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5 Ways Target is Pushing Customer-Driven Innovations in Omnichannel, Grocery

Retail Dive | January 23, 2023

NEW YORK — Target wants the retail industry to know it’s brought its “Targét” touch to grocery and omnichannel. Ease, joy and affordability are the pillars of the retailer’s framework for differentiating itself to customers, Chief Growth Officer Christina Hennington and Chief Food and Beverage Officer Rick Gomez said during the National Retail Federation’s conference in New York earlier this week.

While Target a few years ago lagged other large national retailers in areas such as grocery assortment and having a loyalty program, the Minneapolis-based retailer has not only worked to catch up, but now, according to Gomez, sees its innovation in food and beverage and omnichannel as providing competitive advantages over traditional grocers and other mass retailers. That innovation ties into Target positioning itself at the intersection of affordability, one-stop shopping and experiential retail, both in-store and online, with “affordable joy,” Gomez noted.

Taking a ‘holistic’ approach to value

With the challenging economic environment and the looming threat of recession, Gomez said Target is tapping into different components of value to appeal to consumers. Gomez highlighted Target’s private brands as a prime example: Good & Gather, which launched in 2019 and is now a $3 billion brand, offers high-quality, better-for-you options at an affordable price while Favorite Day, which debuted in 2021 and is growing by double digits, focuses on indulgence. To provide value through ease, Gomez spotlighted Target’s dinner solution meal bags, which cost around $15 and include the ingredients needed to make family-favorite recipes: “It’s been a huge success.”

Using assortment as a differentiator

Target’s multi-category offerings provide one-stop shopping that people can’t get at most grocery stores, Gomez said: “We’re a $20 billion grocery business. It’s a big business for us — bigger than a lot of regional grocers — but it’s only 20% of our mix.”

Drilling further into assortment advantages, Target has a three-pronged approach to its food and beverage business that sets it apart from conventional grocers: own brands; national partners who can offer exclusive, limited-time items; and small, emerging brands often from BIPOC founders and women, Gomez said. Target is growing its private brands portfolio. “Our own brand portfolio is actually growing 2X [compared to] national brands, and I think that’s our guests saying, ‘We are looking for value during these tough times,’” Gomez said.

Gomez noted that Target supports emerging brands to help them scale their business at Target “and beyond.” For example, the retailer worked with the McBride Sisters wine brand to launch varietals: “They’ve gone on to other retailers and they’re selling in other places, but we’re really proud that we were able to partner with them in the beginning,” Gomez said, adding that the brand’s Black Girl Magic wine has been “hugely successful” with Target shoppers. Hennington also pointed to the commitment Target made in 2021 to invest more than $2 billion in Black-owned businesses by 2025, which the retailer said in May it’s on track to achieve.

While Target, like many other food retailers, has had to stay focused on supply chain availability for the last couple of years, increased innovation in food and beverage that provides “newness” is an area Gomez is especially excited about. Health and wellness, in particular, is one area where Target customers are leading edge and interested in trying new things, Gomez said, pointing to its vegan, plant-based line launched with Tabitha Brown at the start of this year.

Experimenting with store formats

Target has completed over 1,000 remodels to date and is rolling out different store formats to meet different markets, Gomez said. In March 2021, the retailer promised to invest $4 billion annually in remodels, new stores and online fulfillment enhancements. Last year alone, Target pledged $5 billion to scale its operations in 2022 with work on its digital, fulfillment and distribution capabilities.

For example, the retailer has dozens of small-format locations, which it heavily leaned into in recent years, in Manhattan and paired with college campuses, Gomez said. Last spring, Target unveiled its first net zero energy store, which is located in Vista, California, around the same time Amazon announced its pursuit of a net zero carbon certification for a new Amazon Fresh in Seattle.

Boosting omnichannel services

Target has long had a strong reputation for its in-store shopping experience, but the retailer is positioning itself as an omnichannel retailer that blends in-store and digital, Gomez said, noting customers are intertwining different shopping methods.

The pandemic prompted Target to transform its business overnight, Gomez said, by expanding same-day services and allowing shoppers to get dry and frozen grocery, alcohol, fresh produce and more in a four-minute drive-up pickup. Target has also brought its widely popular in-store Starbucks cafes into its curbside pickup service and has also expanded its pickup and same-day delivery options for alcohol.

Creating a customer-focused loyalty program

Collecting data is important but Target learned the hard way it needed to build a customer-first loyalty program in order to successfully glean shopper insights.

In its next attempt to create what is now Target Circle, the retailer made personalization the centerpiece, allowing members to unlock offerings that are tailored and relevant to them and also letting them vote for which local charities in their communities they want Target to make donations to. With more than 120 million members currently, the program is one of the largest and fastest-growing loyalty programs in the U.S., the Target executives noted. Hennington said that Target is connecting its loyalty program data with its retail media network, Roundel, to further boost its customer experience and also deepen its vendor relationships.

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