Many retail stores in recent years met their demise due to a shift in preference to online shopping, also commonly referred to as the retail apocalypse. Target, however, managed to stay on top of its game for the past 5 years.
In 2020, it was projected that Target’s retail e-commerce sales will jump by 24% to $8.34 billion from $6.73 billion in 2019, receiving a 1.2% market share e-commerce market in the United States (US). Target was also placed number 8 in the Top 20 US Ecommerce Sales Share list of 2020 amongst other giants such as Amazon, Ebay and Walmart. Today, we examine how Target managed to stay afloat at a time like this.
Target's growth in revenue over past 5 years
Customers comes first
Despite facing a downhill in sales 5 years ago, they picked up their sales by quickly restructuring their strategies to adapt to changing demands. Target invested in a US$7 billion dollars turnaround plan to expand its e-commerce capabilities, remodelling their stores and establishing ties with emerging brands. They found, according to CommerceHub survey, that 9 out of 10 shoppers in the US tend to purchase orders online and shifted their focus accordingly.
Many brick-and-mortar stores all over America were closing down but Target continued to remodel their brick-and-mortar stores. As of 2019, they have opened 100 mini-stores across the United States and finished remodelling its 500th store. They plan to continue remodelling 300 more of their stores in 2020 and plan to open 30 small-format stores this year which are projected to be about 6,000 feet.
New small-format store in New York City, Herald Square
“We think the differentiator is going to be what the in-store experience is like,” Chief Operating Officer John Mulligan told CNBC in an interview. “Even today somewhere around 90% of retail is still done in stores. The store isn’t going away.”
Each of these small format stores creates a seamless experience with the option of buying online, collecting in-store to extend its reach. Not only that, the small stores are placed strategically where each store is customised according to the location’s needs. For instance, in a college town of East Lansing, Michigan, the store can hold items like dormitory supplies and college materials.
To remain competitive with Walmart and Amazon, Target acquired Shipt, which enables same-day delivery pick up services from their stores at various locations in the US. The joint venture allowed Target to have 100,000 customers from Shipt. Customers who do pickups, and drive-ups are recorded to spend 25% more, reinforcing their brand loyalty.
Employees deployed at Target's Drive Up service locations
Investing in their employees is yet another wise decision Target has made over the years. They are willing to put resources in their employees, choosing to pay them higher and provide training. Whilst doing so, they invest in robotics and artificial intelligence to help optimise their supply-chain production where sorting is much more efficient. The box-sort-sequence has enabled them to have lesser out-of-stock situations, leading to improved customer experience. Instead of deploying their manpower for these back-end operations, they place them strategically where they can focus on meeting customer needs.
Moreover, during the COVID-19 crisis, they re-adjusted shopping hours to end earlier, to allow their employees time to restock and clean the place thoroughly. They paid for employees who received the 14-day quarantine notice and illness fees for confirmed cases. Target on a usual day was known for having many other employee benefits such as having student loan support programmes, which makes Target the choice employer in the US.
A once failing brand 10 years ago has become the head of digital transformation. What we can observe is the leadership’s unyielding strength to grow and adapt to the current climate. According to Mulligan, Target is learning as it goes.
“This really speaks to what Target is good at ... we need to bring newness,” Mulligan said.