Agility, adaptability and flexibility - Target CEO Brian Cornell's checklist for omni-channel retail in 2022

Three things are going to define retail in 2022, according to Target CEO Brian Cornell - agility, adaptability and flexibility.

It has to be said, none of these seem particularly in evidence at the National Retail Federation’s Big Show in New York this week, where the organizers determination to push ahead with an on-the-ground event has seen exhibitors and sponsors significantly scale back their presence as a result of them at least adapting to the realities of the ongoing COVID crisis.

Target itself also pulled back on its physical attendance at the event, although one of the execs who did turn up in person was Cornell, the well-deserved recipient of this year's NRF’s Visionary award. Target had ‘a good war’ during the height of the pandemic in 2020 as its omni-channel transformation program launched in 2017 paid dividends and that’s continued through 2021. But for all that, Cornell remains wary of making too many predictions about how 2022 will pan out:

I’d love to have a crystal ball and tell you what the first half of the year is going to look like and the second half and when the variant starts to subside, but we are going to have to recognize that each day we have to listen to consumers and make sure we flex and adjust as needed.

What will be vital is to keep the pandemic operational learnings from 2020 and 2021 front of mind as they are clearly going to be as important, one way or another, in 2022, he advised:

There is going to be a continued importance of ease and reliability, and the importance of safety - whether that’s putting plexiglas up at the point of sale, putting signs up about social distancing or providing masks and other safety features - and giving the option, if you are not comfortable in the store, of using same-day [fulfilment] services.

All that said, Cornell has been encouraged by data from the all-important Holidays season in the US. At some points in the run up to the end-of-year shopping splurge it looked as though Christmas might be metaphorically cancelled, although Cornell was confident things would be better. In the event the numbers saw a return to some kind of normality as store doors remained open despite the Omicron variant doing its best to disrupt:

Consumers came out and shopped all categories. They shopped early, they shopped late, they shopped throughout the season. They used both physical and digital channels. Most importantly, consumers said retail is still critically important to them and that bodes well for the future of the industry.

That’s despite what Cornell described as “some unique headwinds - a playbook that none of us had in front of us” for the past 22 months. Those headwinds are going to continue into 2022 with global supply chain challenges, inflationary pressures and labor shortages, but there’s room for hope, he said:

What’s so fulfilling to me is seeing how the consumer reacted during the Holidays season. They came out to shop. It just gives me incredible optimism for the future. America wanted to get back to a little bit of normal and get out there with friends and family and shop in our stores.

Storing up success

As noted above, what has placed Target in a strong position during the pandemic was its decision back in 2017 to take a different approach to transformation than many other retailers. While an alarming number of rivals were like rabbits in the headlights of the oncoming Amazon behemoth and threw all their efforts solely into digital in a bid to ‘be’ Amazon, Target’s strategy was built around both digital and the transformation of physical retail, rejecting the accepted wisdom that offline shopping was dead. It wasn’t a popular pitch among retail experts back in 2017, recalled Cornell:

We said, ‘We have been testing and learning and we are going to put billions into re-modelling stores,’ when people were not talking about re-models. We said, ‘We are going to build new stores in urban centers, like New York City, on college campuses, in new towns where Target had never been before. We are going to invest in our brands, activate our 1,900 stores as fulfillment centers across the country and we are going to make a big investment in our team, increase our starting minimum wage and continue to invest in developing talent'.

That got the firm a pretty cold reaction from sector analysts, but that emphasis on the store-as-hub paid off in spades as health and safety concerns around COVID fuelled the importance of alternative fulfilment methods, such as curbside pick-up and same day delivery from the nearest store. As all too many retailers scrabbled to play catch-up, Target had already had its capabilities in place. 

And, as diginomica has noted repeatedly, the omni-channel genie is well-and-truly out of the retail bottle. While firms such as Target were essential retailers and as such their doors never closed even at the worst of the COVID crisis, there was an overall societal shift towards online that, while it will level out, will not default back to the ‘old normal’ of 2019. Cornell said:

As we go forward, there’s going to be that great balance between consumers who still love physically being in a store and who want all the ease and convenience and safety that comes along with just driving up and receiving that order or having something put on their doorstep. A lot of those components are going to be sticking going forward. Even in the pandemic, consumers have gravitated to both physical stores and taking advantage of digital and, in many cases, same day fulfillment options to meet their needs. I think that’s here to stay.

Headwinds

As to the other headwinds cited by the Target CEO, the global supply chain crisis will continue to be a concern. Target is among the largest of retailers and as such has had the scale and scope to take direct action to tackle this, chartering its own ships to ensure that goods make it into its distribution facilities and onto the shelves. Smaller retailers are, of course, less fortunate in this respect.

From Cornell’s perspective, the current situation makes clear a need for greater data transparency and sharing of information for the greater good. It also requires a long game when it comes to strategic thinking, pointing to the Biden administration’s Infrastructure Bill as something that will enable the modernization of ports and the building up and improvement of transportation. But that’s not going to happen overnight, he added:

That’s a multi-year investment which will allow us to have a state-of-the-art supply chain in the US versus one that has been lagging behind. Short term, the best thing we can do is share data, provide more transparency and make sure there is more visibility upstream, so that we work, as a nation and as an industry, to continue to use data and analytics to deal with some of the short term issues.

Another challenge that will become more apparent in 2022 is the impact of rising inflation - which hit a 40 year high in December in the US - on the price of goods. How this impacts on consumer behavior will only become apparent over the next few months, but Cornell can see some precedent here:

Some of the historical ways consumers react to inflation will play out again in 2022. You’ll drive fewer miles. You’ll consolidate the number of times and locations where you shop. You’ll probably spend a little more eating at home versus your favorite restaurant. And you might make some trade-offs between a national brand and an own brand.

How it all pans out will be a fresh set of learnings to come, reckoned Cornell. And learning is something that retail has had to get used to during the pandemic:

I had no sense we were going to facing the challenges we have faced in the last couple of years. I actually didn’t know what ‘sheltering in place’ meant back in March 2020. We all learned together.

My take

A well-deserved recipient and a prime example of the benefits of getting the foundational transformation work done early.