The $550 million all-cash deal will let Target customers order groceries and other goods online, and then have the items sent directly to their doors from nearby Target stores, Target CEO Brian Cornell said at Shoptalk in Las Vegas.

Target Corp., No. 20 in the Internet Retailer 2017 Top 500, embraces change, said CEO Brian Cornell at Shoptalk in Las Vegas this week.

Take, for instance, the retailer’s December acquisition of Shipt to beef up its same-day delivery capabilities. The $550 million all-cash deal will let Target customers order groceries and other goods online, and then have the items sent directly to their doors from nearby Target stores.

The deal will enable Target to offer same-day delivery from about half of its 1,834 stores by next summer, with the number growing to a majority of stores in time for next year’s holiday season. The service—which costs $99 a year for unlimited deliveries—will initially encompass categories like groceries, household essentials and electronics before expanding to all major product groups by the end of 2019.

Shipt already had a loyal membership base, Cornell said, including working with stores such as Meijer. Shipt expanded from one market to 70 in its first three years. Shipt CEO Bill Smith, who shared the stage with Cornell, told attendees he got the idea for the company after shopping for the first time for groceries with a newborn and a one year old. “Both kids were crying and it was a huge pain,” Smith said. “I said ‘I’m going to figure out a way to solve this.’ We buy everything else online, why not groceries?”

Beyond Shipt, Target is “investing in its team,” Cornell said. Last year it raised its starting hourly wage to $12, up from $11. It is also adding experts to its stores such as employees who focus on beauty products or apparel and can help a shopper put together outfit

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Having launched as a retail chain in 1962, Target has learned a number of lessons regarding the need to evolve over the years, he said. For example, in 2015 Target launched an exclusive, limited availability line of products with popular designer Lilly Pulitzer, who is known for brightly colored women’s apparel and accessories as well as children’s and home décor.

“Guests lined up early and licked our store shelves clean,” Cornell said. “But the demand also brought down our site.”

The company brainstormed ways to work around such intense online demand for exclusive product launches, including forcing customers to come to a Target store to get such limited goods.

Then, there was the launch of the Amazon.com Inc. price-checking app that allows shoppers to scan a barcode and compare prices in a store with those on Amazon (No. 1).

“We considered shutting down Wi-Fi in all our stores all together or blocking the Amazon app in our stores,” Cornell said. “These were real types of conversations we were having.”

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But Cornell said Target instead chose to evolve. Instead of making exclusive product lines available only in stores, Target built a more stable website and invested in speed and digital technology. Instead of blocking the Amazon app or turning off Wi-Fi in stores, Target “leaned in to mobile” and continued to enhance its Target Cartwheel app that offers in store coupons and deals.

Digital is a careful line for Target to walk as it wants to drive shoppers into its stores. “You all know how people say they came into Target for toothpaste and left with $100 worth of stuff,” Cornell said. Those impulsive purchases amount to lots of sales for Target. But Target’s guests demanded to shop how they wanted to shop.

“Our job is to make it easier than ever to shop and to make it more fun,” Cornell said. For example, with Google Home voice-activated devices Target shoppers don’t have to type to order online. And Target has launched a program where a shopper can order online and have their items delivered to their car within two minutes when they arrive at a store. It’s also offering same-day delivery at Target stores with its purchase of software company Grand Junction, which manages local and same-day deliveries.

 

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