The room was no bigger than a walk-in closet, a tight fit for Target CEO Brian Cornell and the team of executives and support staff who were sharing it. Sketchy air circulation made the room feel even more claustrophobic. And its cable-TV feed didn’t work—which meant the gang couldn’t tune in to see just how badly Wall Street talking heads were freaking out about Target’s stock.
The chamber, a “greenroom” at a former church turned event space on Manhattan’s Park Avenue, was an uncomfortable place to share an uncomfortable moment. It was Feb. 28, 2017; the executives were waiting to address Target’s annual investor meeting. About an hour earlier, Target had pressed the “Send” button on a news release announcing a make-or-break revival plan for the massive but struggling big-box retailer.
In the release, Target told the world it would sacrifice short-term profitability to make its prices more competitive with those of Walmart and Amazon. It would junk and replace some of its best-known brands. It would overhaul its e-commerce and raise wages for a large cohort of its 320,000 employees. And—most unnerving of all to cautious investors—it would undertake hundreds of extensive store renovations. Total price tag: $7 billion over three years.
Cornell and his leadership team were convinced that they had the right plan to reverse Target’s severe sales skid. But when their PR crew finally rigged up an iPad to stream CNBC, it became clear that few others agreed. A bemused anchor surmised that there must be a typo in the press release: What brick-and-mortar retailer would spend billions on stores in the Amazon era? Shares were down in premarket: They would go on to fall 14% that day, as investors concluded that Target’s profits would take a hit for years.
And when the Target crew finally escaped the stuffy greenroom and faced their investors in person, the reception didn’t get any more sympathetic. “I finish out that morning,” Cornell recalls, “and the final question is, ‘Brian, how long do you think you’ll be in this job?’ ”
Investors had plenty of reason to be skeptical. Target was already reeling, suffering four straight quarters of comparable-sales declines. E-commerce, which Cornell had vowed to jump-start when he became CEO in 2014, was growing at barely half the pace he had promised. Some of the hip-on-a-budget store brands that had earned the chain the mock-highbrow “Tarzhay” moniker had grown too stale to lure new shoppers. Analysts had begun to fear that the chain was slipping into irrelevance, as traditional department stores had done. And a dismal 2016 holiday season, in which Target’s sales declined while Walmart’s soared, put an exclamation point on Target’s woes.
The way Cornell’s team saw it, these problems shared a common root: Target stores themselves had been better suited to retail in 1962, when the chain was founded, than they were in the 21st century. Many looked shabby after years of insufficient upkeep; few had the infrastructure to support e-commerce well. (It wasn’t unheard-of for customers picking up online orders to find themselves killing time at cash registers while employees ran around the store collecting their items off shelves.) The holiday debacle was the final straw, convincing the C-suite that it was time to bring out the heavy artillery and fix its stores. No matter how badly Target needed to grow again, Cornell says, “we couldn’t go down that path until we built some of those capabilities.”
店面的改善对于零售商的重振来说至关重要，这一理念听起来是一个很简单的常识。但塔吉特股东在2月那天的惊慌心里说明，眼下盛行的投资者强烈意愿恰恰与高管的想法背道而驰。像梅西和彭尼这样的百货店以及像Gap和Bed Bath & Beyond这样的专业连锁店共计已经关闭了数百家店面，为的是通过线上业务的增长来弥补实体销售额的下滑。此举受到了其股东的支持，因为电子商务成本通常对利润没有多大的影响。
The idea that store improvements would be crucial to a retailer’s revival may sound like simple common sense. But the alarmed reaction from Target shareholders on that February day indicated just how strongly the prevailing winds had been blowing the opposite way. Department stores like Macy’s and J.C. Penney and specialty chains like Gap and Bed Bath & Beyond have collectively closed hundreds of stores, seeking growth online to make up for declining brick-and-mortar traffic—moves their shareholders have backed because e-commerce expenses are typically less of a drain on profit.
Target, in contrast, saw the potential in doubling down on what makes a retailer a retailer: stores and merchandise. By the end of 2020, Target will have remodeled 1,000 of its 1,800 stores; it’s also rolling out smaller, brand-new locations in dozens of higher-end city neighborhoods. Changes visible to shoppers include fancier presentation of apparel (think mannequins sporting “looks,” instead of stacks of shirts on shelves) and better-lit, sleeker checkout areas. Just as important, behind the scenes, is the retooling of backroom space to facilitate e-commerce—which helps Target earn more on its digital sales.
