In the decades of retailing before 2000, retail was relatively stable. There were actually categories of retailing based upon retail models and distinct customer segments. When I first started teaching IMS Retail University three decades ago, we started with a foundation in "classes of trade." There were distinct types of retailers such as CE (Consumer Electronics) or "Gamers." And then there were the "mass merchants," who had the big box stores with huge assortments, who appealed to the masses on low price. But, even within the mass merchants there was "Tar-zhay." They had "cool" brands that especially appealed to women in search of chic. Whoa, what happened to Target? Are there any "loyal" shoppers anymore?
Why this is important: In the age of omnichannel consumers, there are no distinctly unique lines of distinction as consumers shop anytime everywhere. Retailers must make some critical decisions on where, and how, to differentiate ... or die.
In the good old days of retail, Tar-zhay owned the female consumer
I had the pleasure of raising three daughters in the heyday of big box mass merchants. With EDLP (Everyday Low Pricing), Walmart became the category killer that put many grocery stores and specialty retailers out of business. The alternative to Walmart's hypermarkets were Target stores. My teenage daughters (and their mother) were the primary consumer segments of Target - women ages 18-54.
Target literally "owned" the female consumer. And my daughters contributed to the cause by literally bringing weekly hauls of merchandise home in those white bags with the red bull's-eye logo. Females affectionately called their favorite store "Tar-zhay" - a French pronunciation signifying "luxe" and unique stuff for less.
What made Target so appealing to women?
- They had well-designed stores that were clean and well lit;
- They were consistently plan-o-grammed so they were easy to shop;
- The floor staff kept things neat and tidy, clothes folded and well merchandised;
- Target had branded merchandise (e.g. Michael Graves) you couldn't buy elsewhere;
- Target also had a great selection of branded merchandise (especially cosmetics);
- Target had all of the essentials ... food, clothes, consumables, plus personal items; and
- Target had unique items ...
cool chic for cheap that you couldn't get at Walmart.
Target's past success -- differentiation for female customer loyalty
As retail entered the age of "big box" and "always" low prices, Target proved to be very successful at differentiation. They stood out by focusing on "what women really wanted." Target even went so far as to conduct video graphic research to discover that moms bringing kids to stores wanted bigger carts, safety for their kids and wider aisles that were well lit and easy to navigate without bumping those big carts into others.
In addition to a positive shopping experience geared to suburban moms with minivans, Target created specialty items that created a sense of luxury that a mom could afford on a family budget. Target even hired famous fashion designers like Isaac Mizrahi to design exclusive items for Target. Women could buy a crockpot designed by Isaac for Target. It looked cool, and you couldn't buy one like it at Walmart.
The big red Target bull's-eye lost its luster with Wall Street and moms
Target was on a roll marketing to women, literally rivaling the retail goliath Walmart in many markets. Target's success emboldened them to be one of the major U.S. retailers to cross the border to aggressively open stores in Canada. So, what happened?
In short, a lot of things happened to both Target and retailing in general:
- The economic downturn hit the U.S. in 2009, and consumers shifted their shopping to cheaper alternatives. Even Walmart has lost core customers to the "Dollar Stores."
- There is a powerful new competitor called Amazon, that will not only ship you clothes, but diapers, to your door at cheaper prices.
- To compete, Target abandoned many of the trendy and chic brand names and emphasized rock-bottom prices, especially in groceries.
- In 2013, Target suffered a massive data breach that rocked the confidence of the core mom shoppers who had their credit cards hacked.
- Target's focus got diluted in trying to figure out how to compete in the Canadian market, and now has closed all 133 Canadian stores, losing an estimated $5 billion.
Should Target double down on past success, or reinvent its strategy?
Sarah Halzack just published great article in The Washington Post on "
Target's New Strategy." The interesting question for Target is whether they can find a differentiation strategy that works in a world now filled with omnichannel consumers.
In a review with investors, Target executives described their core customers of the past as "boomer moms living in the suburbs who drove minivans and wanted it all." Can Target go back and create relevance and value for this core group of women?
According to Target's new CEO, Brian Cornell, Target has big plans to revitalize the bull's-eye:
- Target is not abandoning the minivan driving suburban moms
- But Target is looking to expand its base, especially with young Hispanic shoppers.
- Target is focusing on key categories, especially the baby department (young moms!).
- Target is looking beyond the suburbs and building more CityTarget & Target Express.
- After shedding Canadian stores, Target will invest $1 billion in supply chain and tech.
- Target is pushing for style, baby, kids and wellness categories to be "distinctive."
- Target plans to reposition grocery department to focus on "healthy and fresh."
Can a retailer still focus on products and target "loyal" segments?
Target's iconic bull's-eye is a symbol of its past success with differentiating a value proposition for women, especially moms and families. The strategy was focused on targeting a specific segment, and then developing a store, merchandising and differentiated products that appealed to that core segment. Will it still work today?
The question is whether Target can still paint a bull's-eye on specific consumer segments? The even larger question for Target, and any bricks-and-mortar retailer today, is... are any consumers loyal to retail brands anymore?
Target is yet another example of the product-centric retailer that was highly successful pre-2000. Today, those minivan moms shop anytime and anywhere ... and get more choices and unique styles available online, from e-tailers like Amazon as well as traditional retailers now online.
The bull's eye might be seriously off target in a consumer-centric world
Can Target make stores attractive? Yes, a good selection of preferred products in well-run stores is always a compelling place to start. Consumers still prefer to shop in stores, IF there is a positive experience.
Will it be enough to create overwhelming loyalty of female consumer segments that Target desires to attract? Today's female consumers are more omnichannel, more social and less brand loyal.
Will Target survive? It's still "differentiate or die," but on what?
It is not the strongest, largest ... or even the previously successful retailers that will survive. It is those most adaptable to change. Most of Target's strategies are very product centric. They are focused on historical successes of customer segmentation, and Target brand loyalty.
From an omnichannel perspective, Target's one strategic bright spot is their $1 billion investment in technology and supply chain. Hopefully that investment is targeted to catching Target up with competitors (e.g., Walmart), who are rapidly becoming omnichannel, with many small suburban stores which also serve as distribution points.
Bottom line: Target will NOT survive by focusing its bull's-eye on past pillars of success focused on differentiated products for females, who are omnichannel today.
Successful differentiation today is not product centric. It depends upon delivering a premier experience across all channels ...
when, where and how the consumer prefers to shop, and ultimately make a purchase, and where they prefer delivery that given day.
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