Our guest this week is Nancy King, SVP, Product Engineering at Target who shares the remarkable story of her company's journey to omni-channel--or is it harmonized?--leadership. This episode provides a deep-dive, insider's perspective on how Target has embraced the blur of modern retail and put their stores at the center of the guest experience. We get a fascinating behind the scenes look at how the application of agile methodology, combined with digital technology and a willingness to experiment aggressively, has driven break-through results. We also explore how Target knew to invest in these areas ahead of the COVID crisis and what their plans are to stay in sync with ever escalating customer needs and wants.
Our guest this week is Nancy King, SVP, Product Engineering at Target who shares the remarkable story of her company's journey to omni-channel--or is it harmonized?--leadership.
This episode provides a deep-dive, insider's perspective on how Target has embraced the blur of modern retail and put their stores at the center of the guest experience. We get a fascinating behind the scenes look at how the application of agile methodology, combined with digital technology and a willingness to experiment aggressively, has driven break-through results. We also explore how Target knew to invest in these areas ahead of the COVID crisis and what their plans are to stay in sync with ever escalating customer needs and wants.
But first we unpack the hot retail news of the week, including Amazon CEO Andy Jassey's first letter to shareholders and the company's plans to get serious (at long last) about product returns. Then we do a few quick hits--Kohl's take-over talks, K-mart's last gasps and the retail industry's resale curiosity --before lamenting over the train wreck that was Bed, Bath & Beyond's recent quarterly earnings. Steve also riffs a bit on the pointless pursuit of promiscuous shoppers.
Authentic, progressive engineering leader with 20+ year’s hands on experience in Fortune 100 IT organizations solving the hardest problems. Able to quickly assess challenging situations and build relationships across the enterprise to align engineering, product and operations to business strategy. Strong focus on team building and culture to create empowered, energized, high performing teams. Proven ability to set strategy, drive change and foster more innovative and technically responsive organizations. And while all that is happening, my teams and I build amazing software.
Software Engineering Leadership
Enterprise Agile Transformation
Product Model Leadership
IT Strategic Planning
Enterprise and Solution Architecture
Sense of humor when it's most needed
Global Delivery Models
Process Design & Optimization
Vendor & Contract Management
Steve Dennis is an advisor, keynote speaker and author on strategic growth and business innovation. You can learn more about Steve on his website. The expanded and revised edition of his bestselling book Remarkable Retail: How To Win & Keep Customers in the Age of Disruption is now available at Amazon or just about anywhere else books are sold. Steve regularly shares his insights in his role as a Forbes senior contributor and on Twitter and LinkedIn. You can also check out his speaker "sizzle" reel here.
Michael LeBlanc is the Founder & President of M.E. LeBlanc & Company Inc and a Senior Advisor to Retail Council of Canada as part of his advisory and consulting practice. He brings 25+ years of brand/retail/marketing & eCommerce leadership experience, and has been on the front lines of retail industry change for his entire career. Michael is the producer and host of a network of leading podcasts including Canada’s top retail industry podcast, The Voice of Retail, plus Global E-Commerce Tech Talks , The Food Professor with Dr. Sylvain Charlebois and now in its second season, Conversations with CommerceNext! You can learn more about Michael here or on LinkedIn.
Be sure and check out Michael's latest venture for fun and influencer riches - Last Request Barbecue, his YouTube BBQ cooking channel!
Michael LeBlanc 00:05
Welcome, Remarkable Retail podcast, season four, episode 14. I'm Michael Leblanc.
Steve Dennis 00:11
And I'm Steve Dennis.
Michael LeBlanc 00:13
Well, Steve, we've got a very special guest today on the show retail executive actually, you hosted live on the stage at Vegas Shop Talk, Nancy King, SVP, Product Engineering at Target.
