Future Focused: Target Successfully Navigates Unprecedented Change and Ignites Industry-Leading Growth

Future Focused: Target Successfully Navigates Unprecedented Change and Ignites Industry-Leading Growth

With its on-trend merchandise, fast fashion, and amazing deals, Target is the perfect place to shop, socialize, and spend a Saturday afternoon. But more than that, Target is an example of a company that’s been able to thrive despite massive disruption across its industry. Today, thanks to the company’s agile execution and future focused strategy, Target endures as one of America’s most beloved consumer brands. 

Target is a retailer like no other. With its on-trend merchandise, fast fashion, and amazing deals, it’s the perfect place to shop, socialize, and spend a Saturday afternoon. The company is a best-in-class performer with more than 1,900 brick-and-mortar locations and an end-to-end eCommerce experience that includes same-day fulfillment, in-store pick-up, and curbside delivery. But more than that, Target is an example of a company that’s been able to thrive despite massive disruption across its industry. Today, thanks to the company’s agile execution and future focused strategy, Target endures as one of America’s most beloved consumer brands. 

Their success, however, was far from given. Not long ago, many observers believed that brick-and-mortar retail was dead. Amazon and other eCommerce upstarts were the future. Target — along with dozens of other big box retailers — struggled to adapt quickly to the changing behavior of consumers who were shopping online more and more. As retailers like Macy’s, J.C. Penney, and Gap shuttered hundreds of stores, analysts thought Target should do the same. 

But Target chose not to copy the playbooks of old retailers or new digital competitors. Instead, they created a different model. In the face of disruption, they laid out a bold, future focused plan that reimagined their brick-and-mortar locations as distribution hubs for same-day delivery. They then invested in making those stores showpieces of great customer experience. They created a raft of proprietary offerings. And they launched a unique customer loyalty program. Over the course of five years, Target’s new strategy enabled it to beat its peers, and the overall market, achieving industry-leading growth in revenue, earnings, and share price. 

Future Focused: Target

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Target Ascends, Then Takes a Fall

During the nineties, Target took its differentiation to the next level as a class-to-mass retailer, attracting millions of consumers with hip designer items at affordable prices. Shoppers and shareholders benefitted. Target nearly tripled its sales and increased its net earnings ninefold.  

But that strategy began to fade in the early 2000s. Rather than embracing digital transformation and the widespread innovation that was required, Target spent years optimizing its old model through continued store expansion. In 2013, while Amazon was growing rapidly, Target embarked on an ill-fated expansion into Canada that quickly racked up millions in losses. That same year, the company suffered one of the largest data breaches in history,exposing Target’s failure to build a robust digital infrastructure. Sales started to slide. Stores looked faded. And the stock price plunged. Target had lost its “Tar-zhay.” 

Facing Down a Retail Apocalypse

Target was facing challenges from every direction when CEO Brian Cornell took the reins in 2014. As an array of woes chipped away at Target’s profits, Cornell knew he needed to act quickly. He shut down Target’s Canadian operations, a financially painful and publicly embarrassing decision. He exited the pharmacy business and instead partnered with CVS. And he brought in the company’s first Chief Technology Officer to revamp its digital infrastructure.  

As dramatic as these changes were, Cornell knew they were only buying time. Amazon was systematically devouring retail on all fronts. Then, in a move that surprised many, it acquired Whole Foods Market. Suddenly, brick-and-mortar operations were no longer a barrier to Amazon’s growth. Target leaders knew they needed a future focused strategy to evolve their stores and digital channels to recapture consumers. But how? 

Working with Jump, Target leadership began the process of transforming the company into a more purpose driven, customer centric, future focused organization. Jump’s insight-driven approach to strategy enabled Target to identify its unique strengths, understand its customers, anticipate trends, and make strategic decisions to reignite its competitive advantage.  

Who Are We? Finding Target’s Lost Cachet

To start, Target needed to give the market and its customers a clear reason why it deserved to exist in a world now dominated by Amazon. Any successful strategy for navigating the future would have to leverage what made the company great. 

Jump helped Target understand why people came to Target in the first place and how that secret sauce applied to its strategy. Conventional retail merchandising divided categories between “want” items and “need” items. In contrast, Target guests reminded the team that its magic was in the weaving together of wants AND needs. Guests came to Target for their essentials and aspirationals — making a Target run to stock up on toilet paper gave them an alibi to spend a few minutes browsing for a new skirt or seasonal tablecloth. 

Beyond refocusing on its key differentiators, Target needed to identify its big why. Why should Target exist in the first place? Too often, purpose exercises devolve into group brainstorms to find a catchy tagline. Cornell and his team sought something deeper. Surely there was a single underlying idea that both motivated their team members and attracted their guests. That higher purpose would be critical to any transformation. 

With that goal in mind, the team undertook a process based in rigorous social science. They conducted in-depth, personal conversations with execs, support staff, and front-line team members. The process uncovered a common psychological thread: an unwavering belief in families and a realization that joy is something everyone deserved — and Target delivered that in everyday ways. Jump guided Target in articulating that purpose through a single compelling statement: To help all families discover the joy of everyday life. 

More than a list of assets and capabilities, Target now had a clear understanding of who they were when they were at their best. That framework became the filter for hard choices the company would need to make. A greater purpose would also be a rallying cry for teams to make the significant shifts that would be necessary for transformation. 

