Target holds first storewide sale
A week after reporting its first quarterly comp decline in more than two years, Target yesterday ran its first-ever storewide sale. Called #TargetRun, the promotion delivered an extra 10 percent off any purchase (with some exceptions) in stores and on Target.com.
Storewide sales are a regular occurrence at department stores but a rarity for a big-box discounter. For Cyber Monday 2015, Target offered 15 percent off any online purchase but it didn’t extend the promotion to the store.
For #TargetRun, shoppers had to either clip the coupon from Sunday’s circular or text “RUN to TARGET” to get a mobile coupon to use on the day. REDCard members still earned another five percent savings on any purchase. Shoppers were encouraged to share photos and screen grabs on social media using the #TargetRun hashtag.
Although positioned as “just in time for back-to-school gear and Labor Day BBQ stock-ups,” no specific reason was given for the sale.
Reports assumed the sale was tied to the prior week’s second-quarter report, which was in line with expectations. However, comps missed plan — down 2.2 percent — and the retailer slashed its guidance for the year.
“In the second quarter, our No. 1 challenge was traffic, which affected sales in all of our merchandise categories,” Target CEO Brian Cornell said on a conference call with analysts. The drop came as Walmart’s U.S. division showed its largest comp gain since 2012’s second quarter.
The traffic decline was blamed on weakness in traffic-driving categories such as grocery. Pharmacy also declined, although the slip was partly due to the rebranding of those departments to CVS. Smaller fill-in trips declined for the second straight quarter. Some believe the chain is over-marketing “signature” categories (style, baby, kids and wellness) as it tries to recapture its “cheap & chic” reputation.
As typical, the one-day discount came with a few exclusions, including gift cards, prepaid cards, alcohol, dairy milk, pharmacy, optical, portrait studio, and brands including LEGO, Vitamix and several electronics brands.
- #TargetRunDay Is Coming! Save An Extra 10% On Your Purchase — Sunday Only – Target
- Target is discounting everything to win shoppers back amid boycott – Business Insider
- Target Reports Second Quarter 2016 Earnings – Target
- Target’s traffic problems won’t be an easy fix – CNBC
- Wal-Mart earnings: $1.07 a share vs $1.02 estimate; raises guidance – CNBC
Discussion questions: Do the benefits of its one-off storewide promotion outweigh the risks for Target? Are you generally in favor of wide scale promotions as an occasional marketing tool?
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27 Comments on "Target holds first storewide sale"
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President and CEO, Stealing Share
Target needs to work on the branding problems that have led to declines in sales. Couponing and store-wide sales never build loyalty and in the long run train consumers that the REAL price is the sales price.
Another example of fixing the wrong problem. Target is well to remember Pavlov’s dogs.
President, Max Goldberg & Associates
I see little risk for Target in running a one-day sale, but I wonder if the sale will have any long-lasting benefit. The sale probably exacerbated Target’s chronic out-of-stock problems, reminding customers of one of the main reasons they dislike the chain. It may have moved merchandise that Target wanted to clear out before resetting for Halloween and the winter holidays, and it may have brought some new customers into the store, both of which are positive, but it will not build loyalty.
President, Integrated Marketing Solutions
Retail is all about traffic, especially for large big box mass merchants. A storewide discount is a slippery slope for Target. While it might be a one time quick fix to get customers back to stores, it does nothing to address the foundation of omnichannel experience that keeps them coming back. The small one time gains in traffic and revenue might create a blip for the purposes of comps. The real danger for Target is sliding down the death spiral of competing on price instead of fixing the fundamentals.
Founder, CEO, Black Monk Consulting
There’s little trick to buying business, but it takes a sold offer to hold it. The benefits are fairly clear — increased traffic, increased sales and the potential to convert occasional shoppers into regulars, possibly even attracting some ex-Target loyalists. The risk, of course, is that when you are buying business you are doing two things wrong: First, creating a customer base is that is most responsive to your brand when you offer extreme discounts and can’t necessarily be counted on to patronize you when you don’t. Second, and just as serious, you are artificially spiking results, pushing your sales and performance problems ahead of you so that the following quarter you face exactly the same problem.