Steve Dennis 00:23
Yeah, well, you know, I've had probably like a lot of people a fascination for Target over the years. One of my favorite retailers, it's been a really interesting story over the last few years in particular, as we'll get into, and I was very, very lucky to be able to interview her at Shop Talk. That interview was, I think, about 13 minutes because the Shop Talk folks hone the timing of all things very carefully, but this time, we get to air it out a little bit and do a, do a deeper dive. So very, very interesting story and interesting role that she's got a target as well, which we talk about.
Michael LeBlanc 01:00
We've talked about them extensively throughout the series of you know, how they respond to the pandemic, and, you know, how they, how they're coming out the other end so, so powerfully. So, looking forward to that. Let's get to the news of the week. So pretty big week, I guess, so to speak for Amazon, Andy Jassy's first letter to shareholders pretty, what do you think of the letter? What is it a 24-minute read? They, you know, you subscribe to Amazon, they helpfully calculate how long it's going to take to read it, you know, not a short document by any means. Right?
Steve Dennis 01:31
No, he's really, I guess, continuing on in the tradition of Bezos, his annual letters, which are both long, as well as usually pretty, pretty interesting. So, I have encouraged people over the years to go check out the Bezos letters, and I would encourage people to go check out the Jassy letter, he does a very deep dive on just about everything that's going on at Amazon. So, I think there's a lot of just kind of fun facts, but also a lot of interesting implications as to what retailers can take away from it and maybe a bit about what's on the horizon for Amazon.
Michael LeBlanc 02:07
Well, I thought, as I read through it, that it was sometimes as, as it is in these things, what was not talked about was as interesting as what was talked about what, what jumped out to you, in the, in the letter and the note?
Steve Dennis 02:19
Well, the main thing that jumped out to me was that Jassy is apparently a Foo Fighters fan, he quotes a lyric from a, from a Foo Fighters song. So, that, that was probably the most interesting thing, but the converse of that was, he didn't really talk at all about advertising, which is really fascinating to me is folks probably know or might want to start to pay more attention to the advertising business at Amazon just recently got shed more light on because they started to disclose more about it in their earnings and what we learned is, or what we learn more about is that it is a huge and rapidly growing part of Amazon's business, and it is probably now the most profitable part of Amazon. So, the fact that it is extremely profitable, growing quickly, and an important part of the Amazon flywheel and doesn't get talked about in a 24-minute read. Kind of interesting. Suspicious,
Michael LeBlanc 03:15
I don't know, I don't know, maybe, maybe thought he's already covered it and, you know, Jeff spoke about it actually, for the first time, right. In the last letter, it was the one of the first times they'd actually zeroed in on it, but, you know, I liked the way he ends it. It remains day one.
Steve Dennis 03:29
Like I said, you certainly can get a lot of kind of fun facts and figures about Amazon, and he really dissects how the business performed and how they responded, particularly during the peak of the COVID crisis. I think that's pretty interesting. The, the thing I think of the strategy standpoint, is most interesting is how he talks about innovation, and how they think about that and this idea of a minimally lovable product, and a bunch of other aspects of their innovation process. So, that if you only have a couple of minutes, that's, that's the place I go to first.
Michael LeBlanc 03:58
Yeah, sticking with Amazon, they were in the news talking about, you know, they're doubling their efforts to get their arms around their, their returns process. My thoughts were you kind of created that mess yourselves Amazon, and so good, you're focusing on it, but the, they seem to be very liberal with their returns and that's worked for them in terms of acquisition, but feels like the bill is coming due?
Steve Dennis 04:23
Well. Yeah, I mean, this isn't, you and I have talked about this before. I think I wrote like four years ago about the growing returns problem in ecommerce, as many people probably know, returns online are much, much higher than they typically are in stores and so as ecommerce continues to grow disproportionately, barring some major changes, you're going to see, returns grow disproportionately, and that's terrible for the environment. It's often not great for customers that have to deal with returns, but it's also very expensive. So, on one hand, yeah, it's not surprising that they need to focus on this for a whole bunch of reasons, but yeah, they've, they've, they've enabled, I guess, the problem in a lot of respects and given that Amazon is, you know what, roughly 40% of all, all e-commerce, presumably, they're in the vicinity of 40% of all returns. So, if they're able to do some things differently, it can be very important to their performance, but I think it also could be, hopefully pay setting or set an example for the industry more broadly, because generally speaking, lots of people tend to respond to what Amazon does in terms of policies and pricing and all those things.
