Target Is Keeping It Simple for Holiday Season Sales
Peppering customers with non-stop deals during the holidays can often have the opposite effect retailers are hoping for, as Target (TGT) learned last year.
So the discount chain, hoping to avoid the 1.3% decline in comparable sales of the 2016 holiday season quarter during the most important time of year, is streamlining the number of promotions and making them simpler and easier to understand, Target executives told reporters at a briefing last week in New York.
Last year, the onslaught of deals, which included a ten days of promotions plan around Black Friday, left customers unimpressed, prompting Target to decide that for the 2017 Christmas period, less would be more in terms of promotional cadence. The strategy’s weakness last year was only underscored by the sales increases at Walmart (WMT) and Amazon.com (AMZN).
That’s not to say Target won’t offer deals, Mark Tritton, Target’s chief merchandising officer told reporters. The sales events will just be streamlined to ensure frequency doesn’t dilute impact, even as Target emphasizes every day low pricing on many items in a bid to hold its own with Walmart on price. For instance, rather than that ten-days-of-deals scheme, which had worked well in 2015, Target will instead offer special deals every weekend.
“We will have meaningful promotions,” Tritton said, noting that Target would nonetheless fight hard over the Thanksgiving to Cyber Monday shopping extravaganza. (Target will announce its Thanksgiving to Cyber Monday deals shortly.) “But priced right daily will be our regular drumbeat.”
The trick of course will be to find the right balance between avoiding promotions fatigue and not giving customers a reason to come to stores during holiday season retail wars, all the more so given that Target is struggling to keep customer traffic growing.
Other areas where Target will redouble its efforts this year in offer gifts under $15 meant to serve as easy, affordable gifts customers can get for people outside their closest circle, such as a teacher or a second cousin. In all, Target will offer 1,700 such items and showcase them in dedicated kiosks through its stores. “We had some room to play here but we weren’t stepping up our game,” Tritton said.
As for advertising, Target keep a bigger proportion of its efforts on non-holiday features such as its Target Run and Done campaign focused on shopping for household essentials. Target will also go easy on the holiday ads before Thanksgiving before ramping them up, finding that that occasion should not be overlooked given the potential sales of food and home décor, said Target Chief Marketing Officer Rick Gomez. What’s more, ads will not just be aimed at young families that are Target’s sweet spot, but will also cater Latinos and older customers, often overlooked groups, as well.
“We felt we left a lot of sales on the table last year by not overtly marketing to these groups,” said Gomez.
At the same time, Target is hoping to get a lift from its efforts to beef up its own brands. Some eight of the 12 private brands it is planning to create from scratch or overhaul will be available in time for the holiday season, and Target is hoping for more success such as that it has enjoyed with Cat & Jack, a brand launched in 2016 that has already rung up $2.1 billion in annual sales. And next week, Target is launching Hearth & Hand with Magnolia, an exclusive line of home items by HGTV stars Chip and Joanna Gaines.
And of course, fulling anticipating aggressive shipping policies by rivals that are now basics expected by shoppers, Target will again offer free shipping with no order minimum from November 1 through Dec. 23. Target has also equipped hundreds more stores to help with e-commerce so that this year 1,400 of its 1,800 stores can fill online orders, thereby speeding delivery. Target CEO Brian Cornell had told reporters in a separate briefing that the company wants to make 48 hours the typical delivery time eventually.
Another initiative on the e-commerce friend is a new feature called “GiftNow” option online. It is aimed as reducing the risk of a holiday misfire and getting someone something they don’t want. The shoppers develops “electronic gift box” and then the recipient can then choose to accept the gift, or change the color or size for instance before it gets sent out. For Target, that potentially also has the added benefit of lowering the amount of returns it would later have to handle, protecting profit margins that will inevitably come under pressure during the holiday season promotional free-for-all among retailers.