The outcome? Two and a half years after its big bet spooked shareholders, Target is posting ticker-tape-parade-worthy results. The company has notched eight straight quarters of comparable sales increases. Target’s total first-quarter sales hit $17.4 billion, 8.7% higher than the same quarter in 2017. That’s phenomenal growth by retail standards, and the “comp” growth rate has outpaced that of most of Target’s rivals, including Macy’s, Kohl’s, and Walmart. And while operating profit margins initially shrank slightly under the $7 billion plan, total earnings remained steady and recently began to tick up again.
Just as important to Target’s future: Its products are buzz worthy once more. Two of the brands Target has launched since 2016 already reap $1 billion or more in annual sales, and it has won substantial market share in areas like swimwear, toys, and men’s clothing. All the momentum suggests that Target has recovered its long-absent swagger, says Charlie O’Shea, an analyst at Moody’s: “What Cornell and this team have done is to bring it back to Tarzhay.”
康奈尔此前曾经在百事集团供职多年，是塔吉特首位非公司内部产生的首席执行官，而且是临危受命，其中包括大规模的数据泄露以及加拿大扩张的惨败。借助多项引人注目的举措，他在上任初期着实火了一把。康奈尔将塔吉特年营收40亿美元的药品业务销售给了CVS Health。公司推出了“创新实验室”，旨在加速塔吉特的科技更新换代。新Cat & Jack儿童服装线品牌在年轻母亲中大受欢迎，很快成长为一项20亿美元的业务。
Of course, Target executives know what it’s like to celebrate prematurely. In September 2015, a little over a year after he became CEO, Cornell had basked in a standing ovation during a companywide staff meeting at the Target Center arena in Minneapolis. He was grinning with satisfaction as he stood below a Jumbotron that displayed a graphic showing Target’s shares rising—and Walmart’s stock falling—over the preceding year.
Cornell, a PepsiCo veteran who was Target’s first CEO from outside the company, had taken the job during a particularly bad spell, one that included a massive data breach and a catastrophic expansion into Canada. His early days were a hit, however, thanks to several splashy moves. Cornell sold Target’s $4-billion-a-year pharmacy business to CVS Health. The company launched “innovation labs” meant to quicken Target’s tech metabolism. And the new Cat & Jack children’s apparel brand was a runaway hit with young mothers, quickly becoming a $2 billion business.
But those successes masked some deeper structural problems. Target was being outflanked by Walmart and others in retail’s price wars—particularly in apparel, where most of its older brands no longer had enough appeal to draw customers away from cheaper rivals. Target also stumbled in the culture wars: After the company spoke out about allowing transgender shoppers and employees to use the restrooms of their choice, boycotts in relatively conservative markets like Dallas ate into its sales.
Bigger headaches lurked behind the scenes. Target wanted to bolster its e-commerce with “ship from store” operations, using store inventory to fill online orders. But inventory management was so bad that chief operating officer John Mulligan had to pause an early pilot project. Target had long struggled with being out of stock on popular items—and it’s hard to ship an item, or invite a customer to retrieve one, if you don’t have it in the store.
This was exactly the kind of lackluster execution that Cornell’s renovation plan was designed to fix. But like other retailers, Target faced a bind with investors: Wall Street wanted brick-and-mortar giants to do more to counter Amazon but often dumped shares when a retailer committed money to do so. (In 2015, Walmart announced plans for big e-commerce investments and higher wages—and immediately suffered its biggest share drop in 25 years.)
Little wonder that Cornell’s $7 billion announcement turned stock charts red. The price tag was greater than Target’s net profit for the two previous years put together, with no obvious payoff in sight. Target’s shares had already been sliding since Cornell stood under that Jumbotron; by the time the stock bottomed out in June 2017, it was down more than a third.