Michael LeBlanc 05:34
Let's talk about stores, so there's a bunch of information on, on stores, you know, Kohl's, for example, takeover bids, they seem to have dozens or hundreds more if they could convert all those people and analysts walking through the stores to do due diligence, and the shoppers might actually have a good quarter.
Steve Dennis 05:50
Yeah, I never thought of selling your company as a traffic driver, but that's an interesting point.
Michael LeBlanc 05:54
I don't know, there's not much transparency there. So, we'll kind of keep an eye on that. Kmart down to its last three stores.
Steve Dennis 06:00
Well, it's been, part of the reason why I talked about Sears being the world's longest liquidation sales, I think, you know, in fact, my former boss at Sears, Alan Lacy said several years after he left Sears that, you know, we all know how the movie ends, we're just not sure how long the movie is. It's like this has been going on for a really, really long time and it's kind of amazing, actually, that there are any Sears or Kmart stores still around. So, in a lot of ways, yeah.
Steve Dennis 06:24
Much ado, but nothing, I did go back in my book, I've got a chart that depicts a graphic that Doug McMillon, the CEO of Walmart, supposedly carries around on his phone, which has the top 10 us retailers by decade and I went back, and I looked at that and I was reminded that in the 1970s, Kmart was the number three retailer in the United States.
Michael LeBlanc 06:48
Steve Dennis 06:49
In the 80s, and 90s, Kmart had dropped off that list, but both during the 80s and the 90s, Sears was number two. So, you think now about you know, here are two massive, iconic household names, at least in the US and a few other markets that you know, now are down to three soon to be zero stores. So, it's, it's a sad story, but it does. It does show obviously what happens if you don't transform and respond to what, what customers want and how technology is changing and all that good stuff.
Michael LeBlanc 07:22
Well, speaking of transforming and what customers want a couple of new notes from, let's see, Lululemon wants to get into resale. I mean, I don't know, I'm not that interested in buying used Lululemon stuff, but maybe somebody is, Target on Thread Up Marketplace. So, we've got an I guess, Rent the Runway.
Steve Dennis 07:40
Well, I think the question here is really how high is “up”, and I think the interest in the so-called circular economy remains strong on both the part of consumers as well as retailers. You know, we were talking off mic about the challenges whether you're talking about a model, like Rent the Runway, which is rental, or literal resale, there are a lot of handling costs, and there are a lot of pricing pressures and so the economics of, of doing some of this stuff is not yet so clear, but I think we're gonna continue to see retailers really experiment with different models to see if there's a there's a way to make this work. You know, one of the things I think that's characteristic of, pretty sure, this is what Lululemon is doing, but also, I think, Patagonia, and some other brands is, you know, they're giving store credit or some sort of incentive for the customer to come and trade in their, their use products. So, it's both a play for sustainability, but it's also potentially an incremental way of getting an extra sale or making it, you know, increasing the frequency on the part of customers.
Michael LeBlanc 08:50
All right, so stay with stores, Bed, Bath & Beyond, put out some numbers that were, shall we say, unimpressive?
Steve Dennis 08:58
Well, that's, that's the understatement of the year, Michael, I think it was pretty much a train wreck. They fell way short of Wall Street's expectations, but just on an objective basis, the results were terrible. They had about an I think, a negative 12% comp store decline. They've had an even greater loss than they've been experiencing. So yeah, very, very disappointing. They did point to a number of supply chain issues, which makes sense.
Michael LeBlanc 09:24
Steve Dennis 09:25
But, but you know, they, you know what Mark Triton's trying to do there I actually think is fundamentally pointed in the right direction. They've been investing in improving their stores. They've been doing sort of he comes, as some people will know he comes from Target. So, he's sort of doing a target from a private branding standpoint, clearing up a lot of the clutter that Bed, Bath & Beyond was known for and I think that's the direction they need to go in but it's a pretty big shift from the sort of flea market, 20% off coupon, core way they've been running the business for a while.
