strategic repositioning wasn’t enough. There have been lots of very good retailers and plans attempting to do that, so this is much more structural and fundamental,” Pearson told
Inside Retail.
While it’s still early days, there are some positive signs of progress. Target’s comparative store sales were up 13 per cent in FY21, according to Pearson, and even more in the kids category, a key area where he sees an opportunity to gain market share. And its online sales more than doubled to represent around 15 per cent of total sales.
“Obviously, that’s been helped to some extent by Covid, but that number is higher than than most peer businesses,” Pearson said.
It’s enough to make him “really confident” that the department store is on its way to being a successful business again.
The next step will be to communicate this message with customers. A major brand relaunch is about to be revealed after being delayed due to Covid lockdowns.
“I think customers will respond really well to it,” Pearson said. “It’s going to take us back to our heartland of affordable quality…and take what we think is a very strong asset in the Target brand to new levels.”
Taking share off specialty stores
Pearson sees apparel, homewares and toys as being “destination” categories for Target, where it not only can compete against other value retailers on quality and price, but take market share off of premium specialty stores.
“When we get it right in terms of our product offer, we offer the same or even better quality at around half the price of the specialist retailers in the market,” he said.
This is due to Target’s in-house design capabilities, long-standing partnerships with manufacturers in Asia and owned retail channels, which give it end-to-end control over the supply chain.
“The most important part of our offer will always be our own products where we can bring things to market that nobody else can. We think it’s a real competitive advantage,” Pearson said.
About half of the retailer’s overall offering is private label, although the split is higher in certain categories, such as apparel, and lower in others, such as toys.
With a background working in supply chain at the likes of Coles and Mecca, Pearson has introduced new design and fabric standards to improve quality and style cues while still keeping prices affordable.
Target has made the most progress on this front with its kids products, which is why the category space performed so well in FY21, he says.
Targeting 30 per cent online sales penetration
For Pearson, the closure and conversion of Target stores and digital growth go hand in hand.
“Even though we still have a strong national footprint, obviously we have less stores than we had, so it’s more of an imperative for us to have a very strong e-commerce arm because some customers don’t have easy access to our stores anymore in a way that they [once] did,” he said.
On the front end, Target has made improvements to its website user experience, including the checkout and search function, which have helped increase conversions. It has also improved marketing its products through social media and other digital channels.
“All of those things are basically getting more users to the site and more users to transact on the website,” he said.
On the back end, the retailer has sped up picking times in its distribution centres and stores, where it supports ship-from-store and click-and-collect. Since Covid, Target has built dedicated areas in the back of around 60 stores to make the pick-and-pack process more efficient and speed up shipping times.
Pearson believes this hybrid fulfilment model gives Target an advantage over other retailers. In the next four to five years, he believes Target could see 30 per cent of its sales occurring online.
“It’s building, and I think we’re well set to be ahead of the game for years to come,” he said.
