BRAND - Target Responds with Agility and Speed

Target Pushes Back with New Brands, Remodelled Stores and New Services. 

Target CEO Brian Cornell, the former CEO of Sam's Club, arrived to lead the Minneapolis retailer just four years ago. He has piloted the company through a crisis field of icebergs that would have felled many leaders. Cornell has been a proponent of moving faster and becoming more agile.

The rapid shift to online, as well as other changes to shopping habits, has been a huge challenge for many retailers. A large number of store closings and bankruptcies took place in the market last year. Target’s sales, which had been in a slump, are beginning to lift. The company saw growth of 3.4 percent in November and December. 

“We put a premium on speed and agility, but we also want to make sure we’re making the right choices,” Cornell said during an interview at Target’s bustling Nicollet Mall store, which has a sleeker look following a $10 million makeover. 

“We now have more of the proof points in place and we can accelerate. I think there’s been a great sense of urgency for four years now,” he said. “The difference is we’ve been very disciplined. I use the term ‘surgical’ in testing and validating before we roll things out.”

The Q4 Financials Reports have drawn criticism from some analysts. Cornell and other top Target executives revealed more of their strategic road map at the analysts meeting this morning. The CNBC report earlier today discusses this criticism in some detail.

“They have an ambitious agenda,” said Mark Miller of BlueView Investment, who has been following Target for two decades. “They’re starting to see payback from some of their initiatives. The challenges haven’t gone away, but they’re now able to speak more to” how they’re addressing them.

While the retail outlook is looking much brighter this year, Cornell said it will still be difficult for retailers who aren’t investing in their stores, employees and online infrastructure to make it. 

“There’s really no place for poorly run and highly leveraged retailers in this environment,” he said. “I think we’ll continue to see some of those retailers unfortunately close stores and potentially move to bankruptcy and liquidation. But for well-run retailers, I think there are significant opportunities in front of us.”

In December, Target bought Shipt and will add home delivery along with curbside delivery to Target stores this year. Shipt features one hour delivery from local grocery stores to your home. The ability to add delivery will help Target compete with the biggest threat to Target's sustainability, Amazon Prime.

Target Share Price

ACQUIRE - Target buys Shipt for US$550M Cash

Target ramps up same day delivery to compete with Walmart and Amazon

According to TechCrunch, Target's acquisition of the Birmingham-based online grocery delivery service Shipt, marks the largest known acquisition of a venture-backed company in the state of Alabama.

According to an article in RetailDive today, Daphne Howland expects Shipt, to be a wholly owned Target subsidiary, operating independently under CEO Bill Smith. The company was founded in 2014 and operates in more than 72 U.S. markets. The online service enlists a network of more than 20,000 "shoppers" who pick out customers' orders and deliver them for an average of $20 per order. 

Back in August, Target acquired Grand Junction, a San Francisco based transportation technology service founded the same year as Shipt (2014). According to Ms. Howland, the purchase of these two operations is based on two essential ideas: that retailers know their inventory really well and that a slew of local and regional delivery companies already exist. The key has been to match those two things up, via technology. In both cases, Target is accelerating its same-day services by acquiring technology, infrastructure and talent from established players.

Sucharita Kodali, Vice President & Principal Analyst at Forrester Research, published her prognosis for the Target acquisition of Shipt, in Forbes magazine yesterday. She continues to see issues with adoption of paid delivery services and expects to see the free delivery service offered by Walmart as well as Amazon Prime, as services that will be hard to beat.  

Why this is important:
It is clear that retailers are acquiring emerging companies that already exist with expertise, management talent and ecosystems which allows the retailer to gain traction quickly. Building your own technology and infrastructure is too costly and time consuming to be an appropriate competitive response in this environment.

BRAND - Gillette responds to Harry's and Dollar Shave Club

Gillette is rapidly moving to a more cost effective shave

In a "very different approach", Gillette said it will introduce lower-cost razors and beef up its disposable shaver collection.

Gillette will start selling new three-blade and five-blade razors in January that will cost less than $10. It will also start selling disposable razors that will feature the Gillette cooling technology.

This new approach appears to be Gillette's latest response to subscription competitors who have been very disruptive. Until now, Gillette had focused most attention on its expensive Fusion razors, marketing itself as a top-tier brand. That strategy and the rushed to market copycat, Gillette Shave Club, hasn't paid off.

