For years, big-box retailer Target rode high, with its sprawling stores popping up in seemingly every suburb in America. It was affectionately known as “Tar-zhay” among its most loyal customers for delivering a luxe shopping experience with low prices.
In a presentation to investors this week, Target executives said its core customer has traditionally been the “Boomer Mom,” someone who “drives a minivan,” “lives in the suburbs” and “wants it all.”
But now, as the retailer aims to revive its business after stumbling during the recession and losing the trust of consumers with a massive data breach, it is looking to a new customer base for growth: Hispanic millennials.
“Our guest is going to be increasingly a Hispanic shopper,” Target’s chief executive Brian Cornell said at the investor event.
During the investor presentation, Jeff Jones, the company’s chief marketing officer, presented company research on how many Target shoppers identify the store as their “favorite,” a measure they see as a proxy for brand affinity. While just 38 percent of Target shoppers overall identify the store as their favorite, some 54 percent of Hispanic millennials said it was their favorite.
Hispanic millennial moms have served as “the creative muse” for a major new marketing campaign for its popular baby department, Jones said. And Target will launch a Spanish-language ad campaign in March with a spot on the hit CW dramedy “Jane the Virgin.” The company says it is a “first for any brand” to do a Spanish-language ad on an English-language network.
Target is also hoping to widen its base of customers by looking beyond the suburbs. This year, Target plans to open only 15 stores, and just seven of them are the sprawling big-box outposts for which the brand is best known. The rest are CityTarget and TargetExpress stores, small-format outposts that are geared toward an urban audience. So far, these stores have been highly successful, with higher average sales per store and higher gross margins than a traditional Target store. With that kind of performance, it is clear the company has been working to better understand and appeal to the urban shopper.
The root of many of Target’s problems can be traced to how it responded to the recession. Instead of sticking with the trendy clothes and housewares that rocketed it to success, Target emphasized rock-bottom prices in essential categories, such as groceries. The strategy didn’t work well. Chief executive Brian Cornell said this week that Target “lost its brand balance,” focusing too much on deals and not enough on the chic styling that made Target stand out from its rivals.
The problems for Target haven’t stopped there: Its first international business, a fleet of stores in Canada that opened two years ago, are to be shuttered because they are failing. And, of course, a massive data breach in 2013 cost it sales and bruised its reputation.
The company plans to revamp by investing $1 billion in technology and supply-chain innovation this year to help boost its digital capabilities and to cut “several thousand” jobs at its corporate headquarters.
Cornell is also pushing the company to make its style, baby, kids and wellness categories truly distinctive and to reposition its grocery department to feature the healthy, fresh options that its shoppers say they prefer.
There are early signs that Cornell’s strategy is working. Target’s third-quarter and holiday-quarter sales were relatively strong, and foot traffic has increased in its stores. With its focus on a new kind of shopper, Target may finally find itself again hitting the bull’s-eye.
