I literally go to
Target for everything. I really love Target. The whole
store just makes us calm. I love everything about Target. I'm at Target right now. It makes me so happy just
to be in the parking lot. At the top of 2020, Target
secured its spot as the seventh-largest retailer by sales in the U.S. With 1,880 stores across all 50
states, the company brought in $78.1 billion in revenue in 2019. Target has revolutionized the entire
shopping experience, from the width of the aisles and the weight of
the shopping carts to the smell of Starbucks coffee and the
placement of dollar bins. The tactics are paying off. Despite the pandemic, profits rose more than
80% year over year in the last fiscal quarter. This whole crisis
has really upended how consumers are shopping, where they're shopping
and what they're shopping for. Here's how Target keeps
its shoppers hooked. Expect more, pay less. That's been Target's slogan
since the mid-90s. The first Target store opened in
Roseville, Minnesota on May 1st, 1962. That year, Target advertised itself as a
store that is fun to shop and exciting to visit. It's kind of gotten that nickname "Targét"
that you hear a lot among customers because it's tried to bring
something a little different with its unique brands and its variety
of slightly higher priced but still affordable merchandise. These claims hold true
for today's shoppers. I think I do have a bit
of an unhealthy obsession with Target. It's like a one-stop shop for
food, for my baby's items. Our love for it has only increased
because it's like the one thing that still kind of sparks joy. Target is at the center of cheap
and chic, which differentiates the brand from its competitors. Dr. Terry Wu, a neuroscientist with
over 17 years of marketing experience, says the brain likes
both familiarity and novelty. Too much familiarity is boring. Too much novelty is overwhelming. Target strikes a balance between old
faithful products and new trendy merchandise like apparel
and home decor. Target has a well-deserved reputation
for stocking fashionable apparel products at reasonable prices, something
which has endeared the retailer to many middle-class
consumers, especially U.S. women, who tend to view Target as
a more stylish alternative to Walmart. Even though we don't shop at Walmart,
I know that Walmart is significantly cheaper. I think that's the draw
of it for so many people. Target price points are pretty good. Target began collaborations with
high-end designers in 1999. From Isaac Mizrahi to Lilly Pulitzer,
from Marimekko to Zac Posen, Target delivers designer goods for cheap or
"cheap chic," as it's often called. The hype around these limited
edition collaborations fosters anticipation. Retailer Target launching a new line
designed in conjunction with HGTV stars Joanna and Chip Gaines. The Who What Wear collection that they
do, the partnership with them, I have — half of my wardrobe
is from Who What Wear now. I kind of dragged my friends to go
to like five different Targets just to find this one item. The brain reacts to anticipation
of a reward very strongly. Dopamine is a reward
chemical inside the brain. When we have the anticipation of a
reward, the dopamine level surges and that surge of dopamine actually drives us
to go back to Target to buy again, and again. This is
how they build loyalty. This is actually exactly how casinos
actually bring customers to the door again and again. We were able
to create Black Friday in April. We had hundreds and hundreds of guests
lined up, all excited to get in there and shop that collection. This dopamine rush breeds loyalty and
excitement, which in turn drives profit. Private labels are a
huge component to Target's success. They have one of the best private
label strategies of any retailer in the United States. They're the envy of even
Amazon when it comes to their private label strategy in apparel. I think they are
well-positioned in apparel. In-house women's wear label A New Day
accounts for more than $1 billion in annual sales. In-house kids line Cat and
Jack accounts for more than $2 billion in annual sales. There's a reason Target brought
Starbucks into its stores. This aroma of the coffee
can trigger happy feelings. Scent has a very strong influence
on our emotions, judgment and decisions. The nose and the "emotional
brain" or limbic system are only one synapse away. So smell is the most direct
access point to our emotions. Coffee has another upside too. Caffeine. They're more excited. They're going to buy more. They're
going to stay there longer. They don't get tired quickly. Target's bright red and white
design is another sensory strategy. Target has to created
a very inviting environment. The aisles are wider, the shelves
are shorter, the space has less clutter. Some prefer the look to
one of Target's biggest competitors, Walmart. I like Walmart. I like Target. I think because Walmart's
floors and stuff, a lot of them are, they're older stores and they need
to be updated more to be light, bright. More like Target. There's not really an equivalent to
Target and we're not really Walmart shoppers. It's like horrible fluorescent
lighting that makes you feel like you're in a horror film. Yeah, I'm just not a fan of Walmart. No. Hard pass. The room is well lit. You can see things very easily. And also when you need help, you
can spot Target employees very easily by their red shirts. They have been able to
elevate what's at the end of the day, just a general
merchandise, big box retailer. It's open. It feels really spacious. It's just sort of like
a feast for the eyes. Everything's pretty organized. It's very bright, white with the red. This doesn't hurt the eyes. And don't discount the power
of a dollar bin. Right when you walk in our Target,
there's the dollar bin aisle, which is like dessert because there's always something
I never knew that I needed that is right there that
I absolutely have to get. It's a subconscious priming impact on
the brain telling you when you shop at Target, you can expect more
but at the same time, you're not going to spend too much money. You earn the freedom to
spend more than you want. The carts. They're made of super
light plastic, making them easy to maneuver. When we push the cart
around and it feels easy, it subconsciously tells us, "Shopping here
at Target is very easy." Doctor Wu also says that when the
