Target promises focus on style and family
As Target prepares to lay off several thousand employees in its bid to restructure, a new picture of the retailer is emerging.
During meetings with Wall Street analysts last week, company leaders pledged to restore Target's reputation for cheap chic in clothing and home furnishings.
"We're in the very early stages of a real shift in our business to create the Target of tomorrow," CEO Brian Cornell told analysts.
Cornell said the retailer lost its commitment in recent years to fulfilling both sides of its "Expect More, Pay Less" promise, as well as its focus on product categories that set Target apart, such as fashion.
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In laying out his vision for the company, Cornell promised a big fix. Target will focus on four categories that the retailer historically has been known for: stylish design, baby, kids and wellness.
Those lines now account for $20 billion in annual sales, about a quarter of the retailer's revenue.
"Our job is to make shopping both easier and inspiring," said Kathee Tesija, the company's chief merchandising and supply chain officer.
The new Target store will look different, too, as the company breaks up a sea of clothing racks with mannequins. Less than a year ago, mannequins were in just 15 stores. Target aims to eventually place mannequins in 1,000 stores.
The grocery business also is in line for a major makeover. CFO John Mulligan said Target has only done a mediocre job in that department.
"In food, we heard the feedback very clearly: 'Be more specialized. Drive the assortment through wellness and well-being.' Yogurt. Healthy snacks. Along with improving our perishable offerings," Mulligan said. "So, there's a lot of work to do in food."
Target plans to emphasize organic, natural and other good-for-you foods, as well as more locally produced and fresher products. But Mulligan expects the transformation will take a few years to play out. Chicago will be the lead market for Target's grocery experiments.
A local look
Mulligan also said Target will strive to make departments in all of its stores better reflect their local markets.
To illustrate the need for attention to regional detail, he mentioned what Cornell saw on a recent visit to a Florida store.
"It's already 75 degrees down there and we're shipping in mittens and hats!" Mulligan said. "The guest looks at that like, 'What are you doing here?'"
Target also will place smaller stores in some cities, but just nine more this year, including a Target Express in St. Paul's Highland Park neighborhood. Their numbers will grow slowly, but Target wants to follow shoppers as more of them return from the suburbs and beyond to urban centers.
Mobile: "The new front door"
Target also plans a major focus on making it easier buy products using smartphones and tablets like the iPad.
"Mobile is truly the new front door to Target," Casey Carl, Target's Chief Strategy and Innovation Officer, told analysts. "Ninety-eight percent of Target guests shop digitally and the vast majority of that shopping occurs using a mobile device."
Last year, mobile traffic grew 44 percent. But there is room for growth.
Online sales still only account for 2.5 to 3 percent of Target's total revenue. But those online shoppers are deeply loyal. Target officials say the customer who shops online and in stores generates three times the total sales of a store-only shopper.
Carl said Target has many plans to improve the mobile shopping experience — some aimed at customers in stores — by building on the success of Cartwheel, a Target smartphone app that offers shoppers discounts on selected products. It has attracted 13 million users and generated more than $1 billion in sales.
In North Carolina, Target is experimenting with a Red Perks smartphone-based reward program that appeals to people who don't like programs tied to payment cards, as the Red Card is.
Carl said Target will be trying to get to know its customers better so they are more likely to act on the coupons and other deals Target offers.
"Today we have lot of different data sources that give us unrivaled insights into our guests and their preferences," he said. "But we're not getting as clear a picture as we could."
If experience is any indication, Target may want to be careful about what it tries to divine about shoppers. The company took some heat after reports that Target was trying and succeeding at identifying pregnant customers to provide them custom offers.
Cornell promised analysts that Target will be a different company in three years, a leader in the digital and mobile commerce, more nimble and agile. The question is whether those changes will make Target more successful at boosting sales.
"We will be a brand that separates itself from others based on merchandising authority and experience," he said.