What Brick-And-Mortar Brands Can Learn From Target’s Recent Earnings
Target's performance may have fallen short of investors' hopes, but its Q1 earnings showed movement in the right direction.
In trying to get a longer view of the state of retail, the business and marketing trajectories represented by Target and Sear’s offer clearly defined paths for trying to tackle opaque, general concepts like customer experience and omnichannel.
While Target’s Q1 earnings, which were released in late May, fell short of investors’ expectations, sales and traffic numbers continued to demonstrate a positive direction for the discount retailer.
With sales reaching $16.56 billion for a decent gain of 3.5 percent compared to the same period last year, it was Target’s digital sales rise of 28 percent in Q1 — compared to Q1 2017’s 21 percent increase over Q1 2016 — that represents a clear victory for the omnichannel strategy executives have pursued the last few years. Further proof: in-store visits were up 3.7, which executives said was the strongest growth in a decade.
“Store shopping remains very important and will continue to be so in the future, but it’s no longer the only way people choose to shop,” John Mulligan, Target’s COO, said during the earnings call (Seeking Alpha transcript is here). “So, for both our physical assets and our people, we are modernizing how we work, which includes a meaningful investment to continue providing the best of what physical shopping means today. At the same time, we are reorganizing virtually everything we do to ensure we provide convenience, speed and reliability in all the ways that our guests want to shop.”
That realization has been the foundation of Target’s aggressive efforts to balance bricks and clicks to attract shoppers. In October, Target became the latest brick-and-mortar brand to sign on to accept requests made by owners of the Google Home through their voice-activated Google Assistant (aka “Okay, Google”) for delivery or pickup via its local online shopping marketplace Google Express.
The ability to keep pace with Amazon’s speed and breadth of products by offering immediacy and a reason to shop with Target is key to making the acquisitions and services the brand has added actually “work” to drive business as opposed to more cosmetic attempts to appear to embrace consumers’ omnichannel expectations.
Focus On Experience And Fulfillment
Target’s somewhat surprising acquisition of transportation tech company Grand Junction last summer has helped it keep its promise on same-day delivery to customers.
Conversely, Target has also been quick to jettison efforts without a clear, practical pay-off in the near term. For example, at the start of 2017, it decided to abandon its sub-rosa e-commerce program called Goldfish, which was dubbed as the “store of the future.”
Instead of embarking on such headline offerings, Target has focused simply on practical services. In addition to same-day delivery platforms like Grand Junction and Shipt, which it also acquired last year, Target has continued to find ways to add digital capabilities that drive convenience in all channels.
For example, it has integrated coupon app Cartwheel into the native Target app. Following that combination, in Q4, Target added REDcard into the app with a new wallet feature.
But the question for Target’s progress as it, and other brick-and-mortar retailers look to counter Amazon’s expansion into faster delivery and fulfillment with “instant pickup” options, the battle will be to make Target’s app as important on users’ smartphone homescreens as the e-tail giant’s is.
For Target, the answer to that question is ensuring a “personal touch” that is merely augmented by digital touchpoints and not the other way around.
“Being different means always changing,” Target Chairman and CEO Brian Cornell told analysts last month. “Right now, we’re investing to deliver differentiation that matters in today’s world, focusing on convenience, digital brands, our operating model, small formats, and the look and feel of existing stores. And we’re investing in our greatest differentiator, our team, because human touch still matters even in a digital world.”