Target will cut jobs but invest more in digital and mobile commerce
March 4, 2015 02:06 PM
Target Corp. is going to invest more than $1 billion to improve its technology in an effort to restructure and build on digital sales gains. The company’s changes include cutting thousands of jobs over the next two years.
The retail chain, No. 18 in the Internet Retailer 2014 Top 500 Guide, held a conference call Tuesday to discuss its outlook. On the call, chief strategy officer Casey Carl spoke of significant gains in mobile, telling analysts that mobile conversion rates increased 69% year-over-year in 2014 while mobile traffic grew 44%. That’s something he attributes to consumers’ continually evolving shopping habits.
“Almost everything begins on mobile,” he says. “98% of Target guests shop digitally and the vast majority of that shopping comes using a mobile device.”
As Target restructures, most job cuts will be felt at company headquarters locations, not in stores, the retailer says.
A key component in future digital success is going to be its Cartwheel mobile coupon app, executives said. The app has been downloaded more than 13 million times and is responsible for more than $1 billion in revenue since it launched in May 2013. Carl says the key to building on that momentum is continuing to customize the app for individual shoppers.
“We’ll continue to test more personalized and meaningful offers,” he says.
On the mobile side of the business, the retailer will test Apple’s iBeacon technology, which involves retailers placing tiny Bluetooth-enabled beacons in strategic locations in stores and allows Target to better personalize mobile offers, Carl says. A company spokesperson would not provide any further specifics.
“Today’s consumer expects to receive relevant personal offers and experiences,” CEO Brian Cornell says. “We’re investing to build digital capabilities to make Target a leader in this space.”
Target reported digital sales gains of 30% year-over-year in fiscal 2014, though it does not break out a dollar figure for digital sales. On the call, Carl told analysts Target’s digital conversions 50% year over year.
Target recently lowered its free shipping threshold to $25 in an effort to increase its share of the e-commerce pie. Carl says the retailer will boost personalized e-mail marketing efforts to drive traffic and conversion on its website.
Target’s data shows that digital helps drive and does not detract from in-store sales while it also builds brand loyalty. “It actually creates additional store trips and sales as our guests develop a deeper and deeper relationship with our brand,” Cornell says.
Target’s emphasis on ramping up personalization efforts and improving the functionality of the Cartwheel app left analysts feeling encouraged about the company’s outlook.
“We walked away with confidence that management will approach change carefully and deliberately, while being mindful of profitability, which was not only apparent in guidance, but also in comments around improving productivity and efficiencies,” Wells Fargo analysts Matt Nemer and Trisha Dill wrote.