View Slideshow

Brian Cornell thinks he’s discovered “the secret sauce” — and he hopes it will drive Target through the competitive crosswinds buffeting the retail world.

This story first appeared in the August 10, 2016 issue of WWD. Subscribe Today.

The “sauce” is a combination of data analytics, style cred, intuition — and even exhaustive one-on-one interviews with consumers in their homes — that entices shoppers to visit Target Corp. stores, log onto its web site and ultimately part with their money. Like McDonald’s, Target’s chairman and chief executive officer isn’t divulging the recipe. What he will say is that Target is paying much closer attention to what its customers — or guests, in the retailer’s parlance — are saying.

With Amazon undercutting prices and beating delivery times, as well as trying to make inroads in fashion, Cornell, who joined Target in August 2014, has focused the $74 billion mass retailer on four signature categories: style, baby, kids’ and wellness.

Target was badly in need of transformation. Under its former top management, the company’s supply chain had become inefficient, while its technology strategy was bloated and unfocused after years of subcontracting, causing glitches during key events — even the holiday period — that stunted sales. Several of the retailer’s biggest owned brands that generated $1 billion in revenues annually were tired and in need of a revamp, but while Target boasted plenty of talent, a silo mentality hampered creativity and sapped morale.

Recognizing the urgency of the situation, with consumers flocking to e-commerce, Cornell in less than two years has made dramatic and sweeping changes in Target’s strategy, shuttering the money-bleeding Canadian business and shifting the emphasis from building large supercenters to opening smaller stores geared for urban areas. He also shook up things at headquarters, reassigning top executives to different jobs and giving them license to fail and learn from their mistakes.

While the changes have been significant, Cornell believes that on a scale of one to 10, Target is around a three or a four along its reinvention journey. There’s still a lot in the works, including LA25, where new technology such as RFID to track products misplaced on shelves and services such as baby advisers are being incubated at 25 Los Angeles locations. Smaller, flexible-format stores built for cities and college campuses with hyper-localized assortments are the retailer’s future, says Cornell, who sees the potential for hundreds of these stores, including its first Manhattan unit bowing in TriBeCa in October.

Target could launch a new women’s ready-to-wear brand in the not-too-distant future. The retailer’s longtime licensing agreement with Cherokee, a $1 billion business, wasn’t renewed and Cornell believes that Target’s 500-person in-house design team is up to the challenge with newly hired talent from designers such as Paul Smith. In addition, an ath-leisure collection under the C9 label or a new Target-designed brand is in the offing.

Cornell has pushed for collaboration between the product development and design, merchandising and marketing disciplines, which previously functioned in their own separate realms. He’s stacked his leadership team with hires from Nordstrom Inc., Gap Inc. and Express and created enhanced roles such as chief strategy and innovation officer. Remarkably, Target didn’t have a chief operating officer.

With a changing consumer base that includes “more Millennials and more Hispanics,” Cornell wants to know more about shoppers. He wants to get inside their heads, look in their closets and refrigerators and rummage through their makeup bags.

“We go to guests’ homes with researchers to understand how they shop, how they think about different categories and what’s important to them,” Cornell says of the incognito visits. “The two or three threads I’ve taken away is that experience still matters and human interaction still counts. In this digital environment where a guest might start with an iPad or iPhone, our team members are using technology to solve any problems guests may have.”

It doesn’t stop there. “We’re getting the guests involved in cocreating some of the product for us,” Cornell says. He’s not kidding. Target’s new Cat & Jack brand gave a cadre of kids a wide berth to opine, create, rave and rant, although Cat & Jack’s recent launch party in Brooklyn, N.Y., was a tantrum-free zone where the many child models and other talent tapped by the retailer seemed uberpoised and wise beyond their years.

With positive messages on T-shirts such as “Challenge Accepted” and fashion items like ombré tulle capelets, Cat & Jack is a new blueprint for launching brands, from the recommendations from real people to supply chain improvements and leveraging Target’s sourcing prowess.

“I’m counting on Cat & Jack to be a $1 billion brand,” Cornell says.