cart isn't heavy, it signals to the brain that you can continue shopping. And finally, strategy number five. Logo redesign. Did you even notice? it used to be all uppercase
letters and now it's all lowercase. Why do you spend so much
money on something so trivial? Uppercase brand names looks
more masculine and aggressive. Lowercase brand names look
more feminine and friendly. You have over 60% of Target shoppers
are women in the United States. They're more affluent than
the average Walmart shopper. They tend to have a higher
average household income than the average American. When Covid-19 hit,
shoppers' habits changed. Apparel and décor sales slumped. Instead of people shopping for typical
merchandise, they were looking for very key categories like
groceries and essentials. Think toilet paper
and hand sanitizer. They were selling more merchandise that
was lower-margin, like gallons of milk or cartons of eggs, and fewer
items like clothes that have higher markup. Even though Target stores were
open, many customers felt safer shopping online. They were spending
a lot more on labor. They needed staff to be sanitizing
shelves, stocking shelves, and in exchange for the extra risk that
employees were taking on, Target gave them additional pay and that led to
about $500 million of added expenses, Target's CEO said at the time. Though staying open presented new
challenges, Target benefited from its essential business status. A lot of the stores that were open,
like Walmart and Target and Home Depot and Lowe's, all reported
really strong sales. Even learning how to keep stores clean
and have employees wear masks and try to encourage customers
to wear masks. They had a head start with that. Acquiring Shipt in 2017 set the
company up for success during the pandemic. It helped Target fulfill more
online and delivery orders in 2020. In the second quarter, Target
reported really what can only be called eye-popping numbers
across the board. Their profits jumped by more
than 80% year over year. Extremely impressive. I think the key things for me
were really the breadth of performance, the fact that they saw strength across
multiple categories, the growth in their digital business, the growth in
offerings like buy online, pickup in-store or curbside. And, you know, the earnings flow
through was actually quite strong as well. CEO Brian Cornell shared a
few strategies for this wild growth. First, Target essentially turned stores
into fulfillment centers, kind of like Amazon. Second, pickup and delivery service. In the second quarter, curbside service
grew over 700% from a year earlier, and Shipt grew more
than 350% year over year. Third, Brian Cornell attributed the profit
jump to a wallet shift. So a lot of those families were
taking money from a canceled vacation or flight they would have taken and
putting it instead towards new clothes or backyard furniture or other small
indulgences during this time that they may have put off. We bought out
every kind of lawn game that they have. We have bocce and cornhole and
Kan Jam and we've wiped out the puzzle section and we've wiped
out the game section. This isn't the first time Target
has rebounded from a significant setback. In 2013, a massive credit card breach
spurred a steep decline in profit. And we saw that consumers were
concerned about their data potentially being made public. That did happen to
correspond with a period of time where Target was struggling a bit. Right. That's about the time they
were kind of unsuccessfully trying to expand into Canada. It seemed like there was not a
great consumer message around the time about that. However, Target managed to
bounce back from the 2013 breach and regain customers' trust by
establishing new security measures and issuing more secure chip
and PIN cards. But this is the same area where just
last night the Target was looted and a grocery store was being looted. Just months into the pandemic, Black
Lives Matter protests broke out in Target's hometown of Minneapolis, a few
miles down the street from where George Floyd was killed by police. A Target store was looted and burned. Target promptly closed a number of
stores to protect employees and committed $10 million to advance
social justice and help rebuild Minneapolis. Target seems to only want to
be on the right side whenever it benefits them. Because up until the point of their
Target superstore being burned down in Minneapolis, there hadn't been much of
a peep from them regarding the black community as well
as supporting them. In turn, when the CEO stated, "Oh, it's
OK that they burned it down, I can build another one. Everything is replaceable." It's just
kind of embarrassing and upsetting. Another protest took place inside
a Target store in Dallas. One reason for the public's reaction
came from reports that Target made donations to the Minneapolis Police
Department and the LA Police Department. This put Target in hot water. A big part of this is
acknowledging any actions in the past. You have to address any any
shortcomings you had in the past. It will feel more genuine in the long
run if they invest in artists of color to provide artwork for people's
walls and clothes for people's bodies of all types and
pillows for people's homes. Right? In a statement to CNBC Make
It, Target said, "Inclusivity is a deeply rooted value at Target and
we've had an ambitious diversity and inclusion strategy for many years
for our guests and team. We know that having a diverse
workforce and inclusive environment not only creates a stronger team, but
also provides the perspectives we need to create the products, services,
experiences and messages our guests expect." Despite all of the
uncertainties, Target's still managed to bring in a ton of
customers in the second quarter. CEO Brian Cornell talked about how Target
has gained $5 billion of market share and 10 million new customers online
in the first half of the year. It's trying to get more
people to keep coming back. And the question will really be, once
the pandemic starts to fade, will people continue to
be Target shoppers? Target's long-term trend, they're acquiring
customers that will stick with them beyond this crisis. The reliability and consistency of the
Target brand will likely keep the company going. Its ability to innovate
while maintaining a familiar brand is its biggest asset. Familiarity, novelty and balance are what
will keep it on top.
