Target's efforts to draw shoppers back into its stores are beginning to pay off. Five consecutive quarters of increases in sales suggest that shoppers are returning to the Minneapolis-headquartered discount retailer responsible, in part, for pioneering the concept of putting affordable, often designer collaborative fashions under the same roof as groceries and toiletries. That's good news for Target, which has experienced some significant setbacks in recent years, including a major debit and credit card hack that impacted sales for several months and a shifting focus on groceries, instead of the cheap-chic fashion, such as its Go International line (for which it has paired with Proenza Schouler, Richard Chai, Jonathan Saunders, Thakoon, Rodarte, and Zac Posen, among others) or its larger designer collaborations, such as the much-anticipated and enormously successful one it released with Italian design house Missoni. These collections, according to the Associated Press, are what Target’s customers crave and are much of what is helping Target win back many of the shoppers it has lost.
The sales improvements come as Target continues to implement the turnaround plan it initiated in 2014, when it welcomed CEO Brian Cornell, who, interestingly, comes from a background almost completely devoid of fashion. Prior to accepting his role at Target, he served as CEO of Safeway, Sam's Club, and PepsiCo, respectively.
As part of the plan, Target has phased out it less profitable Canadian operations and revamped its management team. Despite such changes, analysts suggest that the key to luring shoppers back lies in concrete adjustments to the brand's stores, themselves. For instance, Target has been updating its fashion selection – tapping brands/designers like Adam Lippes, Todd Snyder, Lilly Pulitzer, and Eddie Borgo, who debuted collections for the box big retailer in 2015, and Jean Paul Gaultier, the Paris-based brand that will release a collection with Target this year. Moreover, Hillary Kerr and Katherine Power, the founders of fashion website, Who What Wear, are teaming up with the retailer for a series of collections. According to a statement about the impending partnership: “The first week of every month, Who What Wear for Target will refresh with new styles and designs. Each collection will fuse Hillary and Katherine’s foresight with input they’re gathering from their followers and Target’s guests.” This collab marks the first of its kind for both parties.
Target has not stopped there, though. The Associated Press notes, the discount retail giant "has overhauled the fit of its jeans, resulting in at least 10 percent sales growth. It has also launched a plus-size collection for women, Ava & Viv — the first exclusive fashion line it has created in over a decade — with plans to launch exclusive beauty and children's wear collections this year.”
Moreover, the retailer has worked to up the ante on its presentation, as well. It has been adding mannequins to display a portion of its garments, as opposed to its longtime practice of merely hanging them or folding them on shelves. This has paid off; sales of clothing on mannequins at 1,400 of its stores were up 30 percent before the holidays. Additionally, Target has hired in-house experts for most of its 1,800 locations, who are charged with consistently refreshing stores with the best, most appropriate merchandise.
And all the while, Target executives say they have managed to keep prices low despite such cosmetic and core changes, which is absolutely imperative. In order to do so, "the chain says it's better using its large scale to negotiate prices with suppliers. For instance, for basics like sheets and towels, Target offers longer-term commitments with manufacturers, ordering for two years instead of every quarter, a move that cuts costs,” per the AP.
Experts say it is imperative that Target distinguish itself from other discounters, such as Wal-mart, the largest retailer in the U.S. (Target clinched the second place spot). It seems the retailer is aiming to do so by way of its re-introduction of designer collaborations. Meanwhile, it must also work to prevent being perceived as too pricey for its mainly middle-class shoppers. This is certainly where the hard work will come in.
For the year that ended January 2014, Target's annual profit fell 34 percent to $1.97 billion - in part due to fallout from its massive debit/credit security breach. According to analysts, the company's results have already rebounded since it started its plan to revamp. Target is expected to post net income of $2.99 billion for 2015, up 22 percent from the prior year's $2.45 billion. Revenue is expected to be $74.17 billion, up 2 percent from last year's $72.6 billion.
We will have to wait and see what other big name design brands the retailer taps in furtherance of its new re-found focus on fashion, but if the past tells us anything, it could be big. As previously indicated, its collection with Missoni was one of its most successful to date. Maybe Target will tap another iconic brand like that. That would certainly drive plenty of traffic!