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Following the launch of a pilot a program in Dallas-Fort Worth last year, Target is expanding the test of its new loyalty programme, Target Circle, to additional cities.

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We look at how Target is aiming to grow its share in the baby category through private label development.

Extending Cloud Island private label

Following the exit of Toys R Us and Babies R Us from the US market last year, opportunities to gain share in the toys and baby categories emerged. Building on its private brand expertise, Target is extending its Cloud Island brand into baby essentials, including diapers, wipes, toiletries and feeding products.

Source: Target

Developed with input from parents

The retailer worked with parents to develop the range of 30 products, hosting in-home interviews, focus groups and accompanied shopping trips. Products have been benchmarked against premium brands with pricing around 30-40% lower. Target also worked with pediatricians and dermatologists to verify product claims.

Private label powerhouse

The Cloud Island brand was launched in 2017, offering a unique range of nursery décor, bedding and bath products. This formed part of the retailer’s aggressive private brand strategy which has seen over 15 new ranges launched in 18 months. Most of the recent new ranges have been focused on clothing and homewares, although last October it launched, Smartly, its first new brand in personal care and consumables for several years. It also moved into the electronics space with the Heyday brand, while also bringing several digitally-native brands into its stores.

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We look at Target’s performance across the holidays and new leadership changes, including within its food business.

Benefitting from investments to capture share in toys

Target delivered a strong performance over the holiday period in November and December, with comparable store sales up 5.7%. This was a significant improvement on the 3.4% growth it delivered last year and accelerated its third quarter performance. The growth was driven mainly by an improvement in traffic. Sales growth was strongest in toys, baby and seasonal gifts.

Growing its toys business had been a key focus for the business following the exit of Toys R Us. It expanded space for the category, increased its ranges and invested in inventory. Commenting on the performance, Brian Cornell, Target’s CEO, said,

“This performance demonstrates the benefit of placing our stores at the center of every way we serve our guests, including both in-store shopping and digital fulfillment.”

Source: IGD Research

Digital sales up 29%

The retailer also saw its digital sales grow 29% in November and December. Its ‘Store Pickup’ and ‘Drive Up’ programmes saw growth of more than 60% year-on-year, accounting for a quarter of the retailer’s digital sales. The retailer remains on track to grow digital sales by more than 25% for the full year.

New leadership for its food business

Target has appointed Stephanie Lundquist, formerly the retailer’s chief HR officer, as president of food and beverage. In this new role she will be responsible for all aspects of merchandising and operations for food and beverage. This will include strategy development and implementation, advancing the retailer’s progress in the category and driving operational excellence. Melissa Kremer, senior vice president HR, has been promoted to as the retailer’s chief HR officer.

Opportunity to reset food strategy

This appointment is the most significant of the changes Target is making within its leadership team. While the retailer has made impactful changes across most of its non-food categories over the last two years, there have been fewer changes within its food business. This is an important traffic driver for the stores and could become a more meaningful part of the business over time.

Target has built a solid foundation for its food business, developing a strong suite of private brands and adapting its ranges over the last few years. It now offers more unique items and depth in natural, organics and better-for-you products. The acquisition of Shipt has also transformed its same-day delivery capabilities positioning it to potentially become a leading operator in the grocery ecommerce channel.

Bringing marketing and digital under single leadership

Chief marketing officer, Rick Gomez, has been named chief marketing and digital officer. He will lead Target’s digital team, focusing on personalisation, loyalty and the shopping experience. Mike McNamara, Target’s chief information officer, will now lead the enterprise data analytics and business intelligence team, in addition to his leadership of Target’s technology services.

Target also announced that chief financial officer, Cathy Smith, will be retiring. She will continue in her role as until her successor is named, and then move to an advisory role until May 2020. She has played a key role in shaping Target’s strategy since joining the business in 2015.

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Target is partnering with Germany’s Metro AG to launch a new startup accelerator programme, the METRO Target Retail Accelerator.

Seeking ways to differentiate the business and develop new technologies

Target established its accelerator programme for startups three years ago in conjunction with Techstars. It aims to identify startups which can help the business further differentiate its offer, enhance the customer experience and develop innovative technologies. Target has run tests or pilots with more than half of the 30 startups which have participated in its programs.

Source: Target

Participants in a program launched earlier this year included startups focused on food waste, artificial intelligence and rewarding shoppers for fitting room selfies. Several previous participating companies continue to work with Target. These include Inspectorio, a startup that set out to reinvent the retail inspection process, and BYBE, a company which enables Target to include rebates for alcohol products in its promotional tool, Cartwheel.

Providing companies with investment and mentorship

The 14-week programme with Metro will start next May, with each startup receiving up to a $120,000 initial investment. Participating companies will also be mentored by business leaders from both retail organisations, with ten startups selected to spend time at each company’s headquarters. They will learn more about bringing business concepts to market, how to fund raise and develop their businesses. The accelerator will conclude with a Demo Day in August in Minneapolis, when the startups will pitch their businesses to the retailers, Techstars’ leadership and potential investors.

Strategic relationships being formed at rapid pace

Target currently runs three programs which are certified by Techstars; Target Takeoff, Target Incubator and the Target Accelerator Program based in India. This is the first collaboration with a European retailer for Target in this area. It will help the retailer extend the global reach of its programme. Retailers are increasingly forming global strategic relationships to find new solutions to business challenges, often with the goal of optimising new technologies.

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