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.”
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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?