Target CEO Brian Cornell began his talk on the stage of ShopTalk in Las Vegas this week telling the audience, “The future of retail is digital,” a gutsy statement from the head of a public company who currently gets less than 5 percent of its $75 billion in revenue from digital.
Cornell described his vision of how Target intends to make its network of 1,800 stores a strategic asset to win in the digital world, and how they are planning to invest billions of dollars to do it.
Cornell’s vision is the Target store as a “Hyperlocal, shoppable distribution center.” With a store within 4 miles of 50 percent of the U.S. population and they envision a competitive advantage in “last mile” delivery including same-day delivery, as well as a convenient “pick up” center for items ordered online. Interestingly, although Target’s current digital revenue is only $3.5 billion (nothing to sneeze at but a tiny fraction of their total scale), Cornell says over 50 percent of digital purchases are picked up in the store (and as much as 80 percent during holiday peaks).
The design of Target’s new stores offers two different entrances, paralleling the envisioned dual personality in Target’s digital future. One entrance is the more traditional, browsable retail experience. The other entrance is more of a lounge and is specifically designed for customers who are picking up orders placed online.
The first store based on this model will be opening later this year in Houston, Texas with as many as 500 more stores being similarly remodeled over the next 3 years. Target also envisions an increase in small format stores such as the new Herald Square location they are opening, in order to expand its distribution reach and convenience into more neighborhoods.
I’m not making a prediction as to whether this big bet by Target will be the answer for their future, but I applaud the vision and scale of the omnichannel transformation they are envisioning. Companies that make the shifts necessary to win in the digital age will be those that take a hard look at their assets and competitive differentiators in the current and future digital world and reshape their value proposition as a digital one. Target is taking aim at an Amazon weakness, in this age of immediate gratification it still takes a couple days to get your free Amazon delivery in most markets. With Target, if you want to return something, Cornell points out, “We’re just down the street.” Go Target.