Dealernews Research By Dr. Paul Leinberger
EYES ON THE PRIZE Learning From Target
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s the COVID crisis finally begins to ease and we can see light at the end of the tunnel, our thoughts turn to the future and how to make 2021 even better than 2020. We need to ask ourselves: What do we need to change; what do we need to do differently; what do we need to add; and what can we leave as is? As contrary as it may sound, 2020 was a banner year for the powersports industry. Sales grew by 18.4%, with motorcycle and scooter sales up 11.4% (MIC retail sales report). To improve on these great results, we know we need to continue to attract new riders and, at the same time, find ways to bring our current riders back to our stores – again and again. In previous columns I have talked about changing consumer needs and how to address them. This month I want to talk about one American retailer who knows how to follow consumer trends and has the results to prove it: Target. Want to be an even more successful dealer? Take a page – or two or three – out of Target’s playbook. COVID-19 had a devastating impact on much of retail (27 major retailers filed for bankruptcy in 2020), but Target sales hit an all-time high. Target’s 2020 sales revenue increased by more than its revenue increases in the previous 11 years combined. It added an additional $15 billion to its bottom line and gained meaningful marketshare across all five of its merchandising categories, notably in clothing, home goods and electronics. A breathtaking performance in one of the most difficult years in retailing history.
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How did Target do it? What lessons can we learn and emulate? According to retail analysts and Brian Cornell, Target’s Chairman and CEO, here are a couple of the things Target did right: Never Stop Innovating CEO Cornell puts it this way: “Innovation is part of Target’s DNA.” It is at the heart of everything they do and it drives their strategy forward. Every day and in every way, they ask themselves: “How can we do a better job? What should we be doing that we are not doing now?” As Cornell told Wall Street analysts on the 2020 Q4 earnings call: “We relentlessly ask ourselves what products and services we should offer, where should our stores be located and how should our operations be tailored to meet neighborhood needs? How do we keep our guests turning to Target however they want to shop.” Target doesn’t resist change; it thrives on it. For example, the company plans to spend about $4 billion a year over the next few years to build more of its highly successful small-format urban stores; remodel all existing stores; and build out its record-setting e-commerce infrastructure. In addition, it has launched more than 30 private-label brands, including kids’ clothes (Cat & Jack), home furnishings (Project 62), personal care (Smartly), and luggage (Open Story). Ten of their private label brands generated more than $1 billion in 2020, and four of them brought in over $2 billion. The lesson here is simple but powerful: Innovation is as much a mindset as it is a result of making changes. How different would your store be if you said to yourself everyday: “What can I do today to enhance our customer experience? How can I do a better job of supporting my vendors and strategic partners? How can I deliver great value and everyday affordability? And so on. If innovation is at the heart of everything you do, you will create a high level of differentiation and it will be hard for others to duplicate. Create A “Connected Retail Experience” You have heard me call it “omnichannel marketing” (Omnichannel: The Key To Your Future, July 2019). Your retail experience must be customer-centered – focused on what the customer wants and delivered in whatever way the customer wants it – online, in-store, or at the curb. Target has become the master of omnichannel marketing or, as they put it, the “connected retail experience.” In 2020, they turned their stores into hubs for digital fulfillment and began to use their stores as showrooms and service centers. Instead of responding to the Pandemic by shifting their strategy to e-commerce (as so many other retailers did), they put their stores at the center of their strategy and reimagined what their stores could become.
