I literally go to Target for everything.
I really love Target. The whole store just makes us calm.
I love everything about Target.
I'm at Target right now.
It makes me so happy just to be in the parking lot.
At the top of 2020, Target secured its spot as the seventh-largest
retailer by sales in the U.S.
With 1,880 stores across all 50 states, the company brought in $78.1
billion in revenue in 2019.
Target has revolutionized the entire shopping experience, from the width
of the aisles and the weight of the shopping carts to the smell of
Starbucks coffee and the placement of dollar bins.
The tactics are paying off.
Despite the pandemic, profits rose more than 80% year over year in the
last fiscal quarter. This whole crisis has really upended how consumers
are shopping, where they're shopping and what they're shopping for.
Here's how Target keeps its shoppers hooked.
Expect more, pay less.
That's been Target's slogan since the mid-90s.
The first Target store opened in Roseville, Minnesota on May 1st, 1962.
That year, Target advertised itself as a store that is fun to shop and
exciting to visit.
It's kind of gotten that nickname "Targét" that you hear a lot among
customers because it's tried to bring something a little different with
its unique brands and its variety of slightly higher priced but still
affordable merchandise.
These claims hold true for today's shoppers.
I think I do have a bit of an unhealthy obsession with Target.
It's like a one-stop shop for food, for my baby's items.
Our love for it has only increased because it's like the one thing that
still kind of sparks joy.
Target is at the center of cheap and chic, which differentiates the brand
from its competitors.
Dr. Terry Wu, a neuroscientist with over 17 years of marketing
experience, says the brain likes both familiarity and novelty.
Too much familiarity is boring.
Too much novelty is overwhelming.
Target strikes a balance between old faithful products and new trendy
merchandise like apparel and home decor.
Target has a well-deserved reputation for stocking fashionable apparel
products at reasonable prices, something which has endeared the retailer
to many middle-class consumers, especially U.S.
women, who tend to view Target as a more stylish alternative to Walmart.
Even though we don't shop at Walmart, I know that Walmart is significantly
cheaper. I think that's the draw of it for so many people.
Target price points are pretty good.
Target began collaborations with high-end designers in 1999.
From Isaac Mizrahi to Lilly Pulitzer, from Marimekko to Zac Posen, Target
delivers designer goods for cheap or "cheap chic," as it's often called.
The hype around these limited edition collaborations fosters anticipation.
Retailer Target launching a new line designed in conjunction with HGTV
stars Joanna and Chip Gaines.
The Who What Wear collection that they do, the partnership with them, I
have — half of my wardrobe is from Who What Wear now.
I kind of dragged my friends to go to like five different Targets just to
find this one item.
The brain reacts to anticipation of a reward very strongly.
Dopamine is a reward chemical inside the brain.
When we have the anticipation of a reward, the dopamine level surges and
that surge of dopamine actually drives us to go back to Target to buy
again, and again. This is how they build loyalty.
This is actually exactly how casinos actually bring customers to the door
again and again. We were able to create Black Friday in April.
We had hundreds and hundreds of guests lined up, all excited to get in
there and shop that collection.
This dopamine rush breeds loyalty and excitement, which in turn drives
profit. Private labels are a huge component to Target's success.
They have one of the best private label strategies of any retailer in the
United States. They're the envy of even Amazon when it comes to their
private label strategy in apparel.
I think they are well-positioned in apparel.
In-house women's wear label A New Day accounts for more than $1 billion in
annual sales. In-house kids line Cat and Jack accounts for more than $2
billion in annual sales.
There's a reason Target brought Starbucks into its stores.
This aroma of the coffee can trigger happy feelings.
Scent has a very strong influence on our emotions, judgment and
decisions. The nose and the "emotional brain" or limbic system are only
one synapse away.
So smell is the most direct access point to our emotions.
Coffee has another upside too.
Caffeine. They're more excited.
They're going to buy more. They're going to stay there longer.
They don't get tired quickly.
Target's bright red and white design is another sensory strategy.
Target has to created a very inviting environment.
The aisles are wider, the shelves are shorter, the space has less
clutter. Some prefer the look to one of Target's biggest competitors,
Walmart. I like Walmart.
I like Target. I think because Walmart's floors and stuff, a lot of them
are, they're older stores and they need to be updated more to be light,
bright. More like Target.
There's not really an equivalent to Target and we're not really Walmart
shoppers. It's like horrible fluorescent lighting that makes you feel
like you're in a horror film.
Yeah, I'm just not a fan of Walmart.
No. Hard pass.
The room is well lit.
You can see things very easily.
And also when you need help, you can spot Target employees very easily by
their red shirts. They have been able to elevate what's at the end of the
day, just a general merchandise, big box retailer.
It's open. It feels really spacious.
It's just sort of like a feast for the eyes.
Everything's pretty organized.
It's very bright, white with the red.
This doesn't hurt the eyes.
And don't discount the power of a dollar bin.
Right when you walk in our Target, there's the dollar bin aisle, which is
like dessert because there's always something I never knew that I needed
that is right there that I absolutely have to get.
It's a subconscious priming impact on the brain telling you when you
shop at Target, you can expect more but at the same time, you're not
going to spend too much money.
You earn the freedom to spend more than you want.
