Target.com’s president challenges Amazon
June 3, 2015 01:49 PM
“How are you going to beat Amazon? The answer is simple,” Jason Goldberger, the president of Target.com and mobile operations at Target Corp., said in his keynote address today at the Internet Retailer Conference & Exhibition 2015 in Chicago. “Target.com cannot beat Amazon. Target will beat Amazon.”
Goldberger described a multipronged strategy of how Target is using digital technology—incorporating its e-commerce site, mobile strategy and digital technology in its stores—to better engage customers, increase conversion and sales, and develop long-term relationships with loyal customers. He noted that 98% of Target’s customers do at least some of their shopping digitally, and that 75% start their digital shopping on smartphones or tablets.
Customers who shop both online and in stores spend three times more than shoppers who only shop in stores, he added. Target, which is No. 16 in the Internet Retailer 2015 Top 500 Guide, grew its online revenue 37% year over year in its first fiscal quarter ended May 2, as the web accounted for about 28% of its total sales growth. Amazon.com is No. 1 in the Top 500.
Goldberger divided that strategy into three basic approaches: “Be guest-obsessed, not channel obsessed; reinvent assets; and ‘say yes’ to customers, even if that means short-term pain and lower profit margins to win long-term customer loyalty.
One of the more notable features of Target’s digital strategy is Target’s decision to embrace a new approach to take on what is known as “showrooming,” the practice of consumers who physically check out products in a store and then use a mobile device to purchase. “The worrying over showrooming is over,” Goldberger said in a brief interview after his keynote address during the first full day of conference and exhibit floor activity at IRCE.
Goldberger noted that Target is piloting a program with 29 stores that feature several displays of patio furniture that shoppers can try out in store, then order online. Since Target launched the pilot in February, the stores featuring the displays have posted revenue from patio furniture sales “two to three times" higher than average sales of patio furniture in stores not participating in the pilot program, he said. There are more such display areas to come for other product categories.
“Patio is just the start,” he said. Target expects to eventually introduce similar in-store displays of such additional product categories as household furniture and consumer electronics.
“People like to showroom, but they like to buy from the showroom they’re in,” Goldberger said. He added that Target is placing iPads in stores to make it easier for in-store shoppers to order online. It’s also testing mobile beacons, which are pieces of hardware that retailers can place throughout a store and use to pinpoint the in-store location of shoppers who have downloaded the retailer’s shopping app. A retailer can then send messages to shoppers related the type of products a shopper is near.
In certain cases, particularly for large products, Target has learned that many of its in-store customers prefer to place orders online after viewing and touching products. Goldberger said. Free shipping, which Target routinely offers on orders of $25 or more, helps. “Free shipping is better than buying or renting a truck” to bring home large items like patio furniture,” he said.
Goldberger said Target has also developed a policy that gives credit to store personnel for online sales of products featured in-store displays. That has resulted in strong buy-in among store managers and employees for the patio furniture displays, resulting in better service to in-store shoppers. Giving store personnel credit, he added, has been “a huge part of our success.”
Target is also taking other steps to digitally engage customers across stores, its website and mobile commerce, Goldberger told the IRCE audience of several thousand.
For example, a subscription program lets customers sign up online to receive regularly scheduled deliveries of such everyday commodities as paper towels. Although such products are often not those with high profit margins, the subscription program provides a convenience that keeps shoppers coming back to Target.com and its stores for other items, Goldberger said. “Subscribers have kept making about the same number of trips to stores—about once every three weeks—and they’re spending six times as much as online” as nonsubscribers,” he added.
25% of online orders are now either picked up from stores or shipped from stores. By the end of this summer, half of Target’s 1,800 stores will be able to ship online orders, covering 90% of the U.S. market, Goldberger said.
“Embrace change,” Goldberger said. “In this industry, change is constant.”