Blog

Michael Lowenstein, Ph.D., CMC Thought Leadership Principal, Beyond Philosophy

Target Corporation has had a number of challenges over the past few years, from abruptly closing all of their Canadian stores to a 2016 earnings shortfall, plummeting stock price, and a rather negative sales outlook for 2017 (first quarter EPS was 6% lower than first quarter 2016). The company is forecasting a single digit sales decline for the full year.

So, how does Target intend to bring about a performance turnaround? The company is taking aim at a revised store experience for customers. Target has invested $220 million to remodel and renovate 28 stores in North Texas. According to Target spokespeople, the remodels will emphasize “inspiration, discovery, style, and ease”. Among the changes:

– Top-to-bottom overhauls, with new design/style elements and product presentations (based on what customers said they liked about Target’s new stores)

– Two entrances, one that promotes exclusive and seasonal items, the second for Online Order Pickup and quick purchases, such as for groceries (see below)

– More attractive merchandise presentations, including “updated mannequins and fixtures in apparel, home and beauty”.

– Easier in-store shopping flow, with aisle modification designed to encourage customers to browse through apparel, accessories, and other products.

– Updated, more engaging grocery department, with “grab-and-go food and beverage options”, with fresher products, more choice, and greater convenience

– Target’s Online Order Pickup located at front of store, for faster, more efficient, check-out

– Wine and beers shops inside the store

In all, Target plans to fully redesign 110 (out of their 1,800) stores in 2017 and 500 in the next three years. This is a significant corporate initiative, with cash investment running into the billions of dollars.

Apart from design, product, and other store elements, Target is also investing in technology which will enable store employees to more efficiently search inventory and also take payment from mobile point-of-sale devices.

While all of this reads well, the planned modifications are the kind of inside-the-dots, rather conservative approaches most would expect from a mass discount retailer in search of customer experience enhancements. Here’s my question, and my key issue. Beyond these “inspiration, discovery, style and ease” changes, how is Target, in parallel, evolving its store culture to generate more interaction with, and commitment by, employees?

I’m an active grocery and discount department store customer. Among stores I frequent are Target, Wegmans, Trader Joe’s, and Costco. Where employees, and their commitment to customers, are concerned, the Target store experience will (likely) never equal Wegmans, Trader Joe’s, or Costco, but, Target could certainly take some lessons from the store cultures of these successful retailers.

Because Target will now be looking to place increased focus on groceries, I’ll use Wegmans,Trader Joe’s, and Costco as my reference points. Rochester, New York-based Wegmans, has succeeded in creating an almost cult-like bond with its customers. The company, which is well-known for its food selection and quality (you can even custom blend your own trail mix), and for its empowered, well-trained and proactive employees, has been named the best supermarket chain in America by Consumer Reports; and, yes, it certainly might be the best retailer on the planet.

1. Wegmans. Wegmans has constructed and sustained a stakeholder-centric culture where the customer truly comes first, and customer experience is the barometer by which it measures success. For example, the retail grocery industry (and the discount department store industry) is normally associated with fairly passive and reactive customer service; but, like Whole Foods Market and Trader Joe’s, Wegmans’ employees readily make themselves available to help customers (who Wegmans refers to as “guests”) find what they want, and often make recommendations for what they think the customers would like. Do Target’s store employees do anything like that? If so, I’ve never heard of anyone experiencing it, nor have I.

Speaking on a personal level, at Wegmans shopping is not a chore and is often pleasurable. Stores are attractively laid out, almost like an old-world open-air market. There are tea bars, multiple eat-in options, and chef-prepared breads and meals to take home. When shopping there, rather than rush through, the inviting atmosphere makes it enjoyable to take my time, relax and experience what the store has to offer. Better for me, and better for Wegmans. Will the reimagined Target store experience do that?

Wegmans also does other things to set itself apart, and in positive ways. From a merchandising and reputation perspective, they are seen as active members of the communities in which they operate. They were one of the first chains to purchase from local vendors. Does Target do that? Don’t think so.

The chain supports local causes and events. Wegmans represents conscious capitalism, in the truest sense of the term, further building the bond between the enterprise and the customers, many of whom consider Wegmans ‘their store’

They also offer new technologies, such as the interactive recipe and shopping list feature on their web site, and an iPhone app that helps shoppers organize their purchase list on an aisle-by-aisle basis in the store – all to enhance the shopping experience. Is Target including that in their technological upgrades? Don’t think so.

2. Trader Joe’s. Shopping at Trader Joe’s is truly a branded customer experience. Each store has a light-hearted South Seas island theme throughout, including the Hawaiian shirt garb of store staff. Employees at their Monrovia, CA headquarters often served as a ‘tasting panel’, and they help determine which new products will be stocked in the stores; and, with tasting locations at each store, customers get to give the final stamp of approval, or rejection, by ‘voting with their taste buds.’ This is also a device for bonding with customers at the store level. Even though Trader Joe’s stocks about 3,000 items, compared to the average supermarket’s 30,000 items, sales per square foot are typically two to three times that of chain supermarkets.

What has made Trader Joe’s so successful — apart from wage and benefits packages, and opportunities for advancement, well above most companies in the supermarket industry – is the sense that employees are the brand, its communication style and fun, upbeat culture. Employees are selected and trained to multitask, and everyone seems to enjoy what they do. They deliver a great branded customer experience, and they stay (voluntary turnover is only 4 percent) because they enjoy working there and because the organization is thriving.

3. Costco. Going to Costco is not an especially exotic experience, and yet shoppers often describe their visits as “fun.” Costco pays their employees a lot more on average than most retailers, enabling the company to keep turnover much lower than other retailers. Employee behavior, often identified as smiling, friendly and helpful, actively contributes to positive in-store customer experience; and this helps enable Costco to maintain focus on their original strategy – low margins, low overhead, big profits.

So, in Target’s revamped store customer experience experiment, which will soon be rolled out as a major test and downstream strategy, is the store culture, and linkage between customer experience and employee experience as Wegmans, Costco and Trader Joe’s do so well, also being included? Is this strategy on-target or off-target?