickup, Drive Up and Shipt delivery) posted a 45 percent gain on top of a 235 percent jump in 2020. The company’s app is now used in nearly 70 percent of all digital orders, up from 30 percent two years ago.
Cara Sylvester, the retailer’s chief marketing and digital officer, pointed to the chain’s focus on the lives of its “guests” as the key to its success.
“When our insights team talks with guests, we don’t just ask them questions about Target and their experiences shopping with us,” she said. “Guests share their hopes with us, their fears and their dreams. They share simply what’s going on in their lives. Through these ongoing check-ins, every area of our enterprise has a view of the holistic human experience lived by our guests during the pandemic and what that might mean for Target in the future.”
Ms. Sylvester said the chain’s customer understanding directly impacts performance.
“During holiday, personalized offers showed an $8 to $10 lift in promotional basket size compared to mass offers and a conversion rate of 70 versus 40 percent,” she said. “In addition to the personalized deals curated for them and the fact that they can vote and support local nonprofits important to them, I have to call out our guests’ love for Target Circle Bonus. Our new gamification platform personalizes missions and rewards members. And it’s already delivering big for our business, resulting in nearly $200 million in incremental sales in 2021.”
Discussion Questions
DISCUSSION QUESTIONS: Does Target understand and connect with its customers on a deeper level than other large retail chains? What do you see as the keys to continuing similar growth over the next five years?
Poll
Loading …BrainTrust
Gary Sankary
Retail Industry Strategy, Esri
Lisa Goller
B2B Content Strategist
Target is doing an exemplary job of engaging with their guests, but more importantly they are listening and taking action to deliver what their guests want. Target is on target – they just need to stay focused on executing their plans. Focusing on employees through better pay and leveraging their substantial physical stores for online fulfillment are two key areas. There’s no stopping them now.
Target keeps making all the right preemptive moves. Who is going to pass them? And how…?!
So long as it continues to focus on the customer, Target will remain one of the winners. And from everything I have seen it fully intends to do just that. That said, the focus will change from macro – making big changes like complete store remodels and relaunching complete categories – to micro where it looks in detail at categories like beauty to see how it can capture more growth. That is the right approach. Of course, growth rates may come down and growth may be choppier than in the past two years, but in my view it will outperform.
Yes. More than its rivals, Target connects with consumers by keeping humanity and hospitality at the core of its strategy. Even as digital soars, Target uses the human touch to earn our trust and loyalty.
Growth drivers include superior employee and store experiences, omnichannel innovation and powerful partnerships.
Target has a way of connecting with the customer that other retailers haven’t quite mastered yet.
Asking the right questions, building deeper connections with their guests, learning and executing based on insights is so critical. With more product choices than ever before and access to a global assortment, customers can shop a different store every day.
Loyalty driven by closing the customer feedback loop and delighting the customer with the right product at the right time and in the right channel is the secret sauce of retailing today. This will be the key for Target’s continued growth and success for years to come. Listening and delighting their guests through a flexible merchandising strategy that reacts to shifts in consumer behavior.
Every retailer has its own version of consumer-centricity and they employ different methodologies in unlocking shopper insight. Target’s frequent check-ins with holistic questions around daily life arms them with a variety of spotlights upon which they can build their marketing campaigns. Clearly, given Target’s impressive long-term results, these strategies are working and when the app is driving 70 percent of digital orders, there’s no reason to change.
I would bet on Target. Their stores feel very contemporary and that is not an accident (in contrast to a Sears I used to go to on Long Island that felt like I was stepping into the ’70s). They are on top of digital and have even committed to being an adtech player (Roundel) and are doing so effectively with much upside left to be realized. Yes, Target is for real and future focused.
“Find a need and fill it” is still the simplest business model I’ve ever heard, and Target certainly has found a way to better understand the needs of their customers than many of their competitors. And once they understand those needs, their demonstrated ability to efficiently and effectively fulfill those needs has been truly impressive.
Target is really tapped into DTC trends and does a great job of being a close second in early adoption of key trends. For example in the home category, they rolled out the Opalhouse brand two years ago in sync for BTC. This year some other majors copied, like Bed Bath & Beyond launched the Wild Sage brand which is oddly similar. Meanwhile, Target had already evolved the OpalHouse brand to incorporate a collaboration with influencer and designer Justina Blakeney which they further highlighted as a strategy to diversify their suppliers.
Target has enjoyed strong loyalty scores with their customers for decades. They’ve been brilliant at creating a great brand experience through strong marketing backed up with great assortments that resonate with customers. They were wildly successful at pivoting fulfillment and digital shopping to meet the demands of the pandemic. The big story is how well Target pivoted two years ago to react to the new demands of their customers. With their eye on-trend, and their ability to execute quickly, I have every confidence in their ability to keep outpacing the industry and producing outstanding results.
Target has done a terrific job of transitioning from its “cheap chic” image to a full service retailer, both online and in stores. I see no impediments going forward, save the continued improvement of its grocery and fresh prepared food options. If Target can deliver a Publix or even a Kroger-like experience in grocery, the meteoric performance will continue.
Target has taken a digital-first customer-centric and customer-first strategy in driving growth, retaining customers, and attracting new ones. Their digital-first, agile supply chain operating model will help enable sustainable growth over the next five years. Target has a clear runway to continued success, with very few competitors who could keep up with their customer-first strategies.
Ultimately, Target’s success rate will depend on execution at both the store level and across their digital shopping channels. Their stores serve many purposes, and it will be essential to keep them merchandised, well designed, and offer the variety and diversity of products their customers have become accustomed to.
Everything comes and goes
Marked by lovers and styles of clothes
Things that you held high
And told yourself were true
Lost or changing as the days come down to you.
Per Joni Mitchell, everything comes and goes. We are all old enough to remember 2013, the end of Target’s foray north. But Target’s woes extended beyond international expansion. And that can happen again. It probably will, in different situations with different leaders. It’s retail. It’s always changing. Few really get it right. That’s why we love it.
I’ve long been impressed by Target’s astute ability to understand its customers and emerging retail trends ahead of the pack. The retailer is firing on all cylinders across its operations, in large part because of its relentless focus on its people. Target’s culture has a direct impact downstream, on its customers and their experience. I liken it to employee-owned retailers, such as Hy-Vee, that intentionally invest in people and culture, along with technology, in order to outflank their competitors.
Target has gained the respect of the industry but more importantly, its customers. Getting to know them, getting to know all about them ensures that Target can focus on shopper needs and wants. And Target just keeps doing that…well.