Target is so hungry for feedback that it’s launching a proprietary app in the fall to facilitate one-on-one conversations between designers and shoppers. It will also work on a crowdsourcing level, gathering votes on patterns and prints. The as-yet-unnamed app has collected nuggets such as, “If you’d do more A-line dresses, I would buy more.” Designers have been posting photos of themselves with their pets or kids and posing questions such as, “What if your clothes had super powers?”

Cornell’s belief that consumers know their own minds is so far proving to be true. His core categories last year grew comp-store sales three times faster than the company average. That growth continued into this year’s first quarter, but the recent slowdown in consumer trends cooled Target’s view of the second quarter, with comps expected to be flat to down 2 percent, and adjusted earnings per share of $1 to $1.20. Target on Aug. 17 will report its second-quarter results. The company has said it sees full-year 2016 adjusted earnings per share coming in at $5.20 to $5.40.

From a 53-week low of $65.50 and a high of $84.52 on the New York Stock Exchange, Target’s share price has hovered around $74 for the last month.

“These are challenging times,” Cornell says. “Consumers are feeling challenged. It’s so hard to wake up every morning and read about another shooting in Fort Myers or what happened in Germany or the tragedies of Dallas and Baton Rouge.”

Cornell is sanguine about the local and world events that contribute to shaping consumers’ psyches. Things weren’t easy when he arrived at Target, but many of the problems were self-inflicted. He joined Target after a massive data breach during the 2013 holiday season sent shoppers fleeing. A man of resolute decisions, he shuttered the money-bleeding Canadian business launched in 2012 by his predecessor Gregg Steinhafel, which lost nearly $1 billion before interest, taxes, depreciation and amortization in fiscal 2012 and 2013 and contributed to Steinhafel’s fall.

Cornell, whose résumé includes ceo stints at PepsiCo Americas and Sam’s Club, has made other tough decisions. In an effort to win back investors, 1,700 employees and positions were eliminated last year, or 13 percent of the headquarters’ staff, as part of a $2 billion cost-cutting initiative. Despite spending $2 billion to $2.5 billion a year in technology and supply chain improvements, Target has had to play catch-up on the technology front. It’s a key area of focus given the online arms race retailers are facing against Amazon — a battle Wal-Mart Stores Inc. acknowledged earlier this week by acquiring Jet.com for $3 billion. Analysts believe the deal creates further hurdles for Target.

“Target, for the short term, has arguably the most to lose,” says Carol Spieckerman, president of Spieckerman Retail. “Target is playing a pretty serious game of catch-up in terms of their digital efforts, but not to the degree of Wal-Mart with this acquisition.” She says apparel is one of Jet. com’s thin categories, but is one of Wal-Mart’s strengths online. “Wal-Mart is a true third-party marketplace for brands you’d never see in their stores,” she says. “I don’t think Target has built out its third-party marketplace.”

Target has made digital a top priority. Growing digital by 31 percent in 2015 and 23 percent in this year’s first quarter, the retailer says it has significantly outpaced the industry.

Then there are other societal issues like minimum wage. Wal-Mart, Gap and other retailers have agreed to incrementally increase the pay of their sales associates to a minimum of $15 an hour, but Cornell has been coy about compensation, saying only that Target’s wages are market-competitive.

The core focus of Cornell’s tenure so far has been to change Target’s corporate culture. The divide between the current ceo and Steinhafel is striking. A career Target employee who joined the company in 1979, Steinhafel — like his predecessor, Robert Ulrich — oversaw a Target that was internal looking, arrogant and resistant to outside advice or criticism. Steinhafel embodied the stoic self-sufficiency of Minnesota’s Scandinavian residents, along with a moral self-righteousness. Criticized for Target’s $150,000 contribution to MN Forward for a Republican gubernatorial candidate who opposed gay marriage, Steinhafel also supported the ultraconservative former Minnesota Rep. Michele Bachmann, who is now an adviser to Donald Trump.

