The Great Retail Reinvention

Amid the Covid-19 carnage, a handful of innovators have finally figured out how to compete against Amazon and sell in the 21st century. Investors and consumers—and, yes, workers—are all winning. Plus: The Just 100

Amid the Covid carnage, a handful of innovators have finally figured out

how to compete against Amazon and sell in the 21st century. Investors and consumers—and workers—are all winning.

Target CEO Brian Cornell

INlate February, Target CEO Brian Cornell was sipping coffee in a Manhattan deli—one eye on the keynote address he was soon to give at an investor conference, the other on his phone as news alerts of America’s first confirmed Covid-19 death buzzed in. Target’s communications, investor relations and specialevents teams had spent months agonizing over every detail of the speech, given to 200 Wall Street analysts and journalists and able, in a matter of minutes, to send Target’s stock price climbing—or crashing. Three years ago, Cornell, 61, who took over Target’s top spot in 2014 after running Pepsi’s food business, had caused the company’s shares to plunge 12% after analysts scoffed at his bid to counter Amazon by investing $7 billion to upgrade Target’s then-1,800plus stores and raise worker wages.

Cornell’s contrarian moves had been paying off. Target’s stock had nearly doubled since early 2017, but the Covid news had him on edge. In early January, he had created a task force to monitor the virus. Now it had come to America. Cornell shelved the in-person conference and threw together a virtual one in 48 hours. “I’ll always remember how I got only one question about the virus during the conference,” Cornell says, shaking his head. “And it was whether Chinese production delays would impact our spring line.”

Within a few days, America started locking down, and the retail landscape underwent a seismic shift. Panicked shoppers stripped stores of toilet paper, sanitizer, bleach and bottled water. Amazon, overwhelmed by an enormous increase in orders, floundered: Deliveries were delayed; shipments of nonessential items became, well, nonessential. Negative customer reviews went up 50%. So did allegations of price gouging, with six-packs of Bounty paper towels going for nearly $60 and a tub of 75 Clorox wipes offered for $40. (An Amazon spokesperson says, “Our systems are designed to meet or beat the best available price amongst our competitors, and if we see an error, we work quickly to fix it.”)

With supply chains seizing up and Amazon temporarily stumbling, millions of customers gave other online stores a shot. Smaller, savvy web retailers such as Wayfair and organic food peddler Thrive Market saw business boom. Millions of mom-and-pop operations were finally compelled to move from storefront-heavy strategies to digital ones. Ditto luxury retail, including brands such as Prada and Tory Burch (see story, page 132).

No one took greater advantage than big-box retailers. In the second quarter, Target sales jumped by nearly 25% year-overyear, to $23 billion, as online sales tripled, adding 10 million new customers. Home Depot also grew about 25%, to $38 billion, as its online sales doubled. Even at mighty Walmart, where getting revenue to go up significantly is akin to turning an aircraft carrier, online sales doubled and drove a 6% yearover-year increase, to $140 billion.

While no one foresaw the coronavirus, these sudden winners had already been girding for the industry pandemic known as Amazon by embracing the one resource the digital giant lacked—their thousands of physical stores. By hardwiring digital shopping into their locations, Target, Walmart, Best Buy, Home Depot and Lowe’s transformed their stores, long viewed as expensive and fast-aging liabilities, into hyperlocal distribution hubs that are now powering in-person and digital shopping alike. Early results were looking good. In the wake of the Covid-19 outbreak, they became great.

“We are within ten miles of most Americans,” says Cornell, who saw same-day delivery demand nearly triple and curbside pickup service soar 700%. For years, the retail sector had been losing its way with customer service. Yet this shift was an undeniable consumer benefit. “Target has become truly convenient,” says Paul Trussell, Deutsche Bank’s retail analyst. “It’s taken years of investment, but now you can buy online, pick up in store or use their app to have someone put the product right in the trunk of your car.”

So shoppers and shareholders have benefited. But something even more profound has occurred with a third set of winners: workers. To say that high-stress, low-pay retail gigs have lived at the bottom of the economic food chain is an insult to plankton. In 2019, the median annual wage for a retail worker was $25,250, with little upward mobility and turnover rates running about 60 percent a year. All this dysfunction was subsidized by you, the taxpayer—the Economic Policy Institute estimates that more than 35% of retail workers receive public assistance. Little wonder that no brick-andmortar retail company has ever before appeared on our Just

Target CEO Brian Cornell at a new curbside pickup station in Sarasota, Florida. “You can place an order, drive into over 1,500 parking lots and our team member will walk out and put it in your trunk, contact-free.”