Target Plans Big Digital Push for 2015
By Brianna Ahearn, contributing writer
On March 3, Target Chairman and CEO Brian Cornell presented his plans to improve Target's business in a two-hour meeting with investors. Cornell and the company are calling the plans “a roadmap to transform business,” and the strategies continuing to be more guest-focused, prioritizing certain merchandise categories, and taking a channel-agnostic approach for Target customers. Target shared some of their plans in a summary via press release the same day.
Target presented its fourth-quarter earnings in the last weekend of February, and reported that the full-year comparable sales went up by 1.3 percent. Digital sales growth was significant, with more than 30 percent growth. The new plan for 2015 includes a planned investment of $2 and $2.2 billion in capital, with a $1 billion investment in their technology and supply chain. The presentation included the revelation that guests who shop at both Target's physical locations and online at Target.com generate three times the sales for guests who shop only in a Target store. The retailer's focus then is for “continued enhancements in technology, supply chain and inventory management” to make a seamless shopping experience for guests, focusing on ease and inspiration. With this approach, Target hopes to continue its annual growth in digital channel sales of 40 percent, and grow their total projected sales by 2 to 3 percent, and comparable sales growth of 1.5 to 2.5 percent. More personalized digital experiences, loyalty programs and promotional offers are included in their plans. Target is currently testing a loyalty program known as REDperks in limited markets.
The retailer has identified its most profitable categories as Style, Baby, Kids, and Wellness, and will make these “the categories Target is famous for.” Target plans extensive investment in these four categories, as they represent more than a quarter of Target's total sales. Their focus is on expanding the categories and differentiating them from their competitors' offerings. In addition to focusing on these categories, Target will also offer more locally relevant selections of products, much as they have with some of their CityTarget and TargetExpress stores, where merchandise selections are offered after taking demographic, location, and climate into consideration. TargetExpress and CityTarget stores are one focus on the retailer's 2015 plans, with eight planned TargetExpress stores. Target plans to open “stores to fit the community and test new layouts in its general merchandise stores.”
“Following a thorough, strategic review of our business, coupled with a careful evaluation of the changing retail landscape, we have identified the key initiatives that will put Target on a clear path to growth,” says Cornell. “We’re focused on our future and building the capabilities that will take us further, faster. Redefining Target will require a renewed emphasis on prioritization and innovation, and above all else, putting our guests first in everything we do.”
Target is looking to cut costs to save $2 billion as they restructure, and then plans to reinvest those savings back into the company. The savings will “be realized through operations, technology and process improvements; supply chain and sourcing efficiencies; and corporate restructuring.” This plan includes an anticipated removal of thousands of positions throughout Target's business, a process that has already begun at Target's downtown Minneapolis headquarters.
Recently, Target made one of its biggest moves by undercutting Amazon and other competitors by lowering its minimum online order amount from $50 to $25. Some Cartwheel users online have also noticed that the retailer is testing online redemption for its offers. This will prove beneficial to consumers who want to take advantage of a Cartwheel offer, but aren't able to get to a physical location. By letting consumers get Cartwheel offers online, the retailer increases the possibility of guests buying more than one product, especially to take advantage of the free shipping offer. Target now has buy online, pick up in-store for all of its stores, and anticipates increasing the number of its stores that can directly fulfill consumer guests this year as well.