Target Embraces Reality of Rising Digital Customer Engagement

For Target and its CEO Brian Cornell, they’ve been on a multi-year journey to redefine the future of the company. Part of that future is, undoubtedly, digital customer engagement−a rising piece of Target’s customer loyalty puzzle.

“Today, there is total transparency,” Cornell said during the company’s recent fourth-quarter earnings call. “Ease and speed are paramount. The shift in channel preference is real and only gaining momentum.”

Cornell pointed to an “incredibly challenging environment” where many of its competitors are “aggressively rationalizing their assets,” closing stores, exiting markets, and cutting costs “just to keep their heads above water. We all know the industry shift has begun to accelerate, and we believe that rate of acceleration will only continue to increase. But what I want to talk about today is how, at Target, we are embracing this new reality, how we are building a company that’s poised to lead and grow market share in digital and in our stores. And how we are laser-focused on mastering execution and accelerating our efforts to become an even stronger competitor.”

Cornell illustrated the progression of digital sales at Target:

2014 Black Friday weekend: More than 93 percent of transactions took place in stores, less than 7 percent digital.

2015 Black Friday weekend: Digital sales reached almost 10 percent of total sales.

2016, Black Friday weekend: Digital sales climbed to 14 percent, more than double what Target did in 2014.

“We realize, on more and more shopping journeys, our guests are looking to save time by using digital and we only expect that trend to continue,” Cornell said. “But I know and you know, this channel shift comes with additional challenges. Today, that essential base Target run doesn’t completely translate to the new digital world. Traffic drivers are fundamentally different and guests behave differently too. Put a guest in the store, they are looking for inspiration, they enjoy discovery, they enjoy shopping. But very often, a visit to, it’s far more transactional. One item at a time, log on, check out, as fast as possible friction-free. There’s an incredible opportunity for us to do more. But we also need to make sure we don’t impede efficiency or complicate the overall experience in the process.”

The combination of changing behaviors and expectations is causing stress in Target’s business model, Cornell noted.

“But the reality is, this is where the guest wants to be,” he said. “We will never be successful if we dig in and insist they shop the way their parents did. So, as I said before, given these realities, we are embracing the change. We are reimagining and repositioning our assets to deliver even greater competitive advantage going forward. It’s moving from a very linear model, supplier, distribution center, store-to-guest to creating a smart network.”

The challenge ahead for Target, Cornell added, is about “continuing to understand how consumer preference and expectations are evolving. Anticipating where they are going, what they’ll want before they have to tell us. Finding new ways to engage at every stage in every occasion. Offering and clearly communicating compelling value in every interaction at every touch point and building a new Target that’s uniquely positioned to compete and win, delivering on two pillars of market share growth, one digital, and one physical.”

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