What’s Going to Happen? Creating a Future of Seamless Digital and Physical Retail

Growth starts with an appreciation of what makes you great, and Target had clarity on who they were. But that alone wouldn’t be enough to fuel the company’s transformation. Target leadership needed a perspective on what the future of retail might look like — along with a vision of how they could stay true to their purpose and appeal to new generations of guests in any potential future.

Target’s continued ability to capture consumers via high-quality experiences would require deep insights into a new generation of shoppers. Most companies rely heavily on customer data to make strategic choices about what consumers want. But data can be limiting. Data tells you what happened, but not why it happened. Yes, Target had a lot of data on guest purchasing behavior. But to understand why customers shop the way they do, and how they might in the future, leadership would need to build first-hand empathy with the real consumers behind the numbers.

To experience emerging shopping behaviors through the eyes of their guests, Jump led Target leaders on customer immersions to hear their candid opinions and comments. Simultaneously, Jump facilitated a series of scenario planning sessions around important issues such as the future of digital, the future of privacy, and a post-COVID world to position Target for long-term success.

Based on these insights, Target leaders identified four themes that would likely play out in any future scenario. These themes enabled the leadership team to develop a clear point of view on how the industry could be reimagined and how Target’s role within it needed to evolve. 

How to Win? Fulfilling Consumers’ Unmet Mindsets and Needs

With a point-of-view on how Target needed to evolve to reshape its role in the retail industry, company leaders focused on figuring out what that meant for the organization. Many companies spend all their time looking to their competitors to identify new products and services. But this approach limits organizations to the creativity of their peers. Instead, Target focused on identifying white space opportunities by developing deep insight into their guests’ unmet wants and needs.

“We needed to know what would make a difference for someone, what would fill a gap that nothing else could fill in their lives,” said then SVP Carolyn Sakstrup.

Through insight-driven research and future focused planning with Jump, Target identified white space opportunities in a variety of areas, including its product offerings, its digital and in-store experience, and its loyalty program.

Developing differentiated products:

Jump helped Target leverage consumer insights to build a differentiated assortment of products in all areas of the store, including sporting goods, electronics, furniture, and apparel.

As Sakstrup noted, this kind of deep understanding laid the groundwork for a lineup of popular Own Brands customers could only get at Target, such as Threshold Furniture, Hunter Books, and Cat & Jack kids’ clothing.

When we launched the new Cat and Jack line, we learned there was a lot of unmet need in adaptive clothing for kids with special needs. We learned certain features like labels and seams can be annoying to some children with certain conditions, so we reversed the seams to make the jeans soft on the inside. Even though we were serving a very small market, there was a positive halo around that investment that made people love the brand, even if their kids didn’t need adaptive clothes.

Enhancing the customer experience:

Target reinvested in physical stores and transformed its digital strategy to elevate the guest experience both online and off. They made stores easier to navigate, with a unique mix of products that met guest needs and wants and turned shopping into an experience instead of an errand.

Physical stores enabled the company to get things to the customer more quickly, and in more ways, than Amazon could by using them as last-mile capabilities. In addition, Target created a single inventory system that combined both in-store and e-commerce purchases to drive efficiency and introduce new services (buy online, pickup in-store or curbside). This turned out to be prescient during Covid.

Deepening customer loyalty:

Using deep customer insights, Target introduced one of the most successful loyalty programs in a generation by connecting with their consumers’ unmet needs. Unlike most loyalty programs, “Target Circle” is not based on status or free stuff. It connects Target customers with the “joy of everyday life” by enabling them to generate immediate savings and giving them a voice in directing Target’s charitable efforts. Guests loved it. In fact, 80M of them signed up in year one alone.

Target Grows Faster Than Its Retail Peers and the Broader Market

In just a few years, Target’s future focused investments paid off for investors and consumers alike. In 2014, Cornell took over a Target with troubling sales trends. Fast forward to 2022, and Target is thriving. The company’s Own Brands are exploding. Comparable store sales are strong. And it’s regained favor with customers as it continues to help families discover the joy of everyday life. Most importantly, the company’s fiscal performance between 2017 – 2021 outpaced both its retail peers and the broader market:

Target Fiscal Performance 2017 – 2021

Lessons From the World of Omnichannel Retail

At a time when Amazon was the byword for retail’s present and future, Target’s future focused, store-led investment strategy seemed counter-intuitive to Wall Street. But Target’s mindset and bold plan allowed them to reimagine their role with guests, accelerate change, and lead the future. Their remarkable transformation story reveals some major lessons for businesses of any size in any industry:

Focus on the why.

Don’t just articulate what you do right now. Figure out why you do it and why that wins in the marketplace. Identify your secret sauce and focus on a singular strategic intent, starting with your purpose and values. Use that as a filter for strategic choices and future focused investment decisions.

Think 5 to 7 years out.

Don’t obsess about the current state. Develop a POV on where your industry is headed. Envision multiple scenarios for what happens next and how you can thrive no matter what. Then, map back to the investments you need to make now that will pay off down the road, regardless of what future comes to pass.  

Ground in data AND insights.

Don’t copy what competitors have already done. Leverage both data and firsthand empathy to glean fundamental insights about your customers that no one else has in order to create value for them in a way no one else can.

Dev Patnaik

CEO

Dev Patnaik is the CEO of Jump Associates, the leading independent strategy and innovation firm. He’s a board member of Conscious Capitalism. Dev has been a trusted advisor to CEOs at some of the world’s most admired companies, including Starbucks, Target, Nike, Universal and Virgin.

Michelle Loret de Mola

Director of Strategy

Michelle is an expert at bringing together clear strategic direction and compelling experiences to drive change. Michelle advises Future Focused leaders across industries.