Lead story – how Target’s store-as-hub strategy paid off
With so many retailers waffling in Amazon’s wake, Target made another bet: the store as hub. As Stuart reports in his latest Target review:
At the heart of all this is the strategic decision to focus on the idea of using stores as hubs. That was a decision taken at a time when other retailers were embarked on Amazon envy fuelled strategies of closing stores and trying to get everything online. Target took a different tack.
Stuart quotes Target CEO Brian Cornell:
Using our more than 1,800 stores in neighborhoods across the country to handle online orders not far from the guest who bought them. Many retailers are just starting to talk about this concept, but we’ve been doing it.
And how has that been working out? Some encouraging numbers:
- Target lowered average unit cost of fulfillment by 20% but fulfilling close to the store itself.
- Schipt, the shopping and delivery service acquired by Target last year, has now been scaled out to 1500 stores in more than 200 markets.
- Target benefits from the $99 a year fee, and Shipt’s 80,000 shoppers are partaking of a growing number of retailers, obviously including Target.
- 31% year-on-year growth in online sales.
Perhaps the most encouraging bit: this isn’t eating into in-store sales. Stuart quotes Cornell:
It’s also important to note that while our stores are fulfilling more digital orders it’s not coming at the cost of in-store sales… Our stores as hubs strategy isn’t putting our core business at risk. It’s simply helping us grow faster.
Stuart pries further in Is Target the easiest place to shop in the US as CEO boasts he was right about omni-channel vision? Some might find Target’s victory lap unbecoming, but as Stuart concludes:
The Target omni-channel transformation story is a welcome success story in a retail environment that is still claiming victims. We’ve written before about how retailers have had to relearn to love the store rather than flailing pointlessly after an online-only Amazon-wannabe agenda. Target learned that lesson earlier than most.
Taking the retail temperature at Lowe’s, Macy’s, JC Penney Old Navy and The GAP
Alas, Target’s story isn’t indicative of other strorefront retailers. Stuart rounds up the highs and lows:
As for the “NewCo” GAP has created for The GAP, Banana Republic, Athleta and Hill City, Stuart isn’t blown away:
For its part, GAP still has some serious problems that haven’t been addressed. Another 230 stores are going to be shuttered over the next two years in a bid to cut up to $300 million in costs. That’s damage containment, not a growth plan. NewCo doesn’t seem to have any new ideas.
Wendy’s goes digital and Avon’s still calling
Elsewhere in retail, Stuart looked at the latest digital burger: Wendy’s looks to $25 million digital transformation as it enters its second half century. There’s no time to lose. As Stuart points out, McDonald’s has seen its digital transformation efforts pay off, in the process “creating some clear space between it and its rivals”.
Wendy’s CEO Todd Penegor wants to close that gap, but he’s aware that throwing tech at this problem may not be enough:
Everybody is going to be having technology but who does it the best and creates the best customer experience.
Cue the digital transformation, then. Speaking of which, we’re one year on with Avon CEO Jan Zijderveld’s transformation project. Stuart’s got the update in Avon’s still calling, but shifting to online channels is taking time. Retail irony is more bitter than sweet:
This time last year the plight of Avon was flagged up, with the 130 year old company struggling to adapt to the digital world, ironically held in check by the Avon Lady direct sales business model that was once a retail innovation.
And what’s the update?
Flash forward a year and there have been clear efforts to apply a foundation layer, but the wider makeover remains a work in progress. There are huge challenges involved in what needs to happen in practical terms, even though Zijderveld has some clear high-level objectives – repeatable models to reboot direct selling, unlocking what he sees as e-commerce opportunity and a radical simplification of the business model and corporate culture.
Retail analysis and context – select pieces
Beyond the news analysis, a series of diginomica pieces fleshed out the retail picture:
- Gated offers – a different approach to personalization that gives consumers control – Barb hones in on a new personalization angle: “A gated offer also works well with privacy regulations because it requires explicit consent. Consumers self-identify and proactively choose to provide their information in exchange for a good deal.”
- While retail consultants focus on technology are they forgetting the basics? Den holds up a stop sign for techno-obsessed consultants: “Researching for this story reinforced a set of thoughts I’ve had for some time. Technology is certainly an enabler for change and innovation but on their own, technologies are only tools. They have to be seen in a much broader context that is balanced against credible strategies… The savvy shopper is here to stay. Tapping into what that means will be essential.”
From my flurry of NRF 2019 content, this piece has lingered on my mind: NRF to retailers, and Wall Street – we need better metrics to assess retail health. As I wrote:
This strikes me as a much more important discussion than most of the banter I heard on the NRF show floor, which focused on gee-whiz tech like intelligent vending, augmented reality shopping, robotic assistants, retail-as-theater, and other next-gen jingles.
But as it turns out, next-gen tech does actually converge with this metrics debate. Neither will go anywhere unless retailers build an effective data platform, and measure the right things. As Matthews told the audience, this topic has urgency. If retailers can’t earn fair valuations for their transformations-in-progress, they won’t keep up.
That sets up my next retail pieces, which will look at employee experience as the missing piece in improving customer engagement. We’re updating our diginomica retail coverage constantly – check back soon, or have a look at our retail collection.
Image credit – Feature image – Question More © bartsadowski – Fotolia.com.