But it was an approach that worked for more than a decade. Ulrich and Steinhafel drove Target to new heights, not just with its core mass market consumers, but also with a new shopper who celebrated the trendy phenomenon of mixing the high and the low, shopping at “Tahr-jay,” as it was dubbed, as well as Saks Fifth Avenue or Neiman Marcus. Target enthusiastically grasped the trend, rolling out a string of edgy, limited-time partnerships with designers from Luella Bartley to Alexander McQueen, Rodarte to Joseph Altuzarra. Fashion fans rushed to snap them up — although whether Target’s core customer cared was always a matter of debate.

Looking to capitalize on the prestige, the retailer in 2006 licensed its bull’s-eye symbol to Hollywood boutique Intuition, which sold gold and diamond-studded versions as part of a Target Couture collection priced from $25 to $3,000. A tie-up with Neiman’s for holiday 2012 seemed to sound a warning bell — it was a major misfire for both retailers, too expensive and too esoteric, failing to generate much interest with either’s shopper.

And as high-low became not a novelty but the norm, consumers began to vote with their feet. Target seemed to stumble on multiple fronts, culminating in the 2013 data breach that ended up costing the retailer millions. Enter Cornell, who has almost literally thrown open the doors of Target since the day he arrived, adopting a more open and inclusive approach across the board.

Despite backlash from conservative groups, Cornell in May supported a transgender restroom policy allowing customers to use bathrooms and fitting rooms aligned with their gender identity. “We have to make sure we provide a safe, welcoming shopping experience,” he says. “That starts with our internal beliefs and making sure we embrace diversity and inclusion. When we have a team that reflects the guests we serve, we’re going to drive better results.”

Cornell’s big-tent philosophy carries over to the product. Plus-size brand Ava & Viv, which launched last year, has appeased vocal plus-size bloggers who criticized Target for ignoring their cohort. It was also a canny move to grab a piece of the $17 billion market. Likewise, the retailer’s embrace of bigger sizes helped it capture the number-one market share in swimwear, where its #NoFOMO — which stands for No Fear of Missing Out — ad campaign features models in a variety of shapes, from petite to plus. Target also plans to extend the size range of its Who What Wear brand to 29.

But the biggest indication of the change in attitude may be the reaction to the word Tahr-jay: The mere mention of it seems to make some executives uncomfortable.

Jeffrey J. Jones 2nd, executive vice president and chief marketing officer, speaks in hushed and reverential terms about something called “The Manifesto,” which sounds like a multipage document handed down by a retail oracle. Actually a single paragraph, the Manifesto refers to Target as “the place where there’s nothing trendy about being exclusionary.”

The Manifesto is the antithesis of Tahr-jay. “We’re striving for a more modern feeling,” says Jones diplomatically.

“Target is bright and fresh and optimistic,” says Mark Tritton, executive vice president and chief merchandising officer, who recently joined the retailer from Nordstrom. “The Tahr-jay days of happy, shiny people are gone. There is mojo with the brand and part of my job is to amplify that mojo. We can move fashion, be riskier and push it quite a bit further.”

Cornell is pushing designers to create fashion, but not just in limited doses, although he says, “Designer collaborations have been and will be critically important. They create a buzz, allow us to have a unique point of view and bring great design to our guests at an amazing value. But we also want to make sure that we have great design each and every day.”

The ceo says when he joined Target, the company’s image had shifted more toward the low-price end of its longtime brand promise, “Expect More. Pay Less.” The challenge now is, “how do we inform the brand and get the balance back to ‘Expect More. Pay Less?’”

Who What Wear, developed with the celebrity- and style-obsessed web site, is an example of Target’s new approach to fashion. It’s been an epiphany for Cornell, who says items at the edgier end of the style spectrum sell out first. “Who What Wear has given us permission to take fashion risks,” he says. Citing data from a study of female guests — which Target calls SADEs or Style-Aware Demanding Enthusiasts — Jones adds: “We thought the shopper lacked confidence in terms of personal style. That’s not true at all. She’s incredibly confident. She knows what she loves and what looks good on her. She’s not looking for a brand to validate that for her.”

