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Target's Bold Move in 2017 is Paying Off Now
By: Inc.
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It's not an easy time to be a retailer. Let's face it, it's not an easy time for anyone, but it's especially rough for businesses that depend on large numbers of customers walking through their doors. That just isn't happening right now. Never mind that it seems almost impossible to keep those stores stocked with the products in high-demand right now. 

Even the biggest retailers are struggling. Many have closed their stores as states issued 'stay-at-home' orders. It isn't hard to imagine that some of the places we used to shop won't reopen at all. Other retailers have tried to figure out creative ways to continue serving their customers.

Then, there's Target, which was uniquely prepared for an event like this, mostly because of decisions the company made long before the world was facing a pandemic that brought it to a standstill. Last year, the company added to its retail network by opening smaller footprint stores. It also expanded its delivery and pick up services, which were already a major factor in the company's success over the holidays.

But Target's boldest move came back in 2017 when it acquired Shipt, the home delivery service, for $550 million. At the time, the company was facing pressure to better compete against Walmart, Best Buy, and, of course, Amazon.

Now, however, that move looks prescient considering the importance of delivery to consumers who need everything from basic household goods to groceries and every day conveniences. 

In fact, the company is hiring 80,000 Shipt workers to pick and deliver customer orders, a service that has seen an unprecedented surge considering how many people are  anxious about going into public. 

All of that early foundational work is making Target a winner at a time when most companies are trying to figure out how to scale up their own fulfillment options. For Target, that means same-store sales are up 7 percent, with the company's digital ordering up 100 percent.

It is true that the company's expenses are up as well, largely due to two factors. The first is that the shift in customer needs during the pandemic is largely towards lower margin items. Toilet paper and soap are lower margin than apparel and accessories. 

The other reason is that Target has increased its hourly wage, as well as certain benefits, directly as a result of the pandemic. The company just announced it would extend its $2 per hour raises through May 30. 

In that regard, while the company is taking a short term hit to the bottom line, doing the right thing is always the right thing. Just like the company is benefiting now from wise decisions years ago, the investment it is making in people and serving its customers now will realize real benefits moving forward. 




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