要实现这一点，塔吉特必须让沉闷的店面鲜活起来。公司在实施大多数店面的翻修时采用了渐进式、“店面装修，敬请见谅”的方式，因此公司无需直接关闭店面，减少了对现金流的影响。地板上铺的油毡被拆除了，摆上了靓丽的百货展示柜。模特亦是如此。在任职初期，康奈尔曾经告诫经理们要按照百货店的规矩行事，使用模特来展示其服饰。他回忆道，问题在于：“店员不知道该怎么使用这些模特。”事实证明，那些在折扣零售有着丰富经验的员工不知道如何最大化利用这些类人的销售道具。塔吉特花了数千万美元聘请了大量的“视觉陈列师”，这样，模特就能够发挥最大的效用，而且还可以带来其他收益。像Goodfellow & Co男装产品线的服装品牌随后发展壮大，原因在于服装的展示颇为吸引眼球，而且搭配了建议的配饰，而不是像彭尼或西尔斯百货那样把衣物叠着堆放在货架上。
包括Universal Thread女装、Threshold（家居）和Heyday（电子产品）在内的自有品牌是塔吉特的秘密武器。他们与其他公司生产的塔吉特独享产品一道，贡献了30%的营收，以及很大一部分利润。分析师欧西解释说，像尿布和清洁剂这类低价产品可以带来人流，但一旦顾客到了店面之后，“你就得向他们兜售Cat & Jack这种自有品牌，因为它的利润更高。”
总的来说，康奈尔2017年的计划包括推出超过24个品牌，并取消一些品牌。康奈尔一年前从诺德斯特龙挖过来的主要商户马克·特瑞登长期以来一直认为，强有力的品牌可以让那些失去新鲜感的顾客成为回头客，并吸引更年轻的顾客。不管出于什么原因，塔吉特似乎开始重新获得年龄优势。Prosper Insights & Analytics称，塔吉特顾客的平均年龄为42.5岁，家庭收入77610美元，而沃尔玛的平均年龄为46岁 ，家庭收入64202美元。
塔吉特缩短了新品牌的上市时长，此举有助于公司占据先机，将其他步伐较慢的零售商甩在脑后。在玩具和体育用品领域，塔吉特将Gymboree、Sports Authority和玩具反斗城等破产竞争对手的用户揽入怀中。三年前，L Brands授权品牌维多利亚秘密宣布，公司基本上将退出女性泳装市场。在9个月后，塔吉特宣布推出其自有泳装品牌，这位零售商表示，公司目前在美国女性泳装销量方面名列前茅。塔吉特还重启了短期合作，其中包括艾萨克·米兹拉伊、莉莉·普利策和温亚德·万斯等设计师。虽然此举对营收的贡献不大，但却能够带来客流量。
As he tours a renovated Target store in Westbury, N.Y., Cornell points out signs of the redesign plan in action. The location has lower shelves, which reduce the sense of clutter and improve sight lines so shoppers can see farther into the store. Wood “grower bins” in the fresh food area give the grocery aisles an upscale, farmers’-market flair. And brightly lit display cases draw the eye to “grab and go” snacks. It’s all designed to make the Westbury location a place shoppers want to go rather than have to go. “Foot traffic is the most important barometer of Target’s health,” Cornell says.
Today, every big retailer seeks the sweet spot at which in-store and online shopping feed business to each other. At many retailers, digital business simply cannibalizes in-store business, especially when those retailers neglect the in-store experience. “Everybody wanted to act more like a tech company,” Kantar analyst Laura Kennedy says of the industry. “Then they realized: ‘We are retailers and have to figure out how to sell stuff better.’ ”
In that spirit, Cornell wanted Target to focus on its core business and prioritize initiatives that would pay off quickly. He dismantled the team of in-house entrepreneurs mandated with finding “moonshot” tech—electronically lowering the price of an apple as it aged in a produce bin didn’t fit Target’s new mold. The new Target would be less flashy and more focused. “Sometimes you have to turn down the volume,” Cornell says. But it would return to being a retailer where shoppers wanted to browse and explore.
Making that happen required Target to spruce up dreary stores. The company has executed most of its renovations on a gradual, “pardon our appearance” basis, so it hasn’t had to close locations outright—thus reducing harm to cash flow. Linoleum floors are out; slick display cases for groceries are in. So are mannequins. Early in his tenure, Cornell instructed managers to take a page from the department-store playbook and use mannequins to present apparel. The problem: “We didn’t know what to do with them,” he recalls. People with backgrounds in discount retail, it turns out, weren’t sure how to optimize the humanoid sales props. Target spent tens of millions of dollars to hire an army of “visual merchandisers” so that, among other things, the mannequins could have maximum impact. Clothing brands like the Goodfellow & Co men’s line have consequently thrived because the clothing is presented in an appealing way, with items paired to suggest outfits rather than folded and stacked in high piles, as they often are at rivals like J.C. Penney or Sears.
Store brands, including the Universal Thread women’s clothing line, Threshold (home), and Heyday (electronics), are Target’s secret sauce. Along with only-at-Target exclusives made by other companies, they generate about 30% of sales and a disproportionate share of profits. Low prices on staples like diapers and detergent may fill parking lots, explains analyst O’Shea, but once you have shoppers on your property, “you sell them Cat & Jack, which is higher margin.”
In all, Cornell’s 2017 plan has included the launch of more than two dozen brands and the jettisoning of others. Mark Tritton, the chief merchant Cornell had poached from Nordstrom a year earlier, has long argued that strong brands would lure back bored shoppers and win younger ones. Whatever the reason, Target appears to be regaining a demographic edge. According to Prosper Insights & Analytics, the average Target shopper is 42.5 years old with a household income of $77,610, compared with 46 years and $64,202 for Walmart.