To underscore the point of how much Target’s advertising has changed, Jones plays a TV commercial from spring 2014 of a highly stylized and dimly lit fashion show with stone-faced models walking around a red and white circular runway. “Many brands would say, ‘Great advertising,’” Jones says. “It just didn’t feel like us.

“We’re refining existing brands, extending them and adding new ones,” he continues. “We have the courage to reinvent brands [such as the men’s and women’s fashion brand Merona] and create Cat & Jack. How can we take these learnings and translate them into women’s ready-to wear?”

The person most absorbed with that question is senior vice president of product design and development Julie Guggemos, who played a key role in the development of Cat & Jack and Pillowfort, the new kids’ bedding and decor label that replaced the $1 billion Circo. One of the “big ideas” she’s working on is calling out a trend or theme and carrying it through all of the apparel labels, from kids to adults. She picked Saint-Tropez for spring as part of a global theme that also includes Istanbul.

Walking into the Merona showroom, during a tour of Target’s headquarters, she stops to admire the execution of Big Idea — Global. “Look at the extra pleating on the placket of this shirt and the oversize ruffle. It’s quality, quality, quality and detail, detail, detail.”

Executives such as Guggemos don’t drink Cornell’s Kool-Aid as much as chug it. “I cried when I came in two Saturdays ago and saw how this all came together,” she says. “I’m superexcited about how far this brand has evolved. We were hanging onto styles that worked for 20 years.”

In the past, people like vice president of design Cuan Hanly, who did stints at Paul Smith, Original Penguin and Jack Spade, wouldn’t have considered working at Target, Guggemos says. “Cuan wants to push the design really far. We’re giving him the space to create. Before, we didn’t have the proper space or the right ventilation for artists to paint. We used to go out to someone’s backyard or paint in someone’s garage. Brian is investing in a best-in-class facility to further develop the team and recruit talent.”

It’s not enough that products look good in the showroom; they have to look good in stores, too. Target, whose appeal has always been based on the fact that its stores looked better than most of its competitors’, is amping up its in-store experience as well to lure consumers, who these days are more eager to shop from their living rooms than they are to make the trek to brick-and-mortar locations.

At a northeast Minneapolis store-cum-lab, where department-store-style displays for apparel and home are developed before being deployed, mannequins posed on white modular fixtures wear a cross category of looks from Mossimo and Who What Wear. Complete living rooms and bedrooms are shown, while a new activewear layout for C9 will arrive in 400 stores in October and 200 more in February.

“Mannequins are still new for us and in-store vignettes are new,” Cornell says. “One of the things I realized right after we started to put mannequins and vignettes in place is that we have to have the talent in our stores to make sure they look great 52 weeks a year.”

So he hired Erika De Salvatore, who previously worked at Express, to the new position of vice president of visual merchandising, who in turn hired 1,400 visual display experts to bring her vision to life.

De Salvatore works closely with Michelle Wlazlo, senior vice president of apparel and accessories and a 19-year veteran of Gap Inc. “There’s more boldness and declarative statements about our style,” Wlazlo says. “In the past, we had separate buying teams for digital and stores. Now, it’s enterprise buying. We can be confident and not just be a store that just has a bunch of product.”

One of the biggest innovations on the display front, which doesn’t sound like much until one considers that Target is a mass retailer, has been mixing up product categories. The northeast Minneapolis unit is the first store to mix apparel and accessories. “Most accessories shops were over there [in stores],” she says, pointing to the food aisle. “Moving them was a big, scary, bodacious thing for us to do. The strongest results are in these areas. Instead of buying just a swimsuit, she’s buying a beach hat and sunglasses and flip-flops.”

A mannequin in the Who What Wear department wearing a striped brown blouse, denim gauchos, a beige handbag and stiletto sandals may be symbolic of Target’s fashion direction. Gauchos are one of those fashion trends that can be fab or a fail.

“Who What Wear is our most ambitious brand and it’s exceeded our expectations,” Cornell says. “The confluence of great style, great design and great value is really important, if not magical, for us.”

load comments
blog comments powered by Disqus