In the race for digital transformation in the US retail sector, Target appears to be…well, on target really, with year-on-year digital sales growth of 30% in the second quarter.
This sits well with CEO Brian Cornell’s to-do list:
First on our list is to become a leader in digital, this is critically important because guest research shows that digital relevance drives traffic and engagement across all selling channels. While we're pleased with the industry leading growth we've seen so far this year we have much more work to do.
Cornell sees a major asset for Target is its ship from store initiative:
We're already shipping digital orders from approximately 140 stores and by the end of this year we'll be shipping for more than 450 locations.
We win - and will continue to grow - by combining a great store experience the convenience of allowing our guests to order online and pick up in our stores whenever they want and also be able to ship directly to their homes and using our stores as flexible fulfillment centers to make sure that response is a quick one.
We’ve got to make sure that as our guest engages with us digitally we make it really easy, and we make it easy to find product and easy checkout experience.
So we’re focused on making sure that we provide not only a great in-store but a great digital experience and we’re going to make sure that we continue to make our site easy to work with and more and more that’s the mobile interchange that we’ve got to make sure is easy for our guest to find product and checkout.
The firm also wants to speed up its delivery times to customers with the roll out of an available-to-promise initiative. This will, theoretically, take delivery time down from a range of 7 to 11 business days to a more specific one to two days.
We believe that available-to-promise which will roll-out this fall will give our guest the confidence that they know where the product is and when it will arrive for them either in a store for them to pick up or being available directly to their home.
We want to give them the confidence that when they order they know it’s available-to-promise and we’re going to have it there for them when they need it.
We don’t need to be building upstream DCs we’re going to continue to convert more of our stores and as we go in the fourth quarter close to 450 that will act as flexible fulfillment centers to make sure that we can quickly and efficiently get product to the guest.
Another priority is to develop localisation and personalisation capabilities to create a more individual digital experience for our guests. To that end, some pilots are currently running in certain regions of the US. Cornell explains:
To inform our localization efforts we launched a small test in the Chicago market where we're working with a set of stores to test changes to assortment, presentation and inventory commitments on certain items. In these stores we're highlighting locally-relevant items, updating category adjacencies and changing shelf facings to reflect the demographics around these individual stores.
While this test is still early we're encouraged with the guest response so far specifically comp performance in this group of test stores has been one to two points higher than the rest of the Chicago market and a set of controlled stores. Items featured in the tests are present in 5% to 10% of the guest baskets in these stores and we've seen a meaningful improvement in our guest survey stores for variety of products in these stores. Giving these strong initial results we're working to quickly build on our capabilities and create an operating model that allows us to scale our efforts across a broader set of stores and demographic clusters.
This builds on last year’s rollout of a 3rd party recommendation engine which incorporates both in-store and online guest history and complements the company’s Cartwheel coupons program. Cornell says:
In 2015, we've expanded the use of engine across our mobile offerings, email, subscriptions and cartwheel. This engine is driving a meaningful increase in conversion compared with our results on the prior third-party product generating incremental sales of $50 million to $100 million so far this year. We've rolled out personalization recommendations to Cartwheel only a few weeks ago but early data indicates the change is driving more than a 10% increase in the number of offers downloaded per user, a critical co-measure of engagement with this app.
In fact, Cartwheel seems to have a bit too successful as Target has now limited access to it. Visitors to the Cartwheel section of the Target home page are met with the following:
We continue to see really positive response to some of our efforts like Cartwheel. Cartwheel has now been downloaded over 18 million times.
Every time I am in stores I run into guests that have their smartphone in their hand and they're looking for their offers from Cartwheel.
Target is also becoming more aware of its brand on social media and trying to be more proactive on that front. Cornell explains:
We also recognized that Target is a brand that is talked about in social media everyday thousands of times every day. So if you were to visit our headquarter here in Minneapolis, just down the hall from my office we have what we call Guest Central. It is our guest command center where we're monitoring what people are talking about, what they're blogging about, how Target is being referenced in the news and we're making sure we're very engaged with those bloggers and making sure that we're in the discussion.
It's a very important part of how we think about the brand and making sure that we incorporate social into our overall brand development initiatives.
This is undoubtedly a lesson learned from the fall out to the infamous 2013 Target data breach. That continues to case a shadow over the firm with the retailer reaching agreement with Visa this week to pay card issuers $67 million as a result of costs stemming from breach.