Target Quietly Running Four Fulfillment Trials, But The Reason Why Is Far More Interesting
Target (NYSE:TGT) CFO John Mulligan has confirmed that Target is in the middle of not one but four different fulfillment pilots, including acting as a guinea pig for the same-day-delivery trials of both Google (NASDAQ:GOOG) and Ebay (NASDAQ:EBAY). The other Target trials involve pay-online-pickup-in-store, pay-in-store-pickup-at-another-store and pay-online-ship-from-store.
The interesting background to these trials is that Target—as its name implies—has always been precisely focused. These trials, as the CFO pointed out, are the chain admitting that many fundamental shopper assumptions may no longer be valid.
"We spent 50 years honing, moving products one direction to our supply chain and ultimately to the back door of the store. Then through the front door and trying to do that as quickly as possible. Now we’re moving product different directions depending on what our guest wants and for us, we need to learn how to operationalize that," Mulligan said.
All four of the trials are interesting, but one of them—pay-in-store-pickup-at-another-store—is something we haven't seen any chains toying with. Although unusual, it has definite potential for gift-giving, perhaps to a child away at college or Aunt Bertha in Nashville.
It combines the immediacy and cost-savings (no delivery charge) of in-store pickup with the convenience of local pickup. Granted, it's not as convenient as having it delivered to Aunt Bertha's door, but if it's something she needs right away (a replacement for a broken refrigerator, perhaps), it has some huge advantages.
But will shoppers—in sufficient numbers—want it and, more importantly, opt to use it? That's what CFO Mulligan is struggling with.
Target is "just figuring out what the financial model" behind these trials should be, he said. "How does this all work financially? And for us the key is this: Is (this) a way to drive incremental sales against our existing asset base through that other channel and create a return on investment that makes sense in the digital channels?"
Mulligan touched on two other Target efforts that illustrate the chain's evolving thinking. The first is yet another trial—"in pilot in a few stores," Mulligan said—where shoppers can create a shopping list online and then use it in-store. But given the connection of that app and the store's Wi-Fi, it also acts navigationally, literally helping shoppers to find the products.
"Ultimately, the goal would be—with (the customer's) approval—while they are in the store, making real-time offers to convert them as they are working their way through the store," the CFO said.
At a glance, this Target app would appear to pale when compared with the shopping list app that Walmart's (NYSE:WMT) been discussing. Well, maybe "floating" is a better word than discussing, as in a trial balloon.
That's indeed the difference between the two. Target's app is less aggressive, but it's also real, as it's being actively tested with shoppers in multiple stores. Walmart's functionality claims are more interesting and compelling, but they have—to our knowledge—not even gotten this developed yet, let alone trialed.
What Target has detected initially is that these channels are indeed influencing each other. "We see people building their list and, within a week, they come and buy in a store," Mulligan said. "So those two need to work together to drive traffic. Again, wherever the sale happens, we're happy to have it."
Compared with many other chains, Target is asking more of the right questions and is truly trialing interesting possibilities to get real—rather than theoretical—answers. They may not yet have many of the right answers, but asking the right questions—especially at the CFO level—is a great start.