As to the second question, no doubt widespread promotions can work. I’d just rather see them used as a reward to shoppers when business has been good rather than as a Band-Aid used in an attempt to mask poor performance.
President, Global Collaborations, Inc.
Target is doing too many things (emphasizing fashion, holding storewide sales, increasing grocery) but not capitalizing on cheap chic, which was the core that made it successful. I never even saw the storewide sale. If shoppers are not excited about what they find in the stores, putting the goods on sale does not help. The bright, clean aisles with surprises of fun, cool merchandise are no longer the hallmark of Target. Storewide sales do not make up for store deficiencies.
Co-founder, RSR Research
Clearly the object of the game is to drive traffic and hope that when shoppers see the store, they want to come back for more.
The problem is that Target’s biggest losses were in grocery — and I don’t think a storewide sale is going to help in that regard. In fact, since grocery is supposed to be a traffic driver all by itself, it’s a double head-scratcher.
I do think the core issue is much more around the chain’s focus on grocery in general than any one shopping day. I don’t think it can differentiate on food. It wasn’t what made the company successful and I don’t believe it’s going to be a major driver going forward.
If I got a vote (and I don’t!) I’d suggest shrinking the space dedicated to grocery and electronics and increasing the space for home and apparel. Those are things Target is good at. If it waits too long to do so, online pure-plays like Wayfair are going to take its place as a leader.
Maybe this was by design, but the #TargetRun hashtag also seems to be used for photos pointing to the Pokemon balls outside the stores. Is that mixing messages?
Founder and CEO, Segmentis
The root of the problem of Target and all of its competitors is that their business model is obsolete. Sales do not really matter anymore, as they will soon find out.
As customer behaviors are shifting towards online shopping and showrooming the concept of a “sale” becomes increasingly irrelevant. Products are always on “sale” somewhere. Target, however, is the only one who can deliver to its guests on the spot. Why not charge a premium for it?
In my opinion, what they are doing is needlessly compromising their margins where they can compete (i.e., immediate delivery) in return for something the customer can easily get elsewhere (a “sale”). Their margins, by the way, are better than other discounters (e.g., Walmart) so they do have some room to play with. But I really, really do not think it is the way to go.
Sounds like a really good idea to boost sales. However I didn’t hear about it. If didn’t hear about it, a lot of other people didn’t either. Therefore if I didn’t hear about it, it was not effective enough. Menards regularly does sale featuring 11 percent off of everything that can fit into a shopping bag they include in their mailer. I believe they do this several times a year. I’m in favor of this tool but Target needs to find a better way of getting the word out. I don’t watch TV, I have all kinds of filters on my phone and internet and my apartment complex blocks all advertising mailers that are bunched together. Maybe let me know the sale is coming up when I pay my REDcard.
Principal, Mark Heckman Consulting
To David’s point, I stopped in yesterday to Target and bought $75 worth of furniture and pet supplies yesterday, not knowing about the 10% off sale. No one told me about it in the store, nor was there any signage announcing it. I did not learn about it until after I got home and certainly did not get the 10% off my order.
One of my merchandising mentors once told me, “Mark, anyone can give it away.” After my experience yesterday, I am not sure that is true when it comes to Target.
I wonder if you had to download a coupon. And I wonder if people still got an addition 5% off with the RedCard. If not, making a special trip for 5% isn’t worth it. I heard they excluded gift cards, which really makes it not worth it.
Principal, Retailing In Focus LLC
I’m sure that Target management is looking at yesterday’s numbers and thinking, “When can we do this again?” But sales promotion is a hard habit to kick once you’re hooked. Focus on content and execution first.
Retail Strategy - UST Global
Which is worse, a sales problem or a margin problem? Actually it’s coming to the end of the back-to-school season with too much seasonal product left over as that impacts both. It will be interesting to see which of those problems were actually addressed during the sale.
