Two months into the job, Target’s new chief executive has already given the go-ahead to one of the retailer’s key holiday strategies: free shipping.
Starting Wednesday, Target will offer free shipping on any online purchase — no matter the size — through Dec. 20. In doing so, Target is taking an aggressive stance early on in the holiday season. Typically, retailers require a minimum purchase amount before shipping becomes free.
“We’ve spent time as a team to see how we can differentiate ourselves,” Brian Cornell, who began as CEO in August, said in an interview Tuesday. “Leading with free shipping for the holidays we think is a really important step for Target.”
While most of Target’s holiday plans were already solidified before Cornell came on board, free shipping is an initiative decided in just the past few weeks.
In a briefing at its recently opened New York office, Target executives announced more exclusive products for the holidays, a partnership with designer David Stark to transform the stores into a winter shopping wonderland and a new Wish List app for parents and children to share their holiday lists with one another.
But the boldest move was free shipping. One of the most common reasons online shoppers abandon a purchase is when they realize they have to pay shipping. In order to combat that, Target earlier this year simplified its policy to offer free shipping on most orders over $50. It’s taking that one step further for the holidays.
“Clearly, Target will be spending a lot of money on shipping, but to some extent it’s advertising,” said Amy Koo, an analyst with Kantar Retail. “They’re really reaching out and trying to at least play evenly with Amazon this holiday period, particularly as they’re trying to regain those less affluent or more occasional guests” following last year’s data breach.
Getting a jump on the season
According to Kantar’s research, about a quarter of Target shoppers belonged last year to Amazon Prime, the online giant’s fee-based membership program that offers free two-day shipping on many items. But the percentage is probably even higher than that this year, Koo noted.
Wal-Mart and Best Buy have not yet announced any shipping offers this holiday season. Currently, Wal-Mart offers free shipping on orders of $50 and Best Buy offers free shipping on orders of $35 or more. In the past, both have offered free shipping with no minimum purchase during the holidays, sometimes on select items, but neither did so last year. A few retailers, most prominently Nordstrom and Zappos, always offer free shipping on all orders.
Online orders make up only about 2 percent of Target’s overall sales. But the retailer saw 30 percent growth in them last quarter and has been looking to aggressively increase that number. It has improved its website and overhauled its mobile and iPad apps.
“We want to really be there for the guest, no matter how they want to shop Target,” Cornell said.
He also noted that Target has been rolling out ship-from-store capabilities to 38 markets this fall, reaching about 90 percent of U.S. households. This way the retailer doesn’t have to depend on fulfillment centers, but can get items to customers more quickly by sending the items directly from nearby stores.
Cornell is hoping for a big holiday season to pull Target out of a sales slump; the company’s same-store sales have been flat or lower in four of the past six quarters.
Since Cornell has come on board, he’s been upfront about the need to reclaim the retailer’s cheap-chic reputation by focusing on its signature categories such as apparel, home, baby and beauty. And he’s honed in on accelerating the retailer’s digital and mobile growth.
“There’s a clear sense of urgency from our leadership team,” he said. “The payoff has to be top-line growth and building back market share.”
At the same time, Target executives have told investors it will be a tough holiday season. In August, they pared back their profit outlook for the rest of the year.
Deals and price matching
Among its other new tactics, Target will try to steer more customers to Cartwheel, its mobile coupon app, with a 50-percent-off deal on a different toy every day from Nov. 2 to Dec. 24.
For the third year in a row, it is extending the time frame of its price-matching policy, which is usually seven days from purchase, to anytime between Nov. 1 and Dec. 24, excluding Black Friday and Cyber Monday.
Jeff Jones, Target’s chief marketing officer, said Target will spend about 50 percent more on digital marketing during the holidays this year. “Fifty percent of shopping today starts online, so increasingly we’re taking our message to where the guest is,” he said.
The retailer is also trying to drum up more excitement inside its stores with large Santas and other decorations. In 650 stores, it is installing a bench with a statue of Bullseye the dog on it against a skiing backdrop. Target will encourage kids to take selfies next to Bullseye and to post them with the hashtag #targetdog, rewarding some with special deals for doing so.
In addition, Target has been announcing a number of limited-edition holiday items, including a partnership with Toms and a collection of girls’ accessories and apparel inspired by the upcoming remake of the movie “Annie.” Kathee Tesija, vice president of merchandising, said Target will have a greater number of exclusive products this year, including 60 related to the movie “Frozen.”
One other way Cornell has put his own touch on Target’s holiday plans evolved out of a tour of innovative stores in New York last month. One stop was at Story, a store in the Chelsea neighborhood, that reinvents itself every four to eight weeks with a new design and merchandise to highlight a fresh theme or trend. Cornell spoke to the store’s founder and discovered she was a Target fan.
A few e-mails and phone calls later, they decided to collaborate on an assortment of Target items during the holidays. So on Nov. 5, Story will reopen, showcasing Target products that the store’s leaders find interesting.
“As we think about being more agile, more trend-focused, we thought this was a really unique partnership for us to form,” Cornell said.