TARGET’S REBOUND
would largely exit women’s swim-
wear. Within nine months, Target
had launched its own swimwear
brand; the retailer says it’s now
the top U.S. seller of women’s
bathing suits. Target has also
revitalized short-term collabora-
tions that have included such
designers as Isaac Mizrahi, Lilly
Pulitzer, and Vineyard Vines—
which don’t yield much revenue
but do get people into stores.
Managing all these initiatives
puts new demands on workers.
Target has raised employees’ pay,
pledging its lowest hourly wage
will jump to $15 by late next year,
in part because of how much
more involved the typical job has
become. Target is training workers
to have expertise in particular
merchandise categories, notably
apparel and beauty products,
rather than be a “general athlete.”
That approach echoes the classic
department-store model—an
interesting twist, given that Target
was originally founded as an off-
shoot of a Minnesota department-
store chain. “What Target has
become is the modern department
store,” says Neil Saunders, manag-
ing director of GlobalData Retail.
Target was late in rolling out
its own e-commerce platform,
and in that category, it lags far
behind Walmart and Amazon.
Last year, digital sales grew 36%
but reached only $5 billion, not
enough to crack the top 10 U.S.
e-tailers, according to eMarketer.
In 2017, Target bought two
delivery tech startups that have
allowed it to offer same-day
delivery. But rather than compete
with the giants head to head,
Target has aimed to build tight
coordination between stores and
digital shoppers.
Target’s longer-term plan is to
minimize the number of orders
filled via delivery from expensive
distribution centers. Mulligan,
the COO, notes that when you
deliver to an online customer
from a store, you can save 40% of
the costs of handling an item at a
distribution center and then ship-
ping it. If the customer picks up
an item at a store, you save 90%, a
big deal in a low-margin business.
(If that customer buys some addi-
tional items in the store, so much
the better.) This is where modern-
ized stockrooms really matter.
And on this front, too, Target’s
campaign is paying off: Stores
now play a role in 80% of online
sales, which means more digital
revenue flows to the bottom line.
All of Target’s approaches to
retail come together in its small
urban stores. There are now about
100 such outlets, up from 30 in
February 2017. But they punch
above their weight: Mulligan says
that while the typical suburban
Target generates about $300 in
sales per square foot annually,
city stores do almost triple that.
More important, they get Target
into markets where Walmart
stores don’t compete and create
e-commerce distribution hubs in
more affluent urban areas. The
logistics of supplying city stores
are more complex: The new Tar-
get in Manhattan’s Herald Square,
for example, keeps relatively little
spare inventory and instead gets
five shipments a day, while a big
suburban store might get five
shipments a week. But Mulligan
is adapting that “just in time”
nimbleness from the urban stores
to their suburban cousins—hop-
ing to make the whole chain bet-
ter at responding to demand.
t
HIRT Y MONTHS after Cor-
nell’s big announcement,
Target’s shares trade at
40% above their 2017 lows, and
Wall Street forecasts revenue
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