Is Target getting its mojo back?
According to its chairman and chief executive officer, Brian Cornell, it’s showing the right signs but not quite there yet.
“Traffic is back in our stores. We had three quarters in a row of positive comps. Our digital business is growing at twice the rate of the industry, and recently our share price has been at an all-time company high,” Cornell said at the WWD CEO Summit. “While we are really proud of the progress, I tell our team every single day we are just getting started. We have a lot of work to do. We need to make sure we sustain momentum and return to growth.
“It wasn’t that long ago that many people were asking ‘has Target lost its mojo?’ Even members of our own team were questioning were our best days in our own rear-view mirror.…I can tell given our scorecard today, [the answer] is emphatically no.”
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Outlining the mission, Cornell suggested he wants Target to be commonly referred to “Tarshay,” a nickname that surfaced in Diluth, Minn., in 1962, around the time the company was founded, Cornell said, and one that evokes style. “We have to both fix and address the retail fundamentals of our business and begin to innovate for the future. We have to stand boldly for style and double down our efforts, to make sure we elevate assortment, and the shopping experience.”
Outlining how the $73 billion Target can regain its mojo, Cornell cited:
- Spending more than $1 billion modernizing the supply chain and technology this year to provide a “great guest experience,” whether they shop in store or online, and insuring the point-of-sale system is right.
- Modernizing the supply chain. “We operate one of the largest supply-chain systems anywhere in the world, but the reality is it was built for a different time, when it was all about supplying stores,” Cornell said. “We are working to modernize our supply-chain capabilities, to meet this on-demand shopping environment,” including shipping online orders from store inventories and providing pick-up or online orders in the stores.
- Localizing assortments. “Localization and personalization in today’s environment is critically important. We are starting to test localization with a handful of stores in Chicago. It’s really 77 different neighborhoods, and what works in one neighborhood may not actually work in another.”
- Improving in-stock positions. “It is the single biggest pain point we still face with our guests, whether they are shopping in-store on online.”
- Building new, flexible formats. “I am watching consumers move back to city centers,” Cornell said. “We have to be there as they move back to these new neighborhoods so we are building new flexible formats. We have a very aggressive plan to enter these urban markets. We want to make sure we get the right assortments, the right locations, but we have seen some terrific responses as we opened up some stores in Boston next to Fenway Park, in the South Bay area, in San Francisco or just last week in Chicago.” Originally, smaller formats were called CityTarget and Target Express, then in April, they were rebranded simply as Target.
- Operating more efficiently. “We have to control our costs, simplify our organization. We have to set really clear priorities, and unlock the fuel to invest in future growth initiatives.” Recently, John Mulligan was promoted to a new role as executive vice president and chief operating officer, and Anu Gupta was named senior vice president of operational excellence to lead a team in simplifying and optimizing processes.
- Thinking differently about merchandise and “doubling down” on signature categories, including baby, kids’ and style. “We are and always will be a broad, multicategory retailer, but we had to explain to the organization not all categories have the same role and purpose for the guests.”
Before he joined Target in August 2014, Cornell, who was ceo of PepsiCo Americas Foods, broke the news to his daughter, then seven years old. “She grew up in a PepsiCo household and I had to tell her I decided to leave PepsiCo to work at Target. I expected an emotional backlash, but she simply looked at me and said, ‘Dad, I love Target. They offer great style. But lately dad, I don’t hear my friends talking about Target as often.’ I knew she wasn’t alone.”
The month he joined the chain, “I spent a lot of time talking to industry experts. Again and again the conversation always turned to, that Tarshay magic seemed to be missing.”
He launched a deep dive into examining “the fundamentals of our guest experience.…We realized we were making them work too hard. We could deliver great print ads, amazing 30-second spots, but when you went to stores and started browsing or went to target.com, all you saw was a sea of racks or a string of search results. We owed our guests a better presentation.”
In the year since he joined, Cornell closed the failing Target Canada, identified key categories for the retailer to home in on and is in the process of overhauling Target’s food offerings.
Target, under Cornell’s watch, started creating vignettes in home areas, “that told stories, that captured trends, that helped our guests pull all the pieces together. The products we are capturing in these vignettes are performing three or four times better, simply because we are creating that emotional connection.
“In apparel there is nothing more fundamental than mannequins. In the past, we treated them as an expense we could do without, rather than setting the stage to highlight product and giving our guests inspiration.” After playing up mannequins more, “Items we put on those mannequins typically grow over 30 percent, so we are seeing great return on our investments.”
Additionally, “Today, we are hiring over 1,400 visual merchandise experts, and bringing more highly trained team members to staff priority categories in our stores, like beauty, swim and our fitting rooms.”
During the Great Recession, “We became too rigidly focused on expense and gross margin rate at the expense of quality and design, and we simply lost our edge. We are leaning back into quality, making huge investments in fabrics and materials, unlocking our teams, specifically in home and apparel, to insure we deliver great product, on trend, exciting, at a great price for our guests.”
Cornell also said that certain private brands “were missing the mark,” including Room Essentials, which became too focused on value and “too closely associated with your dorm room, not your living room. We revamped that brand to compete with West Elm,” and other home stores.
Target’s plus-size business was drawing “some tough feedback,” but instead of walking away from a $17 billion category, “We actually redoubled our efforts. Earlier this year, we launched our first-ever plus-size brand called Ava & Viv and we are getting tons of positive buzz and seeing very strong sales results.”
For spring, “We will be pulling together some amazing new brands for kids and their parents,” Cornell said without citing any. A couple of months ago, Target said it wouldn’t renew its licensing deal with Cherokee Global Brands, but added there are other suitors in the wings.
Fast fashion was “a gap” in Target’s merchandise portfolio, but the company formed a partnership with WhoWhat Where, to create product and enter street fashion. “It’s our first design partnership that really leverages data and analytics,” Cornell said.
With lots of changes already made, “style categories are outperforming the rest of our business by 2 to 1,” Cornell said. To strengthen its beauty business, Target recently bought the Sonia Kashuk beauty brand, which it’s exclusively carried since its launch in 1999.
“When I think about the future of retail, the only thing that is really clear to me is that in the U.S., people love to shop,” said Cornell, who has a reputation for mingling incognito with shoppers to gauge how they feel about Target.
“We need to do several things at once. We have to improve the fundamentals, drive innovation and unlock new opportunities. We have to create something new, something special, something that will continue to evoke the name Tarshay.” That nickname, he said, “actually landed a long, long time ago — well before our great collaborations with Isaac [Mizrahi], Michael Graves and Missoni.”