How Target's omnichannel strategy grew from nothing

CHICAGO – At Target (NYSE:TGT), the path to becoming an omnichannel retailer started with the supply chain.

       Karl Bracken

Connecting the digital and physical channels was a challenge for Target as recently as 2012, according to Karl Bracken, senior VP supply chain transformation. The retailer was unable to access store inventory to fill orders, resulting in lost sales and frustrated shoppers.

"Other retailers were figuring it out and at Target at that time, we weren't even talking about it," Bracken told attendees at the 2016 Internet Retailer Conference & Exhibition Wednesday. "We were so focused on stores at the time."

Target, like most retailers historically, was product-oriented. "We differentiated with product and experience. But we had to differentiate on more than just product, and that included the supply chain," he said.

Bracken sent a note to the CEO (Gregg Steinhafel, at that time) and was immediately tapped to begin exploring and implementing the flexible fulfillment programs that today are driving Target's omnichannel strategy.

Being late to start was an advantage that Bracken took advantage of. "We studied what other retailers were doing, so we don't make the same mistakes," he said.

The company decided to lead with implementing buy online and pick-up in stores (BOPIS). "We knew it would build foundational capabilities that would let us expand," Bracken said.

Initial concerns about added payroll and workload quickly were overshadowed by new challenges such as system issues, trouble finding products and lack of space to hold orders. Target had to remodel customer service areas and develop more efficient programs to find and track merchandise.

Shipping online orders from stores held its own set of challenges but has allowed Target to cut shipping times in half and reduce costs and out-of-stocks.

Each new flexible fulfillment feature has given way to the next. Shipping to stores led to shipping from stores and then to in-store pickup and fulfillment.

Next up will be using stores as fulfillment nodes and making systems and process enhancements, including algorithmic analysis to drive sales across the network.

In 2015, there was a 60 percent increase in the number of orders shipped to stores and thus far in 2016, that figure is up an additional 50 percent. Said Bracken, "We did not expect it to be as big as it is, we were surprised."

"We still aren't perfect today, but we're getting a whole lot better," he said. "We continue to work on it." And to learn – Target recently discontinued its curbside pick-up program.

"Flexible fulfillment is now core to retail," Bracken said. "We weren't first to the game, but the way this was launched and grown, it's fulfilling to see how well it's done."

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