Target CEO Sees Risk in Innovation for Innovation’s Sake
When all Amazon.com’s tech innovation (AMZN) ever gets from Wall Street and every day consumers is kudos, it’s easy to see why brick-and-mortar retailers want some of that love, too.
But consumers don’t want shiny objects; they want better store and customer experiences, and any retailer’s innovation strategy has to be pursued accordingly, says Target (TGT) Chief Executive Brian Cornell.
Earlier this year, Target’s innovation chief left, the retailer scrapped an ambitious “store of the future” initiative it had planned to open in Silicon Valley; a place where it was to have showcased robots among other innovations. And Cornell was adamant in a financial update this spring: the payoff from any innovation investment has to be faster now.
“We had some great experiences with entrepreneurs we had brought in and gave them some seed money and said, ‘Alright, go think about the future,’ Cornell said on Tuesday at Fortune’s Brainstorm Tech conference in Aspen, Colo. “Unfortunately, they were drifting out to another universe. We had to reel things back in,” he added.
The retailer recently said the current quarter was going better than forecast, putting it on track to end a three-quarter streak of declining sales. Still, Target is facing a brutal price war with Amazon.com (AMZN) and Walmart (WMT), which recently launched its own retail tech incubator in Silicon Valley. And so Cornell and his team are putting more emphasis on lower prices, remodeling 600 stores, and overhauling its supply chain to better meld its digital and physical operations as part of a $7 billion multi-year initiative.
Target is ramping up the roll-out of smaller, urban stores and wants to fine-tune its use of stores to speed up delivery, considerations that are more important than some of the sci-fi tech many retailers are pursuing. Given that 85% of Americans live a short drive from a Target, prosaic considerations such as using stores to fill orders are paramount.
“Innovation has to first start with what is our guest expecting from Target from Target and how does it help our core enterprise?,” Cornell told Fortune’s Andrew Nusca.