This past weekend, I made a #TargetRun to the Target in Fenway. It. Was. Awesome. Call me basic, but I love Target and since they have almost everything a college kid could need, it’s never hard to find an excuse to go. I know that I am not the only one out there with a strange love for Target. That said, the other day, as I wandered aimlessly through the aisles, I began to wonder how Target has continued to attract shoppers like me despite the fall of the typical “big box store”.
In 2016, Target experienced its largest ever one-day decline in its stock following a report that the company had missed its sales and earnings expectations for the year. One of the main reasons for the retailer’s decline in sales is that, like many other big-box stores, Target is in constant competition with Amazon. As online retailers like Amazon become more willing to ship large or bulk items, one of Target’s biggest competitive advantages dwindles. Furthermore, the convenience aspect of Target is overshadowed by services like Amazon Fresh, which make it easier to order rolls of paper towels from your couch than to run to your nearby Target. In general, the movement of customers online makes it more difficult for Target to deliver on two things it has been known for in the past: store experience and style.
Upon returning home from Target, I decided to do a little research to find out how the retailer is reviving itself from this 2016 blunder and responding to changes in its industry. What I found is that Target is fact investing significantly in its digital transformation (some say that number is close to $7 billion). What follows are some initiatives that I found to be quite impressive.
The Target App
The Target app has been around for a while, but only recently have they upped its game. Last summer, Target merged its savings program app, Cartwheel, with its main shopping app. The decision to integrate Cartwheel with the Target app was made with the goal of creating a more simple, unified platform that customers will be more willing to adopt. In September of 2017, Target further improved its app by adding beacon and Bluetooth technology which can show a user’s location on the app’s map as they move throughout the store. The purpose of this upgrade was to help customers find what they needed faster as well as connect them to nearby discounts. Then, in December, another update to the app was made when Target announced the launch of a digital wallet feature. Using the feature (creatively named “Wallet”) customers can now pay with their Target REDcard and save with Cartwheel, all in one scan. One of the biggest benefits of this feature is a faster checkout process (4x faster according to Target).
Starting in October 2017, consumers nationwide have been able to shop their local Target store using the Google Express app or website (Google’s home delivery service). Users can also shop for items using the Google Assistant or Google Home device. This capability positions Target to compete directly with Amazon.
Acquisition of Shipt
In December, Target acquired Shipt, a same-day delivery company, for $550M. “By acquiring Shipt,” explains Target COO John Mulligan, “ we’ll be able to take advantage of our network of stores and Shipt’s technology platform and shopper community to quickly offer same-day delivery to millions of our guests.” Shipt will be a wholly-owned Target subsidiary, but it will continue to operate independently. As of right now, the same-day delivery service is only available in 57 stores in Alabama and Florida (near Shipt’s headquarters), however, Mulligan says that customers can expect to see that number grow quickly. He estimates that the majority of stores will offer the service by the 2018 holiday season. For a $99 annual fee, members will be able to browse Shipt’s online marketplace for Target products (including groceries and fresh foods). After placing an order, Shipt shoppers will visit the necessary stores, buy the products, and deliver them, all within a few hours. Target’s entrance into the same-day delivery market puts it in direct competition with Amazon Prime, whose membership fee is also $99 per year. However, an Amazon membership also provides perks other than same-day delivery so it will be interesting to see consumer reactions to Target membership fee once the service gets rolled out to more stores.
In conclusion, it’s clear that Target is taking their digital transformation quite seriously. However, one key question will be whether Target’s reputation for creating a shopping experience will translate to their new online platforms.