Response to social justice issues, pandemic refine Target’s future actions

The COVID-19 pandemic and the renewed focus on tackling the issue of racism, brought on by the death of George Floyd in Target’s home city of Minneapolis, is shaping many of the next steps for the retailer.

In a webinar put on by the National Retail Foundation, Target Chairman and CEO Brian Cornell shared how these two major events have impacted business and policies for the company.

As the video of Floyd’s death began to air, Cornell said his initial reaction was that this could have been one of Target’s team members. His next response, he said, was to pull together this team and ensure the safety of Target associates as reaction spilled out into the streets and zeroed in on retail stores, including some Target locations. The third reaction was to then reach out to and listen to the company’s African American team members, including pulling together black leaders within the organization, as well as conducting a Zoom call in which thousands shared their stories about racism.

“At Target, we don’t support or tolerate racism,” said Cornell, noting some of the concrete actions the company has taken included donating $10 million to various social justice groups, offering 10,000 hours of consulting to assist small businesses owned by people of color and rebuilding downtown Minneapolis Target stores. They’ve also set up an internal task force on local and national racial equality.

Turning to the pandemic, Cornell said it prompted Target to look at not only how the company could serve its nationwide customer base at 1,900 stores, but also how to ensure the safety of its biggest asset: its team of 350,000 employees. This included raising pay and benefits and addressing the needs of older associates, those who were pregnant or ones with special circumstances.

Cornell said while retail analysts have challenged some of the moves the company has made, he wasn’t going to apologize for investing in associates, such as the recent decision to raise the minimum wage to $15 an hour.

As the pandemic unfolded, Cornell said Target witnessed nearly weekly changes in how consumers shopped and what they were looking for. In March, as COVID-19 cases began to appear within the United States, there was a rush to stores for households supplies and stock up on medications, he said. Then as people began staying at and working from home, their interests changed to buying office supplies, kitchen-related items and games and videos for entertainment. Around this same time, digital sales began to surge.

When the government issued stimulus checks in April, there were more sales of a personal nature, such as apparel. Noting the company’s first quarter results, Cornell said comparable store sales, digital sales and same-day fulfillment all rose within the period.

What the process taught them, said Cornell, was the need to be adaptable and nimble since each week was different. And that flexibility is continuing.

Some of the elements related to shopping that arose during the pandemic are likely to carry over to the post-COVID era, said Cornell. For one, millions of people have learned to shop online — Target has picked up 5 million new online shoppers thus far — and that is likely to continue because consumers have gotten used to and enjoy options such as same-day pick-up or home delivery via Shipt.

Another “sticky” learning is the focus on safety. Cornell said he has challenged his team on how to become the safest place to shop, which likely means continuing to minimize contact.

With the challenges to the economy overall, he said there will be a continued focus on value, and consumers will also consolidate the number of places they shop. The latter gives Target an advantage, he said, because they offer products in so many categories, including fresh food.

Finally, he said, there’s the trust factor. Building trust with consumers will be increasingly important for retailers.

One of the things that worked well for Target during the pandemic was its earlier decision to use its stores as its online fulfillment centers. With stores at the hub, about 40 percent of the cost goes away, mostly because of the lack of transportation from a distribution center. With customers using same-day services, about 90 percent of those costs go away, he added.

“It looks at lot different from shipping eaches (individual items) from an upstream DC,” said Cornell.

The pandemic, he said, was a stress test for digital demand, and the years of investing, training and development of the model have paid off.

Looking ahead, Cornell said the days of long-range planning have been put aside for now. “Now it’s the next four weeks,” he said. While he expects shoppers to embrace the upcoming summer holidays, back to school and the fourth quarter, all will be different.

The horizon and the window for decision-making is much shorter, he said, adding retailers “may place a few bets that won’t work out.” Perfection isn’t the goal, said Cornell, rather it’s the enemy. Instead, retailers need to embrace change and be flexible as the situation unfolds.

He said Target has put some things on pause, such as the number of store remodels, new store openings and its fresh-order pickup, all of which will get picked up again in 2021.