Target: The Great Champion of Covid
Massive investment in physical store technologies has created not only new capabilities, but an agile platform to evolve faster and outperform competitors. While technology laggards are disadvantaged in normal economic times, they are simply outperformed in times like these. And who embodies this better than Target: the store that was able to do its best during the pandemic in the United States by offering more services, more technology and more comfort to its customers.
Target Corporation is an American retail chain. It is the 8th largest retailer in the United States.
In 2019, Target operated 1,844 stores in the United States. The chain has Target discount stores, SuperTarget hypermarkets and «small format» stores previously known as CityTarget and TargetExpress before being grouped under the Target brand.
According to the GlobalData Retail study, 34% of Americans reported visiting Target during the pandemic to walk and get out of the house, which is the highest percentage in the retail trade.
And the results are there: sales growth in the third quarter increased by 20.7%. While many retailers are struggling with half-masting in-store traffic, Target has stimulated growth in in-store traffic (up 4.5%) and in the average basket size (up 15.6%).
It’s nice to be an essential store, but that’s not everything.
Target’s operating earnings nearly doubled, now at $1.9 billion in the third quarter, and net earnings increased 41.9%! But how do they do it??
The retailer, of course, cannot compete with Walmart or Amazon, because this chain is not yet big enough. Walmart has more physical stores and Amazon is the largest online player. Both also generate a lot more revenue.
But Target has a loyal customer base that any company would envy. This is largely the result of the way the company has built a brand as a place where people like to shop.
Target is currently the most convenient place to shop, thanks to the introduction of many options offered to customers: same-day delivery, curbside pickup and even drive-by pickup.
The use of these services has increased by more than 270% compared to last year.
But Target’s entire strategy starts from its stores so as not to change the habits of customers who like this brand. The company has spent billions to build new locations, often smaller stores in urban areas, in order to be closer to customers.
This strategy is bearing fruit in a very important way. Target’s online sales jumped by 195% compared to a year ago. But unlike its competitors Walmart or Amazon (in this area) Target claims that 90% of its online sales were made by its stores, as opposed to distribution centers, which require longer shipping times.
But what makes its stores so attractive and allows Target to surf the crisis?
Why is Target one of the winners of the crisis?
An e-commerce that works
Online sales increased by 195%, sales with product recovery or same-day shipping (order collection, Drive Up and Shipt) increased by 217% in the third quarter. Target’s sales for the quarter increased 21.3% year-on-year to $22.3 billion.
Telsey Advisory Group analysts have attributed Target’s share sales and growth to “the success of its omni-channel strategies, loyal customers and superior execution.” As seen above, we must not forget the shorter delivery times because orders mostly leave the stores.
Smart partnerships in store
Target was one of the first American retailers to open its doors to other brands that operate stores themselves.
This way, customers can find some of their favourite brands in Target stores and, for example, pick up their medication orders from CVS in the pharmacy area, or drink a Starbucks coffee while shopping.
The customer does not have to leave the Target store to take advantage of these different services, which adds even more to the convenience of these stores.
The integration of DNVB (Digital Native Vertical Brand) in its shelves
Target has aggressively launched so-called DTC (Direct To Consumer) brands from startups that previously only sold online.
The company now sells previously exclusively online brands such as Casper, Harry’s, Barkbox, Quip and Native. These brands have already established a customer base and tons of customer data thanks to the direct-to-consumer strategy.
They are interesting actors for Target to reach a qualified clientele. For these brands, as the cost of advertising on Facebook and Google increases and online growth slows, Target offers a point of sale to increase brand awareness and drive customer acquisition.
Target invested $70 million in Casper in 2017. A spokesperson for Target said the company was “aggressively” looking for new digital brands to be introduced in stores of all categories.
Rapid implementation of delivery options for the customer
Target has expanded its “pick and collect” service to fresh and frozen grocery and “curbside pickup” orders nationally, with the program now available in more than 1,500 stores across the United States.United States, which represents about 85% of the chain’s sales outlets.
From milk and eggs to fresh vegetables and frozen pizzas, you can order more than 250,000 different products from the store online and pick them up at your convenience on the same day.
Buyers can use Target.com or the Target app to easily find and add items. Once ordered, orders will be ready in a few hours.
For a contactless option, consumers can use Drive Up and have a member of the Target team bring the orders to the vehicles.
Both order processing services are free of charge, without a minimum subscription or order.
Similarly, Shipt, owned by Target (an Instacart equivalent), has expanded its own order delivery options. In addition to its annual membership offer ($99 per year for unlimited free deliveries of orders of $35 or more), the company now offers customers and potential customers the option of paying by order, by purchasing Shipt passes by delivery.
Target quickly set up checkout options with “self check-outs”. The idea is of course to limit interactions with cashiers and the number of contacts with the products purchased.
Each automatic cash register space is managed by 2 or 3 Target employees: one person will manage the queue, another will indicate the tills available and manage any problems on the tills and the 3rd person will systematically clean each area affected by the customers during the payment phase.
Many Target stores currently offer more self-service check-outs than cashiers. Unlike many other stores, you can enter the self-service space with your trolley and there is no limit on the number of products.
A great way to reassure customers while motivating them to come to the store.