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How Target Is Challenging Amazon - YouTube
Channel: CNBC
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target is in the midst of spending
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billions of dollars to win customers
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back and roughly one year ago that
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costly gamble began to look like it was
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paying off as target sales started to
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rebound thanks to investments online and
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in stores
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the company is earning back its target
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nickname something that it arguably lost
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in the wake of the great recession
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[Music]
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born in 1962 out of the department store
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chain dayton's target was a discount
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retailer but also was known to be a
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destination for trendy items through the
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70s and 80s it aggressively added more
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stores across the u.s to compete with
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grocers and big box chains like walmart
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kmart and kroger getting target to the
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roughly 1800 locations that it has today
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by the early 90s and into the 2000s
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shoppers were opting to go to target for
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its low-priced fashion ford merchandise
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the company was partnering with
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designers like todd oldham and massimo
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gianouli offering exclusive lines for
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home goods and clothing that customers
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wouldn't be able to find elsewhere it
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was all about cheap chic which prompted
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shoppers to jokingly pronounce the
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store's name as if it were a french
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boutique
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when the great recession rocked the
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retail industry in the early 2000s
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target like many companies at the time
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pulled back on its design efforts and
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became more conservative in its approach
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to merchandising
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it moved away from fashion and focused
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more on essentials at the time consumers
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were only looking for the best bargains
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and not many were in the position to buy
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much more than what they needed
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but as the economy improved and shoppers
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began spending more target wasn't seeing
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many gains after 13 consecutive quarters
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of same-store sales growth targets comps
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turn negative in the first quarter of
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2013. its profits declined by more than
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a third for all of 2013. the year ended
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on a final sour note with a credit card
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breach that impacted millions of
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customers and cost target millions of
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dollars target's problem now was it
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needed to win back shoppers trust in
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order to get people back into stores
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there were other cracks too in a hunt
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for growth outside the u.s target
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expanded to canada beginning in 2013.
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within two years it opened more than 100
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stores there but the pace was too quick
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there were a slew of supply chain issues
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with customers complaining about prices
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being too high and items being out of
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stock when brian cornell stepped in as
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ceo of target in the fall of 2014 having
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served executive roles at other
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retailers including sam's club and
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pepsico one of his early steps was to
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get out of canada and close all of those
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shops cornell took a hard look at other
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parts of the business where he recalled
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shopping himself as a child he felt the
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retailer had lost its target mystique
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and he vowed to get it back in february
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of 2017 cornell mapped out a strategy to
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spend roughly seven billion dollars to
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make changes to target's age fleet of
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stores while opening new and smaller
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shops primarily in college towns
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launching new store-owned brands adding
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more delivery options for shoppers and
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growing the retailer's website under the
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plan 2017 and 2018 were investment years
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and 2019 would mark a return to stable
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growth investors initially punished the
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company over these plans by selling off
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shares the stock saw its biggest one-day
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drop in roughly nine years on february
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28th of 2017. wall street wasn't pleased
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with a plan that would weigh on target's
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bottom line investors also were
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skeptical the strategy wouldn't pay off
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but as traffic to target stores is back
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on the rise digital sales are gaining
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momentum and shoppers seem to think of
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the retailer as a destination for cheap
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chic again target's stock price has
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since rebounded through late september
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of 2018 the stock is up roughly 40
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percent
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key to target's latest successes are two
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things it's newer in-house brands and
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impressive store remodels
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well when we think about brands it's not
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an either or it's an end so we want to
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make sure we've got this amazing
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combination of our own brands
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and
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great curated national brands that
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complement our offering
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across the entire store so just
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yesterday i had two of our major
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national brand ceos here in minneapolis
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talking about the fourth quarter talking
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about 2019 so those partnerships are
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really important because they're
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important to our guests
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the company has rolled out 17 of its own
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brands since early 2017. target has its
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own kitchen and accessories line called
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made by design opel house is its
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whimsical home decor line and good
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fellow and co is its new men's clothing
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line target is on track to add eight
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more brands by the end of 2019. it's
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trendy line for kids clothing called cat
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and jack arguably one of the retailers
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most well-known brands today reached 2
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billion dollars in sales just one year
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after its launch in 2016.
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target is also back to partnering with
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well-known designers most recently
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hunter for rain gear and hgtv stars chip
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and joanna gaines for a home decor line
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it's also started to bring online brands
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like harry's and casper into its stores
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aside from the new brands target stores
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are also starting to look a lot
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different whether you're walking around
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the beauty department
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or through the toy aisles the company
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has said it will remodel about 300
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locations out of its fleet of 1800 this
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year and is on track to complete 1100
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remodels by the end of 2020.
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it said it typically sees a sales lift
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of between two and four percent at
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remodeled stores
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if we go back
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five or six years
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you know our target stores really served
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one role it was a place you can shop
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today they're at the very center of our
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strategy both from a physical and a
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digital standpoint we want to make sure
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when you're in our store it is a great
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in-store experience and we're investing
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in
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ours and our team
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labor and wages to make sure we provide
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a great experience but our stores are at
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the center of our digital growth they're
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fulfilling the majority of our orders
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whether it's order pick up or drive up
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it's where we fulfill most of those
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orders in local neighborhoods so the
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stores are centered to everything we're
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doing at target but the company may be
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in a more challenging position now as it
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tries to maintain growth after plowing
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billions into the business
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the retail industry continues to evolve
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across the u.s
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amazon is pressuring businesses to speed
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deliveries target has opted to focus on
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its stores which also serve as many
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distribution hubs helping fulfill online
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orders and the company continues to bulk
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up its supply chain most recently
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acquiring same-day delivery platform
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shipped
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earlier this year on amazon's prime day
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in july target said it had its highest
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single day of traffic and sales on its
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website so far in 2018.
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the company said it fulfilled 90 of
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those online orders from within its
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stores
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cornell tells cnbc there is a lot more
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to come for target in the future
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