Target sharpens focus on core priorities
Today, Target has moved beyond the data breach of late 2013, recording a 4.1% lift in fourth-quarter sales for the period ended Jan. 31, and discontinued its Canadian operations.
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With these weights lifted, Target will focus on core priorities, as outlined by chairman and CEO Brian Cornell, including:
A channel-agnostic approach to growth, driving a total Target experience across stores, online and mobile. Guests who shop Target in stores and online generate three times the sales compared with guests who shop in stores only. Continued enhancements in technology, supply chain and inventory management will create a shopping experience that is rooted in ease and inspiration. “Now, almost 75% of our guests begin their shopping experience on a mobile device,” said Kathryn Tesija, EVP, chief merchandising and supply chain officer. Target executives expect this channel agnostic focus to drive annual growth of 2% to 3% in digital sales.
Elevating its core signature categories: style, baby, kids and wellness. Signature categories account for $20 billion in sales, representing more than one-quarter of its total sales in the United States. One key driver of its wellness platform has been the “Made to Matter – Handpicked by Target” collection of natural, organic and sustainable brands. In 2014, sales of the Made to Matter brands grew twice as fast at Target compared with the overall market, according to executives. In 2015, Target will double the size of the collection with more than 200 new and exclusive products. Sales are expected to hit $1 billion this year.
Target will create a more guest-centric experience by tailoring its assortment and offering more locally relevant products with demographics, climate, location and other guest-led factors driving merchandising decisions. “We’ll be investing to build the capabilities to deliver a much more relevant in-store and online experience. Similarly, today’s consumer expects to receive relevant, personal offers and experiences, and we’re investing to build digital capabilities to make Target a leader in this space,” Cornell said.
Target’s store opening plans will increasingly focus on new, more flexible formats, such as TargetExpress and CityTarget. These smaller formats enable Target to serve dense urban areas and, judging by the numbers, the concept is winning. At the CityTarget formats, for example, sales productivity is roughly double the average of its larger stores, and gross margin rates are nearly 10 points higher than the rest of the chain. As for TargetExpress, the company is seeing “strong early results” and will continue to test this format in 2015, with plans to open eight locations across the country.
Target continues to make dramatic improvements to the digital experience. More than 70% of its digital platform is new, including new mobile apps, desktop and the registry experience. This year alone, Target expects to invest $1 billion in technology and supply chain.
“Digital sales are growing at a breakneck pace. We delivered a 50% increase in digital conversion last year, and sales grew three-times faster than the industry average,” said Casey Carl, chief strategy and innovation officer. “Not only are we closing the gap, but digital sales are beginning to play a meaningful role in achieving our overall financial goals. Digital sales account for more than half of our total comp growth last year.”
As for mobile, in particular, it has truly become the “front door to Target,” Carl said. Today, 98% of Target guests shop digitally, and the vast majority of that shopping occurs on a mobile device. Last year, mobile traffic grew 44%, and conversions shot up 69%. Looking to further drive mobile, Target plans to evolve the user experience by improving its in-store location and navigation capabilities, provide greater mobile payments integration and test such new technologies as iBeacons to make shopping even more personalized.