Target’s Brian Cornell Talks Supply Chain, Economic Headwinds and Holiday 2021 – WWD

Target Corp. chairman and chief executive officer Brian Cornell feels more optimistic about business now than six months ago and has some clear ideas about what it’s going to take for retailers to transcend the headwinds of 2022.

For Cornell, it’s about being agile, staying close to consumers, not forgetting the lessons learned during the pandemic and sticking with COVID-inspired tactics making shopping easier, convenient and safer from health risks, like contactless drive-through pickups and speedy and same-day delivery.

“As I think about 2022, that focus on agility, adaptability and flexibility, it’s going to be as important as ever,” Cornell said Sunday morning at the National Retail Federation’s “Big Show” convention during an in-person, fireside chat with Matt Shay, NRF’s chairman and CEO.

Cornell also said spending billions on modernizing Target’s 1,900-unit store chain – putting stores at the center of Target’s omni-channel platform at a time when many were still predicting the death of brick and mortar – as well as investing in digital, supply chain and upping wages and training, all beginning around five years ago, and the company’s format as a multi-category destination incorporating several high-profile third-party partnerships, like Ulta and Disney, have paid off during the pandemic.

“I’d love to have a crystal ball and tell you what the first half of the year is going to look like and the second half, and when  the variant starts to subside. But we are going to have to recognize that each day we have to listen to consumers, and we make sure we flex and adjust as needed,” Cornell said.

“Principles we all learned during the pandemic are going to be as important in year three as they were in years one and two…There is going to be a continued importance of ease and reliability and the importance of safety, whether that’s putting plexiglas up at the point of sale, putting signs up about social distancing or providing masks and other safety features, and giving the option, if you are not comfortable in the store, of using same day (delivery) services. Those elements are will continue to be important.

“We also know consumers love inspiration, they love newness. For us, brand partnerships are so important- to be able to come to Target to get things you want and need, and discover Ulta beauty shops inside our stores, or an Apple shop, or Disney items. Those partnerships provide that level of inspiration but also ease and convenience, because you can shop in one location. Our multi-category model was certainly beneficial during the pandemic, the fact you can shop for beauty and household essentials, and pick up apparel and items for your home, get those electronic items so important in working from home, all in one place, the ability to find one location where you can combine all of your shopping will be an important feature for many of us going forward.”

Cornell, who has been at the helm of Target since 2014, addressed two of the industry’s biggest concerns: how consumers will react to the nation’s record inflation, and the supply chain.

When gas prices rise, in general consumers drive less, Cornell said. “They consolidate the number of locations where they shop,” he added. “We know that when restaurant prices and menu prices rise, more consumers will eat at home. When they look at price increases on their favorite national brands, they might be looking at a store-owned or private brand as an alternative. Some of the historical ways consumers react to inflation will play out again in 2022.

“I know our branded partners will say, ‘What do we need to do differently to reignite demand,?’ So we are going to learn about how the consumer reacts in the next 60, 90, 120 days to rising prices and some of the challenges that they are going to be facing. We all have to make sure we understand how to continue to meet the needs of the consumer, provide the right level of value starting with availability and the right level of service and continue to weather the headwinds in front of us.”

Speaking at length on the supply chain, Cornell said, “Part of the challenge we face is the unprecedented demand we have seen in our system. That demand will change over time but I think there is still going to be very strong demand in the coming year.”

Among his recommendations for correcting supply chain issues, “There has to be greater data transparency, sharing information…Longer term, the [Biden administration] infrastructure bill over time will allow us to modernize our ports and improve transportation, roads and bridges. That’s not going to happen over night. That’s a multi-year investment which will allow us to have a state-of-the-art supply chain in the U.S. versus one that has been lagging behind. So, short-term, the best thing we can do is share data, provide more transparency, make sure there is more visibility upstream, so that we work as a nation and as an industry to continue to use data and analytics to deal with some of the short-term issues.”

Being flexible and adaptable applies to coping with supply chain issues, as Cornell suggested. “One thing we have been doing, even pre-pandemic, is utilizing different ports around the United States. All the headlines talk about is Los Angeles, Long Beach. The ships are out there and by the way, they have been out for years. You could have taken those pictures five or ten years ago. Can we move more containers to the Pacific Northwest or move them down to Savannah or into Virginia to alleviate some of the strain?”

Unloading containers in off peak hours “is critically important, and we have been doing that for quite some time,” Cornell said. “Now many others are recognizing you’ve got to work on a 24-hour cycle.”

Cornell also urged incentivizing Americans who decide to work in the supply chain, be it a distribution center, manufacturing plant, or a truck driver. “We need more drivers on the road to move all that inventory to its end point and key destinations,” Cornell said.

Recapping the 2021 holiday season, Cornell said, “The numbers reported are really encouraging. Consumers came out and shopped all categories. They shopped early. They shopped late. They shopped throughout the season. They used both physical and digital channels. Most importantly, consumers said retail is still critically important to them and it bodes well for the future of the industry.

“For the last 22 months, we have all faced some unique headwinds – a playbook that none of us had in front of us. It seems like wherever you go today, America is talking about supply chain challenges, inflationary pressure, labor shortages, but what’s so fulfilling to me is seeing how the consumer reacted during the holiday season. They came out to shop. It just gives me incredible optimism for the future. America wanted to get back to a little bit of normal and get out there with friends and family and shop in our stores.”

On April 13, at NRF’s “Honors” dinner in New York raising scholarships, Cornell will receive NRF’s “Visionary 2022” Award, for successfully piloting Target through the pandemic and spearheading investments in the business made years ago which are now paying off. Target’s 2020 revenues  grew 19.8 percent to $92.4 billion. Target’s 2021 third quarter revenues grew 13.3 percent to $25.7 billion, with stores comparable sales up 9.7 percent.

“In the early part of 2017, we were talking about a very different approach. It wasn’t very well received,” Cornell said. “Despite some of the media reports and analysts who said physical retail is going away, we said, ‘We have been testing and learning and we are going to put billions into remodeling stores,’ when people were not talking about remodels. We said we are going to build new stores in urban centers like New York City, on college campuses, in new towns where Target had never been before. We are going to invest in our brands, activate our 1,900 stores as fulfillment centers across the country and we are going to make a big investment in our team, increase our starting minimum wage and continue to invest in developing talent.

“There was a pretty cold reaction. But those investments we made certainly helped us accelerate during the pandemic. I had no sense we were going to facing the challenges we have faced in the last couple of years. I actually didn’t know what sheltering in place meant back in March 2020. We all learned together.”

Cornell concluded his chat with Shay with a few words about corporate culture. “I’ve recognized in the last couple of years, perhaps more than ever before in my career, the importance of culture. We have always had a unique culture at Target. We actually spent some time in the midst of the pandemic saying we better make sure that we talk about this in a consistent way.”

He defined Target’s culture as “all about care, growth and winning together. I found that during the pandemic, that commitment to culture has been more important and a bigger part of our success than ever before…Empathy has been more important than ever – taking care of the team and our guests, investing in personal growth and development. The labor environment is not getting any easier so how to use a culture that’s defined by care, growth and winning together, to attract and retain great talent, making sure that’s part of our approach to hiring and staffing, I think that’s going to be a point of differentiation.”