The ground is shaking at Target
The discount department store is undergoing a fundamental change in business practice, from buying to merchandising to store presentation.
Leading ‘the new way of working’, as the change has been officially named, is Mark Daynes, group general manager, merchandise. He came to Target in November 2008 from the UK where he was managing director of his own company, Merchright Ltd. It provided specialist strategic support and advice to retail businesses. Prior to that he was chief operating officer of George UK, having previously worked in management roles for Littlewoods Home Shopping Brands and The Burton Group.
In Australia, Daynes began by comparing Target’s operation with UK best practice, the direction in which the company now wants to go. Presumably, somebody wasn’t happy with the way Target was performing or, perhaps, Target wasn’t happy with itself.
Being unwilling to divulge too much detail to his competitors, Daynes speaks in generalities when talking about the new way of working.
For apparel suppliers it amounts to Target ramping up its direct buying by strengthening its internal design and production teams. This will mean additional internal horsepower and fewer third party suppliers, but those who do make the cut will be drawn into a closer relationship with Target and will be rewarded with more business, greater stability and longer-term tenure.
In return they must lift their game by adding something to their current performance That may be better pricing, styling, or delivery. There is no precise template to follow, only an upwards arrow.
Does this mean that no new third party supplier will be invited to join the family? Daynes says new suppliers are always under consideration but they shouldn’t present themselves unannounced to the Geelong buying office. Rather, they should make a written submission to him about their company and its merchandise. If he sees merit in it, they will be invited to his office for a chat and then, if the boxes are still being ticked, put in touch with the appropriate buyer.
Once the new way has become the standard way, there will be an annual assessment and review of supplier performance of both direct and third party suppliers.
Who is the Target customer? No doubt Daynes thought long and hard about that before hoisting a new set of sails for the company. He is comfortable with designating Target a fashion store – as far as apparel is concerned anyway. But superimposed over that is the concept of quality and value.
It is well known that Target is among the toughest when it comes to quality control. And prices, rather than being discounts, are better described as value for money, Daynes says.
Nowhere is that better illustrated than in the occasional swipe Target takes at up-market fashion by running a limited season of garments carrying a normally exclusive designer label.
These excursions, while they may not enhance a designer’s reputation, certainly make the dollars fly for the store, the designers and the public. During last year’s economic slowdown Target considered it would be inappropriate to run a designer extravaganza but now this type of promotion is back on the drawing board. The way it is handled is for Target to make the approach to the designer, not the other way around.
Asked for a profile of an ideal Target buyer, Daynes hedges his bets by saying a good buyer understands customers and that involves spending time in the stores mixing with them. That isn’t mandatory but is certainly encouraged. Any more information about buyer expectations is not forthcoming, although suppliers to Target tell of an unusual buying system in which the person who decides upon the style doesn’t place the order – as is the practice with other retailers.
So far, Target has not set up an e-commerce arm. No doubt ‘the new way of working’ will fully stretch the management team for the time being and will be aimed at showing a more immediate result for dollars spent.
How big?
In Australian retail terms, Target is a giant. It employs 25,000 people nationally and last financial year posted sales of almost $3.8 billion, producing an EBIT of $357 million. The merchandise categories at Target include contemporary womenswear, female youth, intimate apparel, menswear, childrenswear, footwear and accessories, toys, homewares, electrical and general merchandise. The majority of turnover comes from apparel and softgoods.
As at the end of April there were 172 Target stores and 118 Target Country stores making a total of 290 The breakup of stores per state is:
• Victoria – 46 Target and 24 Target Country
• NSW – 53 Target and 45 Target Country
• Qld – 32 Target and 25 Target Country
• NT – two Target and one Target Country
• WA – 19 Target and 12 Target Country
• SA – 16 Target and 10 Target Country
• Tas – four Target and one Target Country.
While Target is keen to continue its expansion, it is cautious about doing so until the global financial crisis has been played out. This has meant that some planned developments have either been delayed or cancelled but has not held up store refurbishments.
Under the new way of working stores will progressively offer a different shopping experience.
Not surprisingly, imports dominate the Target offer. China is the chief supply country with some goods coming from Bangladesh, Vietnam and India. Third-party suppliers are not all based in Australia. They can be found in Asia, Europe and the US. There are Target design, quality control and production teams sharing offices with the Coles Group Asia in Hong Kong, Shanghai and India.