Steve Dennis 10:05
So, so whether this is really, you know, fundamentally a bad strategy, or whether this is something that, you know, has to be done, and it's going to be painful, TBD, but he's certainly getting some headwinds from the broader market but, and I often ask the question like, okay, well, for all the people that are dumping on the strategy, I'm like, okay,
Michael LeBlanc 10:24
What would you do?
Steve Dennis 10:25
You know, what's the alternative, because it's not obvious to me that there's a radically better alternative, you know, they're, they're really playing from behind, and they've got just a lot of factors that make this transformation, challenging, you know, if you're selling a lot of undifferentiated product, or, you know, not highly differentiated product, and the customers got a lot of different places to go get it, whether that's online, whether that's target Walmart, you name it, like, there's lots of places to go get the stuff that Bed Bath & Beyond sells that may be more convenient, in some respects. So, you've got that challenge of what is what is the remarkable part of your business.
Steve Dennis 11:04
I think the other thing, and I can't say this confidently without seeing their internal data, but one of the things I think has been true by how about many highly promotional retailers, is they get a large chunk of their customer base, which is filled with what I call promiscuous shoppers, you know, these are customers that are not inherently loyal to the brand, they don't love you, they just kind of like you and they are motivated by a deal and when you start to pull out the promotion, you know, we saw this with Ron Johnson at JC Penney, we've seen this in a lot of places, you know, you start to try to lower the promotional intensity and it turns out that those customers that are kind of in this gray, promiscuous area, they're gone.
Steve Dennis 11:43
It's like I often say like, you know, they're really not just not that into you, like, if the only reason you buy from me is because I give you a huge discount. Well, I'm just not that into you. Right, like, you're acceptable. Well, you're not remarkable and so my sense is that, you know, particularly because we are talking about a lot of products, which are commodity like, pulling back on that, that promotional intensity, you know, it's not so easy to drive the business. So, you know, I suspect supply chain, yes, is absolutely part of the problem but I think a big part of that is the trying to dial back on, on the promotional intensity, and that, that's led to a big drop in and traffic and, you know, ultimately conversion.
Michael LeBlanc 12:21
Let's transition to our interview from a business that's struggling to a business, I think, you would agree is, is remarkable, and we're so happy to have Nancy King on from Target. It's a great discussion and just such a fantastic story. So, let's, let's bring her on.
Steve Dennis 12:38
Well, Michael and I are excited to welcome Nancy King from Target to join the podcast. How are you today, Nancy?
Nancy King 12:45
I am doing well. How are you?
Steve Dennis 12:47
I'm doing pretty well. You know, we usually like to start out by just having the guest tell us a little bit about themselves, their professional journey and your current roles and responsibilities and I have a bonus question about part of your title, which I'll come back to in a second.
Nancy King 13:03
Sounds great. So, I am the SVP of product engineering at Target and so product engineering is really all about building the tools, the technologies, the capabilities that power both our team member experience at Target and the guest experience. So, think of everything from Target.com and our flagship mobile app, to the POS register in stores to our HR system that helps determine schedules for our stores, team members and all of the technology in between that. My teams spend their time creating world class solutions that power Target's strategy, and our future shopping experience. I have had the privilege of being at Target for 16 years now, I'm always in our technology group and prior to Target, I spent six years at one of the big consulting firms traveling the US and getting some great experiences that led me to Target.
Steve Dennis 13:58
As you know, and some of our audience might know, you and I were sharing the stage at shop talk a little while back and we had a great discussion that we're going to build on today but when I was telling people about my session, and people were asking who was part of the panel, I said, Well, we've got this woman from, from Target. She's the Senior Vice President of Product Engineering, and just about everybody said that they had never heard that Product Engineering title for a retailer. Is that something unique to Target or something that perhaps we just have not noticed?
