Posts Tagged 'Target'

Holiday hiring and the “omnichannel” challenge

Two recent (and related) comments from RetailWire on the subject of holiday hiring and whether stores are prepared to deal with the operational demands of omnichannel. First up, my take on the kinds of stresses on payroll and customer service that stores are trying to manage today:

BOPIS can have an impact on customer service especially in those stores where payroll is being stretched to manage “omnichannel” process instead of the shopper in the store. I’m thinking particularly of department stores (Macy’s, for one) whose higher-touch service standards have slipped while they are asking the same sales associates to cover additional tasks.

But there is another kind of “customer service” (in self-selection stores like Target and many others) that really depends on efficient restocking of fixtures and quick checkout. I don’t see BOPIS having the same kind of stressful effect on these stores’ service standards.

And here’s the second comment, published a few days later after Target and Macy’s revealed their holiday hiring plan:

Target’s hiring forecast vs. 2016 is a healthy sign, and Macy’s announcement is also a positive in light of the smaller store base. What both retailers are signaling is that they are figuring out the manpower requirements of omnichannel initiatives like BOPIS and ship-from-store without sacrificing the service standards they need to maintain in their core brick-and-mortar business. This seems to be a particular challenge at Macy’s, so it’s good to see them recognizing the cost of a solution.

 

 

 

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Target’s choice: Cheap chic, or just cheap?

A brief RetailWire comment below on Target’s re-pricing of food and commodity basics,  which is something they periodically need to do:

Target periodically needs to reset its prices on commodities because of customers’ nagging perception that it charges too much. This has always been an issue with Walmart as its key competitor, and now Amazon adds to the challenge with its dive into the grocery price wars.

The key to making this work is to drive the higher-margin categories like apparel at the same time. (That’s really the key to the company’s success, not its grocery business.) Target’s reset of its private brands needs to accomplish this goal, otherwise the lower prices on food and household goods will only erode the company’s profitability.

Target finds small-format stores are more productive

Today’s RetailWire discussion centers on Target, which is enjoying more productivity in its expanding base of small-footprint stores. I don’t think this is rocket science:

Locating smaller-format stores in higher density areas (especially city neighborhoods) should drive more productivity. If these stores aren’t generating much higher sales per square foot, they are unlikely to be profitable given the higher occupancy costs (rent, loss prevention, etc.). So Target needs to hold these stores to a higher standard in the first place.

That being said, the focus on fewer categories and tightly edited assortments probably doesn’t hurt, either, and might be a lesson learned for the full-sized Target stores. I assume that most of the small-format stores contain much smaller grocery assortments, which is a good thing considering the low margins in an area where Target has struggled.

Walmart on a roll?

Walmart’s 2nd quarter results were strong, although their stock price may or may not be rewarded for it in the short term. RetailWire panelists addressed a simple question — is Walmart unstoppable? — and here’s my response:

I would never say “unstoppable,” but Walmart’s strategies in its stores and omnichannel certainly seem to be paying off. They do need to anticipate the impact of the Amazon-Whole Foods tie-up, in terms of its impact on online grocery retailing. But Walmart is seeing payback from its multi-year investments in upgrading brick-and-mortar, focusing on better execution in food, and getting its full-size prototype right

Walmart is the most obvious case of a retailer figuring out how to leverage its e-commerce business into store traffic, but Target’s results seemed to point to the same thing. Even stores like Kohl’s with comp-store decreases suggested 2nd quarter improvements in store traffic — so maybe the stores with the most aggressive omnichannel effort are starting to see results.

Can JCP be a player in toys?

JCPenney recently announced an expansion of its toy business, in time for holiday 2017 selling. RetailWire panelists weighed in on the topic, and here’s my take:

Toys are a double-edged sword for softlines retailers like Penney and Kohl’s who want to strengthen their children’s offerings. It’s hard to avoid carrying toys, but it’s also hard to compete against the dominant space of the discounters and big-box stores. (Not to mention the low margins.) Customers have come to expect the best selection and prices from market leaders like Amazon, Walmart and Target.

The broader risk to JCP is that it becomes a “bunch of stuff” with the addition of new categories (from appliances to toys, from bikes to electronics). Just because the store has square footage to burn doesn’t mean that overassortment is a winning long-term play.

Should customers pay extra for service?

RetailWire recently posted an online discussion — about whether customers will pay an upcharge for customer service — that triggered plenty of comment. My perspective follows, and it is based on the idea that there is more than one way to define “service”:

To answer the question, you have to define “customer service” differently for different kinds of retailers. Customer service at Nordstrom means “high touch” and the SG&A cost of providing it is covered by high merchandise gross margins (or it should be). Conversely, expectations of “customer service” at Target are totally different — shoppers expect store shelves to be well-stocked and checkout lines to be efficient. Again, this lower-expense model is reflected in tighter merchandise margins.

My point? Customers are already paying for the “customer service” they seek in the stores they choose, based on the “cost of goods sold” that they are willing to pay. Any surcharge imposed by retailers to meet or exceed these expectations (hidden or otherwise) would be a bad idea.

Will Target’s latest reset work?

Target’s CEO announced last week that investors should expect tough 2017 returns as the company invests in stores and more competitive pricing. Here’s my recent comment from RetailWire:

Walmart was criticized a couple of years ago for investment spending on its stores because it was likely to put a dent into short-term results. But the long-term view for WMT is brighter because of this decision, and Target is aiming for the same kind of outcome.

But Target has some specific challenges ahead that a store revamp won’t fix on its own:

1. The longstanding conflict between “cheap” and “chic”: Target needs to be more price competitive but has built its brand promise on more aspirational goods;
2. The continuing lack of traction in the grocery business, especially to drive more frequent visits;
3. The head start on e-commerce (and omnichannel) that its biggest competitors already have;
4. The company’s longstanding inability to keep its shelves and pegs filled.

I can’t overstate the importance of the last point. A trip to Target where a third of the shopping list can’t be filled is a waste of time, no matter how compelling or competitive the merchandise might appear.