Retail Merchandiser

This mega retailer is realigning its brand message and retooling its merchandising mix to meet the needs of consumers.

Ask Gregg Steinhafel about challenges Target has faced since he took over the role of CEO in May 2008, and suddenly May 2008 seems very far away. In addition to a major economic downturn and recession, Target reduced its workforce in January and completed a proxy contest in May.

But ask him what he’s wanted to accomplish since taking on the role, and his answer is concise and on point. “We want the corporation to be fully aligned,” he said. “We’ve spent time in the last 12 months ensuring we’re focused on the right vision, mission, and values, reaffirming our direction and strategies are right for Target.”

Whether working in one of the company’s 34 US distribution facilities, one of its 1,698 stores, or the Minneapolis headquarters, all roles in Target align with the corporation’s mission to become the preferred shopping destination for guests and support its six strategic priorities: growth, profitability, expense productivity and capital deployment, superior store experience, organizational effectiveness, and reputation management.

“We’ve developed these priorities and our mission with enough transparency to ensure all Target team members understand what what we want to accomplish,” said Steinhafel.

Maintaining retail relevance

The current economic climate is drastically different from anything the retail industry has experienced in the last decade. Target has responded by thoughtfully re-evaluating how to continue to be a relevant retailer despite the downtrend in consumer spending.

Steinhafel and his management team first looked at what tactical changes to make to ensure Target guests recognized the corporation as one that delivered superior value, innovative products, and quality merchandise. “We rethought our assortment mix, our messaging to consumers, and our marketing messages and validated the fact that even in tough economic times, our guests should continue to expect more and pay less,” Steinhafel said.

In an over-saturated market, Target has long differentiated itself through its unique store design, marketing, merchandising mix and presentation, and fast, fun and friendly guest service. In the past year, Target placed a greater emphasis on its marketing and in-store signing to drive traffic and convey value.

As part of the company’s focus on being a one-stop destination, Target identified merchandising opportunities within the food category and has since increased its food footprint by expanding its offering of dry, dairy, and frozen items and by adding perishable products to some stores within its existing store base as a pilot for a long-term growth strategy.

“We’ve created a hybrid strategy between existing general merchandise stores and a Super Target,” said Steinhafel, referencing the company’s 245 full-grocery locations.

“We want to be more of a destination for the fill-in grocery trip so busy time-pressed moms and dads don’t have to make a second trip to the grocery store,” he continued. “We’ve taken the best of Super Target, and we’ll be adding those products into our general merchandise stores.”

This new expanded food format is a response to what guests have told the company they want: more fresh food selection in the convenience of their local Target store. Moving forward, Steinhafel said this expanded food offering would be incorporated into a substantial portion of the chain over the next three years, assuming continued strong results.

The company is also taking an aggressive approach to remodeling existing stores, freshening their look and their assortment mix to make sure they remain relevant and competitive. “It’s a great time to invest in the existing store base while there are fewer new store opportunities to take advantage of,”
he said.

Fast fashion

Target’s approach to being more of a one-stop shop for its guests isn’t limited to expanding its grocery complement. Roughly 20% of the merchandise in Target stores is apparel, accessories, and footwear.

“We continue to focus on speed-sourcing capabilities to ensure we can bring fast fashion to a market of our scale,” said Steinhafel. “We have the right kind of relationships in the right countries and the infrastructure capabilities overseas to further shorten the lead times in our apparel area.”

As part of a its raw materials strategy, Target is streamlining which mills it goes to for fabric and is committing to more pre-approved fabrics prior to a new fashion season. This strategy results in lower costs, shortened lead times, and increased transparency with vendors.

“It’s a step many of the fast-fashion retailers already do, and we saw it as a logical extension of our business model,” Steinhafel said.

Growing companies often find themselves unable to maintain speed-to-market as they become larger and more bureaucratic. With a goal to do the exact opposite, Target recognized mill streamlining was a key way to deliver better costs and greater speed.

“Whether it’s fabric, zippers, buttons, trim, or details in packaging, we want to be more thoughtful about how we work with fewer large suppliers to improve the quality and shorten the lead time,” Steinhafel said.

Expect more. Pay less.

To differentiate its go-to-market strategy, private label merchandising is at the top of the list for Target, but so are designer relationships, especially emerging designers, in both home goods and apparel. The corporation has exclusive signature national brand relationships with Converse and C-9 by Champion, for example, and the list of names continues to grow.

“In apparel, we have a three-pronged strategy,” said Steinhafel. “Signature national brands, designers, and our differentiated exclusive private brands.”

The concept of having signature national brands and designer relationships has been a focus for Target for the past five to six years. And although there are more opportunities today, the corporation continues to be selective in who it partners with.

“Signature national brands and designer relationships are an important part of our image and significant profit contributors to the corporation,” said Steinhafel. “We’ve gained marketshare in apparel consistently year after year as we’ve expanded apparel and put it front and center in our stores.”

The economic challenges of the last 18 months have brought negative same-store sales to most Target locations, but the corporation has continued to open new stores and gain share—a significant part of its long-term strategy. In addition, the high number of retail bankruptcies has brought increased industry consolidations, and many of the smaller regional independent companies have gone by the wayside.

“We’ve been a share gainer while smaller companies have been share donors,” said Steinhafel. “The specialty store environment, mall-based operators, and department store operators have donated share, and we’ve been the beneficiary of a lot of that share.”

In a way, the downturn in consumer spending has actually benefited Target, but what makes the corporation unique is its adherence to focusing on quality, not just price. “Our apparel and home departments are more aspirational than our competitors,” said Steinhafel. “Our goal is to deliver a higher level of fashion and quality because we think there’s more to value than just being the lowest price.”

And with its corporation-wide alignment securely in place, it’s a message all 350,000 Target team members carry forward each day as they go to work. “The roots of the corporation are founded in being a superior trend merchant and delivering outstanding value with a great store experience,” Steinhafel said. “We must continue to be progressive, innovative, and forward thinking and anticipate where our consumers are headed, not where consumers have been.”