Target has also shortened the time it takes to bring new brands to market, helping the company more quickly capitalize on other retailers’ woes. In toys and sporting goods, Target picked up customers from bankrupt rivals like Gymboree, the Sports Authority, and Toys “R” Us. Three years ago, the L Brands franchise Victoria’s Secret announced it would largely exit women’s swimwear. Within nine months, Target had launched its own swimwear brand; the retailer says it’s now the top U.S. seller of women’s bathing suits. Target has also revitalized short-term collaborations that have included such designers as Isaac Mizrahi, Lilly Pulitzer, and Vineyard Vines—which don’t yield much revenue but do get people into stores.
Managing all these initiatives puts new demands on workers. Target has raised employees’ pay, pledging its lowest hourly wage will jump to $15 by late next year, in part because of how much more involved the typical job has become. Target is training workers to have expertise in particular merchandise categories, notably apparel and beauty products, rather than be a “general athlete.” That approach echoes the classic department-store model—an interesting twist, given that Target was originally founded as an offshoot of a Minnesota department-store chain. “What Target has become is the modern department store,” says Neil Saunders, managing director of GlobalData Retail.
Target was late in rolling out its own e-commerce platform, and in that category, it lags far behind Walmart and Amazon. Last year, digital sales grew 36% but reached only $5 billion, not enough to crack the top 10 U.S. e-tailers, according to eMarketer. In 2017, Target bought two delivery tech startups that have allowed it to offer same-day delivery. But rather than compete with the giants head to head, Target has aimed to build tight coordination between stores and digital shoppers.
Target’s longer-term plan is to minimize the number of orders filled via delivery from expensive distribution centers. Mulligan, the COO, notes that when you deliver to an online customer from a store, you can save 40% of the costs of handling an item at a distribution center and then shipping it. If the customer picks up an item at a store, you save 90%, a big deal in a low-margin business. (If that customer buys some additional items in the store, so much the better.) This is where modernized stockrooms really matter. And on this front, too, Target’s campaign is paying off: Stores now play a role in 80% of online sales, which means more digital revenue flows to the bottom line.
All of Target’s approaches to retail come together in its small urban stores. There are now about 100 such outlets, up from 30 in February 2017. But they punch above their weight: Mulligan says that while the typical suburban Target generates about $300 in sales per square foot annually, city stores do almost triple that. More important, they get Target into markets where Walmart stores don’t compete and create e-commerce distribution hubs in more affluent urban areas. The logistics of supplying city stores are more complex: The new Target in Manhattan’s Herald Square, for example, keeps relatively little spare inventory and instead gets five shipments a day, while a big suburban store might get five shipments a week. But Mulligan is adapting that “just in time” nimbleness from the urban stores to their suburban cousins—hoping to make the whole chain better at responding to demand.
Thirty months after Cornell’s big announcement, Target’s shares trade at 40% above their 2017 lows, and Wall Street forecasts revenue growth for 2020 of a strong 3.4%, to $78 billion. Even so, the threat of a slowing economy can make its gains seem tenuous. Target’s stock, along with those of many other retailers, took a sharp tumble in early August after the Trump administration imposed tariffs on a host of the Chinese-made items that fill store shelves.
Many industry watchers see groceries as a place where Target can boost revenue in a category that’s relatively resistant to economic upheaval. Groceries account for only 20% of Target’s sales, compared with 56% of Walmart’s. Improvements here could add billions to Target’s top line. Kurt Jetta of TABS Analytics says that while Target can’t compete with Walmart as a full-service grocer, the right food offering could add $40 to $50 per visit from shoppers who buy food. Indeed, Stephanie Lundquist, the head of Target’s $15 billion food business, says Target shoppers who buy a food or beverage item spend twice as much per visit as those who don’t.
Outside of the grocery aisle, Target is consolidating its gains. In interviews, executives fret about letting its new brands go stale as some older ones did. Julie Guggemos, senior vice president for product design and development, says that to prevent backsliding, the company is creating a team to provide “proper governance” for brands, making sure each one is growing at the expected rate, and polling customers regularly.
But Target will be playing just as much offense as defense. Now that the chain has its house in order, Cornell says, it should be able to take advantage of turmoil elsewhere in retail. “As competitors around us close stores, we have market share opportunities,” he says. “The winners and losers are breaking away from each other at an accelerated pace.” The losers’ customers, presumably, will be welcome under the sign of the bull’s-eye.
This article originally appeared in the September 2019 issue of Fortune.