Gillette's pricey razors opened the space for innovation in men's grooming

When Procter and Gamble purchased Gillette for $57 billion in 2005, then the largest acquisition in the company's history, Warren Buffett called it "a dream deal." However, a pack of innovative subscription services including Dollar Shave Club, Harry's and ShaveLogic, have chipped away Gillette's market position. "Gillette was poorly positioned to defend (market) share as consumers shifted to cheaper razors," said Joe Agnese, CFRA Research analyst to CNN.

According to Macquarie Research, Gillette now controls about 56% of the market meaning Gillette's share of the U.S. razor market has dropped 11% in the past two years. Sales at Procter and Gamble's grooming unit, which includes Gillette, slumped 6% in the most recent quarter. Yet Procter and Gamble had not launched a new razor line in 12 years. Their strategy seemed to be upgrading the Fusion series while betting on brand power to lure consumers to its higher-priced blades and slogan 'the best a man can be'.


WHY THIS IS IMPORTANT:
Unilever's purchase of Dollar Shave Club for a billion dollars and Target's partnership with Harry's is easier to understand in the light of the Gillette experience. It now seems evident that brand power is expensive and may not be successful for maintaining brand position in the face of innovation. Clearly there is a paradigm shift occurring that doesn't favour legacy brands of the large and powerful consumer directed organizations and retailers.

ACQUIRE - Target Invests $75 Million in Online Startup Casper

Target has become the latest large brick and mortar retailer to take major steps to strengthen their ecommerce profile and appeal to young consumers.

The company recently invested an estimated $75 million in online mattress startup Casper, whose “bed-in-a-box” strategy is tailored to millennials.

The deal will have Casper products exclusively in Target stores starting June 18th.

“At Target, we strive to bring guests amazing new products and exciting partnerships,” says Jill Sando, senior vice president, merchandising, home. “We love Casper’s brand and innovative products—and we really love the idea of giving our guests a simple way to get a better night’s sleep, with everything they need in one convenient place.”

A Recode report, citing unnamed sources, stated Target had initially attempted to purchase the company for $1 billion.

The Casper partnership follows deals Target brokered - with Bevel and Harry’s, two subscription-based online brands - that also resulted in exclusive deals to be the only mass retailer to carry their products.

“The cool factor Target had ten years ago is today captured by these niche brands, and Target is hoping to capture some of their luster with these investments and partnerships,” said eMarketer analyst Yory Wurmser.

These steps by Target are in concert with another large retailer, and one of their major competitors, Walmart.

Walmart recently acquired Jet.com followed by ShoeBuy and Moosejaw - all strong online retailers whose acquisitions have resulted in increased sales and revenue for the retail giant.

Brick and mortar retailers are faced with a rapidly growing global trend in mobile and ecommerce, along with a young customer base growing up in an environment dominated by the Internet of Things.

They are responding by purchasing or partnering with businesses that have a large online subscriber base, outstanding online customer service, and/or strong online retail sales, to help maintain a competitive edge.

Pet Retailer Alert - Showrooming Trend Not Just Best Buy

A TechCrunch article developed with data from Placed.com, indicates the trend toward visiting brick and mortar stores to gain knowledge of a product which is ultimately purchased online (commonly called 'showrooming') is not just affecting electronic stores like Best Buy. The report shows stores selling pet supplies, home products and toys like PetSmart, Walmart, Home Depot and many others are also at risk because of this new trend.

'In store price matching by brick and mortar stores to protect from being undersold by online retailers may be a useful strategy'

The article highlights data from Placed.com, a new application which uses 'location analytic'  data from smart devices to place consumers 'in the aisle' of major retailer stores while comparing these visits to online purchasing trends. This relatively new expansion in 'shopping' data, illuminates the 'showrooming' trend and mentions strategies retailers are using to manage it.

'Equipping the in-store team with price comparison software so they are aware of the real-time competitive environment may also be a useful strategy'

The trend toward price comparison software like Amazon’s Price Check, eBay's ShopSavvy and RedLaser barcode-scanner as well as buyVia, PriceGrabber, Decide and Google Shopper are also mentioned in the article. However, the authors note that Placed.com will need agreements to share data from these applications to make analysis useful. Bricks and mortar retailers may find the information in this article of assistance to develop service and pricing strategies which convert the 'showrooming' visitor to a found sale. 

'Converting a visitor to a customer is the job whether online or offline'

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