From the Source: Stuart Machin
In late October, Inside Retail Weekly was in the newly redeveloped Eastland shopping centre in Melbourne to tour the new store format for Target. While at Eastland, Inside Retail managing editor, Justin Grey, sat down with Target managing director, Stuart Machin, to talk about Target’s ongoing transformation strategy.
Stuart Machin was appointed managing director of Target Australia in April 2013, tasked with leading Target’s transformation and reinvigoration. Prior to this, Stuart was store development and operations director at Coles, where he led more than 83,000 team members and various departments including IT, Coles Online, and Central and Store Operations. Stuart’s retail career spans more than 25 years working across food, general merchandise and clothing, including roles at Sainsbury’s, Tesco and ASDA Walmart in his native UK, before joining Wesfarmers.
Target operates a national network of more than 300 stores generating sales of more than $3.5 billion with a growing online business. Target employs more than 21,000 team members across its stores, support offices and direct sourcing operations in Asia. Recent initiatives that the company has rolled out include launching a new mobile app, introducing size 16 mannequins to represent the diversity of Australian women. Target is currently in the early stages of rolling out a new store format that features, amongst other notable new additions, an instore café, improved visual merchandising elements, and a kids play zone.
Justin Grey: How is the transformation strategy coming along?
Stuart Machin: We’re on an improving trend. Our Q1 results were better, but I wouldn’t get carried away with just a quarter. We’ve got a major transformation…year one didn’t count because we had so many things we had to fix. We spent one year clearing stock, deciding out strategy, looking at the competition globally and deciding where Target fits, recruiting the right people for the jobs. and really just fixing some legacy issues. Last year we built our plan, and this year we’re implementing it. Q1 was slightly better, but our biggest opportunity is we’ve got customer growth. So the good news is customers are coming back. Our volume is growing, but not enough to offset our price investment.
JG: What is the new Target price strategy?
SM: Everyone is so obsessed with discounting. We’ve trained customers for so long to say, ‘shop when it’s discounted’. And we’ve been very brave and said, ‘we’re stopping that’. We’re taking the discount off, and instead of 30 per cent off when we launch something, we’re going to do the best price from day one. So we’ve gone from two years ago having 80 per cent of our sales being on discount, now today 75 to 80 per cent is at first price. That’s a massive turnaround, but also it’s painful, because you’ve got to take customers on that journey. We’ve invested so heavily in price that we need to grow our volume to pay for it. So our customers are up, our volume is up, but we need more. We’re on track with our plan; this is a multi-year journey.
JG: What were the guidelines for the design of the new format Target stores?
SM: With our new format we knew that we needed to do something to overtake the competition, or, at least in the early stages, match them. Internally, this was critically important, because team members were wondering what we stand for. Are we going to copy Kmart? Are we going to copy Big W? Or are we going to be Myer? And I was saying, ‘we’re going to be Target, but we’re going to be really clear about what our customers like and build a store that creates an experience that’s all about what Target stands for’. So we want to be down to earth, we need an environment where Mum can shop with the pram hassle free, we need Mum to feel comfortable. We want to be slightly more feminine, a bit softer than some of our competition. We want an environment that’s a bit trendier and fashionable, but absolutely is down to earth and real. We want to focus on quality, and make sure our stores feel like quality, and our product delivers the quality heritage that we have. In this new format, we looked at stores in Australia and a few stores internationally, and came up with some ideas. And we listened to customers. We’re trying do a bit more than just come in and buy your pants and jocks and kids tops. We’re trying to make it a bit more fun.
JG: Physically, how are the new stores different?
SM: Our average size store is around 7000sqm. Some were as big as 12,000sqm, and really our customers were telling us that that was too big. So we found our sweet spot, which is around 6000sqm, and that is like the store in Eastland. The second thing is, our stores were underinvested – the average age of our stores is 14 years, and that means no capital has been spent for that period. So our stores were old and they were dated. What we did first was clean up shop, we’ve removed carpets, lowered features, turned the lights on, and we’ve cleaned the stores up. And then we started to get better product in. And then we moved our prices to the first price strategy.
JG: What are the intentions for rolling out the new format across the store network?
SM: We’ll do a few more in the next few months. We haven’t actually made up our mind. We know it works now, but there is some fine-tuning. The reason why we don’t want to rush into rollout is we want to just check the action points, implement most of them, and then make sure customers respond to the format still. And respond to the changes we’re making. We just want to be careful and make sure we’re spending the right amount of money and the right amount of time. Then, maybe in a year, when we’re really clear, we might do 20 or so a year.
JG: How is online fitting into the new Target strategy?
SM: Online is massive. We’ve done a lot of work and invested a lot online in the last year. Nearly 90 per cent of our range is available online now. We’ve got great plans we’re about to announce online. We’ve just launched our new mobile app, and the website, from what it was, to what it is now, is very, very different. We’ve got click and collect in 80 stores, and in 52 stores we have assisted kiosks. So we’re investing heavily and really trying to engage with our online customers. And it’s profitable for us, which is good.
JG: What is your strategy for Target to remain competitive against the increasing number of international retailers launching on the ground in Austalia?
SM: We’re learning from the internationals – the new store format is a blend of learnings from everyone around the world. We’ve been bold, we’ve been innovative, but it’s very early days still. There’s far more competition now than we’ve ever, ever had. We’ve got Australian competition, we’ve got international competition, we’ve got massive online competition, but why shouldn’t we protect our brand and try and do a really great job and beat them? Great competition keeps you on your toes. It’s challenging, but at the same time you can’t just stand there waiting for competition to take over. You become focused on your strategy.
JG: Are there further new brands that Target will introduce as a part of the new Target?
SM: There may be. Watch this space. We might have some exciting collaborations to announce next year. We might do a couple of brands online. We’ve just launched New Look, an international brand that does mens and womens and really focuses on women at 35, which is our core customers. We might do some others. There’s enough opportunity; it’s finding the right time and getting it done right and not rushing.
JG: What’s are the longer-term targets for the business under the transformation?
SM: We’re not claiming victory – we haven’t won the battle, we’ve only just started. We’re not rushing to roll these stores out everywhere just yet. We’re just taking our time, improving what we’re doing, and doing things in the right way. We’re very focused on our plan; there’s no massive changes, just small, subtle things we’re changing. But really it’s about customer experience in our stores, working on our new format, making sure we’re getting more customers online and we integrate that as a connected strategy. Customers have to love what we’re doing. They’ve got to love the value we give. And if they do, our numbers will get better. If we get a little bit better every quarter over time, that’d be good.
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