Nancy King 14:34
I would say it's a bit of both, 2015, In the fall of 2015 Target made a substantial investment into our engineering and technology practices and at the time, we moved from what was a very traditional back office corporate IT function to an engineering destination and with that, we moved into a product model we embraced, agile methodologies, or agile methods and when we did that, we moved into a product construct.
Nancy King 15:05
And so traditional corporate IT other retailers don't often operate in a fully bespoke product model, but that's what we do and so to that extent of product engineering, it really means all of the capabilities and all of the software that we build is organized into logical domains that are autonomously cultivated and grown through software development in a product model. So, think Apple, Facebook, you know, all of all the traditional tech companies that everybody brings to mind, they operate in a product model and that's fairly well known. Many retailers haven't moved forward in the evolution of technology to the extent that they operate in that same model.
Michael LeBlanc 15:48
You know, typically, when we have guests, Nancy, we have them spend some time explaining the company that they work for, but I think Target, it's fair to say, doesn't need any explanation. So, let's spend the time talking about this tremendous momentum. That Target has you just lighting it up in the past few years, I mean, you're a fairly, you've been with the brand for a while, you've seen many cycles, it's a fairly mature brand, one could say, but you wouldn't know that from the results and amazing work you're doing, you know, at the big picture level, what, what is it that's causing this, or been the, the contributor to such success and momentum, I mean, you're you guys are really lighting it up, everybody's paying attention. Talk about that for a little bit, from your perspective.
Nancy King 16:28
I would say there's been a lot of attention and a lot of questions that start with Wow, during the pandemic Target really took off, but the outcomes that we saw over the past couple years, started with investments that happened before then and I would say there are two kind of key differentiators that Target pursued over the past four years that really put us in the place to capitalize on the opportunity that came up over the past couple of years and those two areas were one very near and dear to my heart technology, and the way it can help power and deliver against strategies and the second was around our supply chain capabilities.
Nancy King 17:19
So, we came out with a strategy to put the store and our physical shopping experience at the center of our capabilities. So, we see the physical store, in the center of how we serve our guests, no matter how they choose to shop, but that is digitally or physically in the store and to do that we had to invest in the capabilities to support fulfillment, to support operations, modernizing how we staffed and stocked and even allocated physical space within the store to support growing our fulfillment capabilities through those stores footprints.
Nancy King 17:46
And so, we saw a tremendous opportunity in building capacity and building speed and efficiency by leveraging our stores as hubs as a fulfillment vehicle. Along with that, the second bigger strategic priority that we made was a focus on technology and engineering and that's when we really invested in growing our technical teams in increasing their skills and building out just a top-notch in-house engineering team. Like I mentioned, previously, we adopted new principles, we created a very intentional architecture, to let our capabilities move forward at the pace of change of disruptive retail, and honestly at the pace of guest expectations, because shopping patterns were being incredibly disrupted and we needed to be able to move faster, and at the scale of Target in a way that we hadn't before.
Nancy King 18:40
And so being able to change our technology practices and how we brought software to life gave us the opportunity to respond very quickly when the disruption of the pandemic happened and everybody's shopping habits changed and all of a sudden, what we were used to seeing on Cyber Monday from a volume perspective, was a Tuesday afternoon as people across the US were looking for toilet paper and hand sanitizer. So, it, it really did pay dividends that we had approached those investment areas well ahead of the disruption we saw over the past couple of years, and we were, we were in a great position to be able to take advantage of the digital penetration and the shift that happened when other retailers weren't as quite prepared.
Michael LeBlanc 19:26
You know, to that last point that, that I find so fascinating, because, you know, as you describe it, it's, it's, we have to take our minds back to pre-pandemic, the before times when you know, some of the decisions you were making, for example, the big focus on stores. We’re not as you know, not everyone was making those same decisions. It's almost you had a supernatural ability to see forward what was there an epiphany in the business that said, Listen, you know, we think you know, again, pre COVID that this is the direction it's going and, and we're convinced that this is the way and then they were you know, how does an organization gets so aligned? That's a lot of work to get, you know, you must need to align the culture to achieve all that and, and in the expectation or the anticipation of that being the final outcome is, was there a single epiphany or did it develop over time, you were part of it, how did it evolve?
