The Great Re­tail Rein­ven­tion

- By Steven Ber­toni

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.”

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