Target outlined plans for $2 billion to $2.2 billion in capital expenditures this year, with $1 billion going to technology investments including its supply chain and inventory management systems. Company officials said this will help it maintain or even grow Target’s 40% annual growth rate in its digital channel.
Target plans to take a “channel-agnostic approach” to growing its business driving the total Target experience throughout online, mobile and stores. As a result, Target will be eliminating 1,700 jobs in an effort to transform its business over the next two years.
Brian Cornell, CEO and Chairman of Target Corporation, said in an earnings call that Target will be investing to build digital capabilities as more shoppers expect to receive relevant personal offers and experiences.
Over the next two years, Target expects a cost-savings of $2 billion that will help grow and drive profitability for the company. The savings will be realized in its operations, technology and process improvements; supply chain and sourcing efficiencies and corporate restructuring.
Casey Carl, chief strategy and innovation officer for Target, said digital sales delivered a 50% increase in digital conversion in 2014, and sales grew three times faster than the industry average.
“Digital sales are beginning to play a meaningful role in achieving our overall financial goals,” said Carl. “Digital sales accounted for more than half of our total comp growth last year.”
Carl said Target has made some dramatic improvements to the user experience of its digital channels. The company has reconfigured its team structure to move faster, and took the friction out of the shopping experience.
“More than 70% of our digital experience are brand-new including our desktop, mobile apps, and registry experience,” said Carl.
Target recently cut its free shipping threshold in half at $25, given the strong response it saw from its free shipping policy during the holiday season, the company made the effort make shoppers aware that its digital channels will be an easier experience.
Mobile saw explosive growth, Carl said mobile is “the new front door of Target.” Ninety-eight percent of Target guests shop digitally. A vast majority of that shopping occurs using a mobile device.
“Last year mobile traffic grew 44% and conversions shot up 69%,” said Carl.