Brian Cornell, chairman and CEO of Target Corp, has just four simple keys for success in future retail. But as he well knows, they aren’t easy. Speaking Monday morning to a packed house during “More in Store: Target Invests in its Guests and Its Future,” Cornell said whether in an up market or down market, whether a big or small company, these truths remain.
“You must always start with the consumer, in every decision that you make,” he said. “You have got to be willing to invest in both the present business and for tomorrow. Importantly, you have to be willing to reinvest in stores, in digital, in technology, in fulfillment and in your teams. And you have to be willing to disrupt yourselves.”
In recent years, Target has done all of that — and then some. It’s not just that the 2018 holiday season was a good year for retail as a whole; at Target, the company had its best sales in more than a decade.
“So go back 10 years,” Cornell said to the crowd. “What’s changed? I think the short answer is, everything.” Digital, back then, was more a “rounding error” than an essential part of the customer expectation. The millennial consumer was a big mystery. iPhones were just being introduced. “And I can tell you, nobody — nobody — ever shopped from their Blackberry.”
In the period following, stores set their sights on digital, hoping to keep up. Many questioned whether physical retail would make it. Today, however, the conversation is more “and” than “either/or.” And Target is helping lead the way.
“We quickly realized that we were never going to win if we played someone else’s game,” Cornell said. In those days, the company was running Target.com as a separate business, with different buyers and different inventories. “We knew we couldn’t build distribution centers fast enough to go head-to-head with Amazon.”
But then the light bulb went off: Target already had more than 1,800 potential distribution points in its physical locations across the country. “Until that moment, we only thought about them as stores,” he said. “It turns out, they had a lot more potential.”
In February 2017, Target promised to invest $7 billion in capital not only in enhancing the digital experience, but also in reimagining its stores and opening small-format locations. There was also $1 billion of operating income earmarked for investing in the company’s people. Target has been exploring new technologies, from AI to VR. “But we’re also realizing there’s still no substitute for that human connection.”
Those investments have paid off — in a big way.
“Consumers still love to shop great stores,” Cornell said, and Target considers its stores its single greatest competitive advantage. They are service centers, fulfillment hubs and incredible showrooms for inspiration, he said. “In fact, this season, our digital business outperformed the industry by over 50 percent,” he said. “And that’s largely because three out of every four digital orders was fulfilled by a store.”
Over the last couple of years, Target also has introduced 20 new brands that have appealed to different guests, and is growing in market share in every one of its major categories.
Today, however, “If you asked Target guests to name our billion-dollar brands, I know they couldn’t do it,” Cornell said. “Because they really don’t care. What they care about is great value, quality, design, newness and that surprise that we try to offer each and every day.”
For the last half of the presentation, Cornell was joined for a conversation by NRF President and CEO Matthew Shay. The two spoke broadly about leadership, about the appeal and fun of the in-store Target experience, about Target’s investment in its team and how the industry continues to evolve.
Speaking with exhibitors, presenters and others this week, Shay said, he’s heard people say, “We used to be talking about, ‘How do we make a store more digital?’” Now, however, “There’s almost a conversation going back the other way: ‘How do you make digital more like a store? How do you create the experience online that’s more like the experience that you get in a store?’”
Listen up: Target may well have some suggestions.