Nancy King 20:19
I would say it was a bit of an evolution, but you hit on two pieces there that I think were key to it. The first one was that we put the center, we put the guest at the center of all of our strategic choices, all of our planning activities and how we operate and by having the guest at the center, it became clearer as we were working on capabilities, that channel shift was real shopping expectations were changing and while everyone was talking about omni channel, and we were certainly embracing omni channel, it really meant something different to pull the friction out of a shopping experience so it truly was omni channel. So, there weren't strategic or financial incentives, to try and get a shopper to shop in a certain way or get a product delivered in a certain way.
Nancy King 21:09
We had to have the flexibility and the operational scalability to deliver a product in whichever way the guest wanted. Despite however they chose to buy it and decoupled those two things, the purchase and the delivery, the flexibility of that gives us the opportunity to meet the guests in whichever way they want to shop and which, in whichever way they want to receive the product. The other piece you had on there was culture because it takes a lot to move a really large company like Target through agile thinking and test and learn. We all, we heard test and learn a lot at shop talk last week, but what that really means is, is comfort with failure and comfort with being less than perfect and putting something out there that you think is right and knowing that something some part of it is going to be wrong and being ready to very quickly respond to that and I would say what we've seen over the past couple of years is this tremendous shift to embracing agile thinking and not aiming for perfection, aiming for a best first step and then letting the guest give us the feedback to guide where those next steps after that go.
Steve Dennis 22:23
Yeah, it's, it's so interesting and one of the things, and Michael kind of touched on this, but that you guys really went against, I think the prevailing wisdom, you know, this idea that physical retail, I mean, I think everybody kind of agrees the Retail Apocalypse thing is kind of silly, but certainly there was this pole that you really should be investing less in stores, and more in all things digital and you guys really chose to do both, which I think is, is really quite amazing. I mean I kind of wish it wasn't so special, because I think a lot of companies are probably kicking themselves that they didn't get started earlier.
Steve Dennis 22:58
But one of the things I'd love to do is go a little bit deeper on this, the ‘stores as hub’ concept in terms of what that really means, you and I were chatting about how, in getting ready for shop talk, that I personally didn't see, I didn't witness some of these changes in the Target store and my sense is you did a lot of things in, in the back office, but could you just talk about what it's taken to go from a place where you've got 20% of your products being ordered online, but something like 96% of products being fulfilled from store, particularly when stores were largely built for kind of a singular purpose and now they're playing all these different roles. So, can you just kind of get into some of the details about how that, how that actually works?
Nancy King 23:43
A lot of that has been powered through technology, and operational changes, I would say the two things together people and the process and tech that they use. So, when you think about ‘stores as hub’, when you think about the stats you just shared, there is a tremendous amount of change within the store within team member roles in the store and within the tools they use to make that happen. So, and, technology has played a huge part in enabling that when you think about same day services, so they are a cornerstone of that fulfillment method. Obviously shipped to home is still real and we put items in boxes and send them to your house and your doorstep, but our same day services are an overwhelming majority of that delivery and that is by online pickup and store it is Drive Up and then it is shipped. So same day delivery from your local store. And all of that is driven through technology and process changes within the store.
Nancy King 24:38
So, if you looked at a bird's eye view of the store, obviously there are changes that have to happen in the back room. You will see configuration and tooling and processes that look a lot like a miniature fulfillment center. You are picking product you are packing it you are labeling it and shipping it whether it's going in the back of a FedEx truck or going to one of our sortation centers are being picked up by a ship shopper directly from the store for delivery and out on the sales floor, you are seeing team members picking and collating orders in a way that they didn't before.
