Retail Reimagined: A Look at Target’s Digital Roadmap
How Target Built an Omnichannel EmpireAdd bookmark
2013 was a pivotal year for Target. On the one hand, a widespread data breach compromised the personal and/or payment information of upwards of 110 million Target customers resulting in a 40% drop in profits for Q4 of that year. On the other hand, this disaster inspired them to invest in its digital future.
Since then, Target has evolved from a legacy brick & mortar big box retailer saddled with outdated technology into an agile, omnichannel retail innovator. Furthermore, Target’s strong digital backbone enabled it to not only weather the COVID-19 storm, but thrive in it. Here’s a look at how.
To spearhead Target’s digital transformation efforts, they brought on a new CIO, Mike McNamara who had previously served as Tesco’s CIO in Europe. When he came on board, Target had upwards of 10,000 IT workers, most of which were outsourced, responsible for a high volume of rapidly shifting projects and priorities. So, as a first move, McNamara completely restructured Target’s IT workforce and streamlined it’s priorities.
Now, according to an article in Born Digital, Target in-sourced it’s IT staff and now has roughly 4,000 full-time IT employees, many of which are software developers and engineers. Furthermore, they’re narrowed their focus down from hundreds of IT projects to a select few high priority digital initiatives.
However, unlike some other retailers, Target did not want to become just another Amazon clone by sacrificing the in-store experience to bolster the online one. Instead it wanted to create a seamless, all-in-one experience that fully integrated digital and physical channels. In other words, it wanted to deliver a top-notch omni-channel retail experience.
Building the Omni-Channel Experience
To pioneer the omni-channel retail experience, Target announced it would invest $7 billion to transform its supply chain along with its digital and in-store experiences in 2017.
As Target CEO Brian Cornell explained after the fact during a 2020 call with investors, “What would it take to combine the hallmarks of the physical experience, discovery, inspiration and service with the ease, convenience and personalization made possible through digital? In an age of AI and robotics, where do people fit in? When everyone's talking endless aisles, what's the role of curation? In an on-demand world, could digital ever become more than a drag on the P&L?
There were lots of theories, but nobody had the answers. And there certainly wasn’t a playbook. So, we started writing our own. We set off on a different path. We used our purpose as a guide and the rest is now history. Today, nobody's doing what Target is doing, nobody. Target is a category of one.”
To enable the creation of the omni-channel experience, Target’s in-house software development team built one single enterprise platform to support both its commerce channels - digital and physical.
In addition, they’re also leveraging cutting-edge technology, such as machine learning (ML) and robotics. Using predictive analytics, Target is able to forecast demand and in-store traffic. As Mike McNamara explained to diginomica, “We've always had reasonable statistical models in the past, but ML just allows us to become increasingly sophisticated. I don't know an exact number, but probably about 20% of our replenishment products are through some new ML models that we've created.
We use ML everywhere. We use ML to tag photographs that go onto our website that says ‘This is a bikini top,’ ‘This is a bikini bottom.’ It's used for little things as well as for big things. So, I can see ML being fairly ubiquitous in its application, just to improve existing processes or to solve some very, very big problems.”
2020 - The Year these investments paid off
For many retailers, the Coronavirus pandemic was the final nail in the coffin. For others, such as Target, it presented an opportunity for growth and reinvention.
Due to digital-enabled services such as curb-side pick up and delivery, Target’s sales have soared during the pandemic. In fact, sales through Target's curbside pickup service Drive Up increased 500% in Q4 compared to the same quarter a year ago, while sales fulfilled by its online delivery service Shipt shot up more than 300% year-over-year and sales through same-day services grew by 212% in the quarter. All in all, according to Target CEO Brian Cornell, the company gained $9 billion in market share and 2020 revenue increased by $15 billion -- more than the 11 prior years combined.
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