President, founder and CEO Interactive Edge
A one-day sale may help increase traffic for the day and reengage some customers, but if customers have the same experiences that have plagued Target (such as of out-of-stock items and empty shelves) their customers will leave frustrated and continue to shop elsewhere. Target has been working on implementing new changes like redesigned shelving to hold more products and upgrading their supply network and technology. If they’ve fixed these problems, a one-day sale could be a good way to introduce them and show customers the changes they’ve made.
A sale is a sale whether it is one item or the entire store. If it brings in more traffic and sells more product it is good. If all it does is condition the buyer to wait for the next sale and not shop the store except for during sales it is BAD.
Professor, International Business, Guizhou University of Finance & Economics and University of Sanya, China.
This is the first step to teaching Target customers to wait for the next storewide sale.
Principal, Anne Howe Associates
I was in a SuperTarget up in Mooresville, NC Saturday morning around 11:30 a.m. One would expect the store to be jumping since school starts here today. The store was eerily quiet and only six or seven of the 24 registers were open. I too heard nothing about the one-day sale. If Target had a goal for the sale, let’s say traffic, it may have not had enough of a runway to effectively create reach.
One-day sales encourage people to wait for other offers. Target has tried to rebuild core categories. If it were me I’d invest in more fun, experiential interactions with shoppers in stores around the cores of fashion and home decor. They invested a lot in Cat & Jack, why not have some fun with that?
Board Advisor, Light Line Delivery
Walmart and Amazon continue weigh heavy on Target. Target has a performance deficit with meeting customer expectations for stock availability for basics, specifically in grocery. Localization and fast replenishment has to be a focus area for them.
Principal, Your Retail Authority, LLC
The benefits will outweigh the risks only if Target delivers something other than just a sale. For my 2 cents.
EVP Thought Leadership, Marketing, WD Partners
Wait, I thought Target was a discount store. No? Because in reality, they actually became one yesterday? They were just kidding? Ok, so why should I pay full price next weekend? I’ll just wait.
Funny how Target, of all people, didn’t learn from Macy’s demise. “Discounting” is a slippery slope. Especially for discounters. Sure, they’ll punch up some big numbers today, but long term, what’s the damage? You could ask Mr. Lundgren about that.
President, The Treistman Group LLC
If there is so much confusion stated in RetailWire posts about purpose, promotion and long term effect, then Target is clearly off track. Sensitive to retail happenings if RetailWire folk didn’t know about the sale and information from in-store staff and signage was apparently missing then Target probably missed its “target.”
Maybe it was an experiment in stealth discounting. I think we need more information about purpose and outcome before drawing a final conclusion. But it’s not looking good.
Owner, Tony O's Supermarket and Catering
Founder and CEO, Segmentis
That is a great question Tony, and a very important one. Once you paid off all your monthly fixed costs (staff, rent, electricity, etc.) it is in your best interest is to sell as much as possible as long as your retail price is above your marginal costs. That strategy is called marginal-cost pricing.
However, if your competitor consistently does the same, you would both end up bankrupt. Therefore, businesses who compete only on price like Walmart MUST have some other unique advantage in addition to price (like size or specific reach). You are a small business and therefore you need to differentiate yourself in order to survive. Quality and service are great differentiators for small businesses.
Owner, Tony O's Supermarket and Catering
Well said Ori, and believe me, I try very hard to be different and it helps for sure. Wish it were different, but low prices are here to stay and the hunt is on for that next killer buy. I wish all my panelists and store owners a great holiday.
Looks like Target is having an identity crisis. It’s no secret that today’s shoppers are bargain hungry, but Target’s promise of trendy affordable looks was previously delivered with a unique assortment that wasn’t readily available elsewhere. This recent promotional tactic is likely meant to shore up a failing assortment and seems to be part of a larger questioning of the retailer’s strategy and positioning moving forward.
Food Regulatory Consultant (labeling, advertising, promotions)
In their Sunday FSI ad, the prominent 10% off on the cover was positioned right next to a promotional offer for an LG Flat Screen TV. However, a consumer would have to read the fine print on the coupon to learn the exclusions from that 10% discount, which included LG Televisions. I wonder how many Target “guests” didn’t learn of that until they went to a Target store and tried to get a 10% discount on that LG TV.