The carts. They're made of super light plastic, making them easy to
maneuver. When we push the cart around and it feels easy, it
subconsciously tells us, "Shopping here at Target is very easy."
Doctor Wu also says that when the cart isn't heavy, it signals to the
brain that you can continue shopping.
And finally, strategy number five.
Logo redesign.
Did you even notice?
it used to be all uppercase letters and now it's all lowercase.
Why do you spend so much money on something so trivial?
Uppercase brand names looks more masculine and aggressive.
Lowercase brand names look more feminine and friendly.
You have over 60% of Target shoppers are women in the United States.
They're more affluent than the average Walmart shopper.
They tend to have a higher average household income than the average
American. When Covid-19 hit, shoppers' habits changed.
Apparel and décor sales slumped.
Instead of people shopping for typical merchandise, they were looking for
very key categories like groceries and essentials.
Think toilet paper and hand sanitizer.
They were selling more merchandise that was lower-margin, like gallons of
milk or cartons of eggs, and fewer items like clothes that have higher
markup. Even though Target stores were open, many customers felt safer
shopping online. They were spending a lot more on labor.
They needed staff to be sanitizing shelves, stocking shelves, and in
exchange for the extra risk that employees were taking on, Target gave
them additional pay and that led to about $500 million of added expenses,
Target's CEO said at the time.
Though staying open presented new challenges, Target benefited from its
essential business status.
A lot of the stores that were open, like Walmart and Target and Home Depot
and Lowe's, all reported really strong sales.
Even learning how to keep stores clean and have employees wear masks and
try to encourage customers to wear masks.
They had a head start with that.
Acquiring Shipt in 2017 set the company up for success during the
pandemic. It helped Target fulfill more online and delivery orders in
2020. In the second quarter, Target reported really what can only be
called eye-popping numbers across the board.
Their profits jumped by more than 80% year over year.
Extremely impressive.
I think the key things for me were really the breadth of performance, the
fact that they saw strength across multiple categories, the growth in
their digital business, the growth in offerings like buy online, pickup
in-store or curbside.
And, you know, the earnings flow through was actually quite strong as
well. CEO Brian Cornell shared a few strategies for this wild growth.
First, Target essentially turned stores into fulfillment centers, kind of
like Amazon.
Second, pickup and delivery service.
In the second quarter, curbside service grew over 700% from a year
earlier, and Shipt grew more than 350% year over year.
Third, Brian Cornell attributed the profit jump to a wallet shift.
So a lot of those families were taking money from a canceled vacation or
flight they would have taken and putting it instead towards new clothes
or backyard furniture or other small indulgences during this time that
they may have put off. We bought out every kind of lawn game that they
have. We have bocce and cornhole and Kan Jam and we've wiped out the
puzzle section and we've wiped out the game section.
This isn't the first time Target has rebounded from a significant setback.
In 2013, a massive credit card breach spurred a steep decline in profit.
And we saw that consumers were concerned about their data potentially
being made public. That did happen to correspond with a period of time
where Target was struggling a bit.
Right. That's about the time they were kind of unsuccessfully trying to
expand into Canada.
It seemed like there was not a great consumer message around the time
about that. However, Target managed to bounce back from the 2013 breach
and regain customers' trust by establishing new security measures and
issuing more secure chip and PIN cards.
But this is the same area where just last night the Target was looted and
a grocery store was being looted.
Just months into the pandemic, Black Lives Matter protests broke out in
Target's hometown of Minneapolis, a few miles down the street from where
George Floyd was killed by police.
A Target store was looted and burned.
Target promptly closed a number of stores to protect employees and
committed $10 million to advance social justice and help rebuild
Minneapolis. Target seems to only want to be on the right side whenever
it benefits them.
Because up until the point of their Target superstore being burned down in
Minneapolis, there hadn't been much of a peep from them regarding the
black community as well as supporting them.
In turn, when the CEO stated, "Oh, it's OK that they burned it down, I
can build another one.
Everything is replaceable." It's just kind of embarrassing and upsetting.
Another protest took place inside a Target store in Dallas.
One reason for the public's reaction came from reports that Target made
donations to the Minneapolis Police Department and the LA Police
Department.
This put Target in hot water.
A big part of this is acknowledging any actions in the past.
You have to address any any shortcomings you had in the past.
It will feel more genuine in the long run if they invest in artists of
color to provide artwork for people's walls and clothes for people's
bodies of all types and pillows for people's homes.
Right? In a statement to CNBC Make It, Target said, "Inclusivity is a
deeply rooted value at Target and we've had an ambitious diversity and
inclusion strategy for many years for our guests and team.
We know that having a diverse workforce and inclusive environment not
only creates a stronger team, but also provides the perspectives we need
to create the products, services, experiences and messages our guests
expect." Despite all of the uncertainties, Target's still managed to
bring in a ton of customers in the second quarter.
CEO Brian Cornell talked about how Target has gained $5 billion of market
share and 10 million new customers online in the first half of the year.
It's trying to get more people to keep coming back.
And the question will really be, once the pandemic starts to fade, will
people continue to be Target shoppers?
Target's long-term trend, they're acquiring customers that will stick with
them beyond this crisis.
The reliability and consistency of the Target brand will likely keep the
company going. Its ability to innovate while maintaining a familiar brand
is its biggest asset.
Familiarity, novelty and balance are what will keep it on top.