Are you a speed shopper or browser? New Target stores to accommodate both (+video)
Years after the start of the e-commerce revolution, American shoppers don't just want web options – they want it all online and in stores, and all at the same time. Retail giants are racing to keep up.
—Whether you are in a pinch for time or have time to kill, Target wants to have a store entrance for you.
The big-box retailer plans to redesign 600 stores to offer two separate entrances, beginning this fall, it announced at an e-commerce conference in Las Vegas on Monday. One entrance will have the time-crunched customer in mind, with groceries, self-checkout aisles, and a counter for online orders all near the front. The other entrance will be built for the browser, with curved center aisles filled with home, apparel, and beauty products.
The billions of dollars Target plans to spend on this ambitious redesign is part of a trend among brick-and-mortar giants to try to keep pace with consumer demands in the age of online shopping. These retailers were slow to adapt during the dot-com era, say analysts. But as they play catch up, they are discovering the customer wants it both ways: in-store pickup when they want a product fast or don’t want to pay extra for shipping, and in-store shopping when they want to linger down aisles in their spare time.
“The future of retail is digital. And people will also be shopping in stores for a long, long time,” Target board chairman and chief executive Brian Cornell said in his keynote speech on Monday at the Shoptalk conference, according to the Minneapolis Star-Tribune.
Today, roughly 30 million people stop in a Target store each week, the Star-Tribune reports – but that could quickly change.
"Whatever it's going to go be, it's still going to be a really big number. So that means we need to keep investing in our stores to give guests every possible reason to shop," Mr. Cornell said.
The first new Target to feature this redesign will be in the Houston suburb of Richmond, scheduled to open in October, according to a press release. Also scheduled for October is the renovation of 40 additional stores.
The idea is to offer customers the best of both worlds when time permits. Those short on time or just wishing to get in and out would be able to use one entrance specifically for them. These shoppers can park in a 10-minute space, find groceries and other essentials at the front of the store, and pay either in self-checkout aisles or ahead of time online.
Customers in the mood to linger can use the second “inspiration” entrance. Filling the curved aisles will be brand-name displays and a section highlighting seasonal fashion, as well as beauty, jewelry, and accessories departments nearby, according to the Associated Press.
“We wanted the design to be flexible because that is what shopping is all about," Mark Schindele, the senior vice president of Target Properties, told the Associated Press.
Target expects this redesign to bump sales 2 to 4 percent. The corporation struggled through parts of 2016, at the time blaming its missed sales targets on a decline in Apple iPhone demands and grocery business, along with management shakeups, according to The New York Times. But in an investor meeting last month, executives were candid about the shabbiness of many of Target’s stores.
Ryan McDevitt, an economics professor at Duke University's Fuqua School of Business, sees Target’s plan as an attempt to recapture the ground it lost over the past decade to variety and convenience stores, as well as Amazon.
“Consumers used to feel there was value at Target. It was sophisticated, and had pretty high-quality items at a low price,” Dr. McDevitt tells The Christian Science Monitor in a phone interview on Tuesday. “For the new generation of shoppers, they don’t see that value any longer. The stores are worn out, and haven’t been updated for a long time. If they want a quick item, they go to a Dollar or convenience store. They’re not going to trek out to this big-box store retailer.”
McDevitt says it may be too late for Target to lure back customers in cities with Amazon’s two-hour Prime Now delivery service or high-end department stores like Neiman Marcus. But suburban areas without such services may stand a chance, he adds.
Consumer habits have been changing rapidly since everything from books, to pet food, to flat-screen TVs became available online during the dot-com era. While the burst of that bubble shook the e-commerce landscape, that industry has since settled into a hybrid, in which consumers want the option to buy online when they need to, wander when time permits, and click and pickup purchases when they don’t want to wait for shipping or want to see the product in person.
Target, Walmart, and other traditional retailers were slow to catch on to this "omnichannel" trend, wrote Darrell Rigby, a partner at Bain & Company who heads the firm's Global Retail practice, in a 2011 article for Harvard Business Review. At that time, wrote Mr. Rigby, online revenue accounted for less than 2 percent of revenue at Target and Walmart.
In the first quarter of 2016, retail sales accounted for 3.5 percent of Target’s sales, according to The Washington Post. This increase follows Target investing $1 billion in 2015 to bolster its e-commerce offerings, which includes everything from grocery delivery, to ship from store, and click and collect, according to CNBC.
With this redesign announced Monday, it appears Target is looking to especially take advantage of in-store pickup. Click and collect allows customers to order online and pick up in stores, combining the best of both worlds: speed, quick comparisons, and the chance to reconsider an item in person.
Retailers like it because they are finding customers don’t leave their wallets in their pockets when they go to the pickup counter. During the 2015 holiday season, for instance, 69 percent of shoppers who used click and collect purchased additional items while picking it up in store, according to the International Council of Shopping Centers’ Holiday Consumer Purchasing Trends, as CNBC reported.
While 41 percent of retailers offered in-store pickup in 2015, 78 percent planned then to implement it within the next three years, according to a survey by Boston Retail Partners.
But Target’s redesign also seeks to take advantage of Americans' shifting attitudes about how to spend their money.
Data released by the Commerce Department in 2015 showed American consumers are spending their extra money on restaurants, upgrading their cars or houses, sports gear, health, and beauty, according to The New York Times.
“The religion of consumption has proven to be unfulfilling. The ‘pile it high and watch it fly’ mentality at department stores no longer works,” Richard Jaffe, a retailing analyst at investment firm Stifel Nicolaus, told the Times. “It’s becoming more and more about the experience – whether it’s going to a festival or sharing a car ride or going to a new city.”
But retailers and manufacturers are also learning they can use technology to design stores that are attractive and engaging for customers, wrote Raymond Burke and Neil Morgan, marketing professors at the University of Indiana in Bloomington, for the spring 2017 issue of the Journal of Shopper Research.
"Technology can augment the physical store environment to deliver a more relevant, transparent, convenient, assured, and enjoyable customer experience," they write. "We are already beginning to see this transformation."