Omnichannel Gains, Private-Label Brands Help Drive Target’s Resurgence

In a keynote presentation and interview at the National Retail Federation (NRF) Big Show in New York City, Target Corp. Chairman and CEO Brian Cornell detailed how the general merchandise retailer has followed a plan of reinvesting in the business, from people to technology to product, and the benefits it’s now realizing as a result.

Following a strong holiday season — same-store sales grew 5.7 percent vs. a 3.4 percent increase a year ago — Target enters 2019 with sustained momentum, and Cornell is intent on keeping it going. In fact, Cornell noted that 2018 was Target’s best year in over a decade.

So what is Target planning for 2019 to match, and potentially improve upon, last year’s success. Cornell highlighted three focus areas: omnichannel, people (customers and employees), and private-label brands.

The Power of the Store

While acknowledging the positive strides Target’s digital business has made — outperforming the industry average by 50 percent — Cornell noted that the company’s stores are its single biggest advantage. Investments made in those stores, including omnichannel systems such as buy online, pick up in-store, have paved the way for growth in multiple channels. In fact, Cornell said that three of every four online orders are fulfilled at a Target store, whether ship from store or in-store pickup.

“The big change that we’ve all seen is that it’s not an either or conversation, it’s both,” Cornell said in response to a question from NRF President and CEO Matthew Shay about the merging of online and offline shopping. “[Retailers] need great physical and digital experiences. The consumer wants both. We want to make it easy for our customers to interact with our brand how they choose. The consumer is being heard, and we’re responding to them. We’ve invested billions of capital to revitalize our stores."

And despite what you may have read or heard, younger consumers, including millennials, aren’t abandoning brick-and-mortar stores for solely digital shopping experiences.

“Young people still like the social interaction of in-store shopping,” said Cornell. “Our customers, including younger ones, tell us they still enjoy a great store experience.”

Human Connection Matters

In addition to investing $7 billion in capital to revitalize its stores, Target allocated $1 billion to its team in the form of increased wages and improved training. That is being done in step with Target’s commitment to personal service.

“We believe our people are the key to Target’s success,” Cornell said. “The best investment we made was in our team. The human connection matters. It’s part of the [shopping] experience, and what differentiates our brand.”

In addition to a focus on its employees, Target is working to continually improve the shopping experience for its customers. One way it’s doing that is through technology. Target has been at the forefront of adopting technology systems that make shopping with the company easier, whether it be curbside pickup, an in-store app, among other things.

“Whether we’re in an up or down market, consumer sentiment is strong or weak, you need to focus on these things: evolving consumer behaviors, always putting the consumer in every decision you make; and be willing to re-invest in the business,” Cornell advised the audience of retail execs. “Always start with the consumer.”

Private Labels Prove to Be a Growth Channel

Target has identified private-label brands as key to its recent resurgence as well as its future growth. The retailer has introduced 20 private-label brands in the last two years, and is seeing those brands drive new traffic into its stores and to its website. Target’s private-label brand decisions haven’t been made independent of its customers’ input.

“Consumers participated in the development of those brands,” noted Cornell.

Cornell recognizes that in addition to the improvements Target has made internally, the retailer has benefitted from a strong macro economic environment. He sees that strong economy continuing in 2019, and is positioning Target to take advantage of it.

“We’ve all benefited for the macro economic environment,” Cornell said. “But we also spent a lot of time looking at marketshare, traffic growth. Those are the proof points we need to be focused on. What are we seeing in the economic data? Strong GDP environment; historically low unemployment rates; higher wages; lower gasoline prices; strong consumer confidence; retail spending outpacing GDP growth. There’s an opportunity for all retailers to grow their businesses — market share for all of us."