Target Chief Maps Aggressive Biz Transformation

After seven months at the helm of Target Corp., chairman and CEO Brian Cornell has mapped out a series of sweeping changes to transform the retailer’s business and restore its “cheap chic” luster by reasserting its "cultural leadership to build unparalleled guest affinity."

Following a "thorough, strategic review of our business, coupled with a careful evaluation of the changing retail landscape," Cornell revealed the planned elimination of several thousand jobs, primarily at the company’s Minneapolis headquarters, where it employs 13,000. Aiming to create a headquarters team that is "more agile, efficient and guest-focused," the moves, which are expected to net some $2 billion in savings, will be invested in technology, new "flexible" store formats and overhauled product selection in several key categories, among which includes a more focused grocery presentation and encouraging shopping across both digital channels and its stores.

While Cornell emphasized that groceries will not be a "signature category," despite accounting for more than 20 percent of its in-store business, they'll be “repositioned to deliver a more compelling and appealing shopping experience" with a new mix of food in the grocery aisles of its 1,795 stores, including more fresh food, greater penetration of local products, and developing a recipe portal to help customers plan healthy meals.

"Overall, we lack a clear positioning (on food)," said Kathee Tesija, EVP and chief merchandising and supply chain officer, and "that has to change," she added.

Style, baby, kids and wellness are deemed the four priority categories which Target will invest in heavily “with a focus on newness and differentiation,” Cornell noted.

At the heart of the retailer’s differentiation strategies is "stronger merchandising authority and a shopping experience that is centered on ease and inspiration, with mobile serving as the front door to all of Target."

A breakdown of Target’s four-pronged transformational roadmap, according to the company, includes:

• A channel-agnostic approach to growing its business, driving a total Target experience across stores, online and mobile. Guests who shop Target in stores and online generate three times the sales compared to guests who shop in stores only. Continued enhancements in technology, supply chain and inventory management will create a shopping experience that is rooted in ease and inspiration…to help spur Target’s continued annual growth in digital channel sales of 40 percent, as well as contribute to a total projected sales growth of 2 to 3 percent and comparable sales growth of 1.5 to 2.5 percent in 2015.
• Prioritizing style, baby, kids and wellness with a focus on newness and differentiation. In 2014, the four categories accounted for more than a quarter of Target’s sales.
• Grocery will be repositioned to deliver a more guest-centric experience by tailoring its assortment and offering more locally relevant products, with demographics, climate, location and other guest-led factors driving merchandising decisions. Additionally, Target will strengthen its data and analytics and technology capabilities to deliver more personalized digital experiences, loyalty programs and promotional offers. 
• Target’s store opening plans will increasingly focus on new, more flexible formats like TargetExpress and CityTarget, which cater to guests in rapidly-growing, dense urban areas. Throughout 2015, the retailer will open eight TargetExpress locations across the country. In addition, the company will continue to open the right stores to fit each community and test new layouts in its general merchandise stores.
• Cost savings of $2 billion over the next two years will fuel Target’s growth and drive profitability. These savings will be realized through operations, technology and process improvements; supply chain and sourcing efficiencies; and corporate restructuring. The restructuring will be concentrated at Target’s headquarters locations and focus on driving leaner, more efficient capabilities, removing complexity and allowing the organization to move with greater speed and agility, including the establishment of centralized teams based on specialized expertise and the elimination of several thousand positions over the next two years.

This year, Target expects to invest between $2 and $2.2 billion in capital expenditures, including a $1 billion investment in technology and supply chain.

“While we’re in the early days and there’s no doubt that transformation can be challenging, we’re taking the steps necessary to unleash the potential of this incredible brand,” said Cornell. “I’m encouraged by our early momentum, and am confident that by implementing our strategy, simplifying how we work, and practicing financial discipline, we will ignite Target’s innovative spirit and deliver sustained growth.”