Nancy King 25:13
So, a couple of things have really powered that we have an application called my device and so our team members have individual handheld mobile devices and we rolled out 1000s More over the past couple of years to give each team member on the sales floor, up to date information on inventory on sales on product on inventory that's coming in and on the health of the business. Meaning do I have a lot of orders that are piling up that guests are pulling into the parking lot soon expecting to have brought out to their car. So, we have invested quite a bit and making sure that we have the operational understanding of what's going on within a store.
Nancy King 25:48
Then we developed specific applications to support each of these new capabilities we're delivering. So, we have a Drive-Up app that lets our team members who are in fulfillment roles now within the store, which has certainly grown over the past several years, understand how many orders that we take and what items are in those orders. Are they fresh, are they frozen, are they shelf stable, or general merchandise? How many are coming in the next hour, how many are coming tomorrow, which ones do I have to get by shift cut off time to get in the back of a truck by the end of the day and that helps us be very thoughtful and operationally efficient with staffing and sequencing of the work within a store.
Nancy King 26:26
Then we have our e-Pick app and this is a bit of the magic because we continually tweak and iterate this as we get learnings, this is what guides our team members through the store or through the backroom, to pick and fulfill those orders and part of what you've called out is, I don't really see a lot of Target team members walking around the floor picking all these orders, but it's such a large volume, we have continued to refine and look at different ways to make it most efficient for our team members to pick in the back room if the product is there and if they can fulfill a majority of the basket there and when they do shop on the sales floor. How do we pull together several orders or batch them up, so I only make one pass down this aisle, but I get seven different products for eight, or for six different orders, so that we're not congesting or adding friction into the shopping experience for the guests that have walked into our store and love the experience of being in store to select their product themselves.
Nancy King 27:21
And so those are just a couple examples but being able to create each of those pieces, and then sequence them together. So, we can be operationally efficient at the scale that Target requires to deliver some of these items, is a bit of the magic behind how we can bring it to market so quickly and then while we do that, how we can make sure it's a world class experience, both for our team members and our guests.
Steve Dennis 27:46
Have you actually had to reclaim space from selling square footage to accomplish the back office or back of the house part of this?
Nancy King 27:55
In some places, yes. So, when COVID first started and drive up in particular exploded, so we saw 600% growth in drive up early on in the pandemic, our fitting rooms were closed, because people were not physically touching and trying on there was a lot of safety concerns and so we actually started using the fitting rooms and most stores to stage drive up items because it just exploded on us. We hadn't pre allocated space to cover that and so that worked for most of 2020 and that gave us a chance to start to get ahead and at the same time we were rolling out fresh grocery into drive up which we hadn't had in most markets and now we have temperature controlled coolers in front locations spaces that we hadn't allocated before and so we did start to reclaim some sales space and then over time as we did remodels and reshuffled, put that space back, but just in different places. So, we could still have staging space closer to the front doors and access to the drive-up plans to be able to get those items out quickly.
Steve Dennis 28:57
That's such a great example of not letting perfect be the enemy of the good right, to be willing to, to be willing to do that, even though you knew that was not going to be the long-term solution, presumably.
Nancy King 29:08
Michael LeBlanc 29:09
You described this as magic as I listened to you. It's like art and science blending together and you know, both Steve and I spent a fair bit of time in retail stores and I'm just trying to imagine the structural massive change that both the supply chain and, and your stores are going through take us a little bit behind the scenes and you talked about people process and technology, but it must be impacting the layouts of the store the workflows, everything, and how have you been dealing with that, you know, these volumes of kind of the waterline has gone up and it hasn't receded, so all these things are still very popular?
Nancy King 29:44
I think there are probably a couple of key parts to that. The first is we did change roles in the store. So, we have roles that are specifically dedicated to fulfillment now and understanding the health of the fulfillment pipeline with orders whether those are going out to be shipped to home or into a drive up spot in the parking lot. So, I think that was a pretty large one.
Nancy King 30:07
Like I mentioned, we did reallocate space within the store, but the biggest ongoing area that we're still focused on is getting the right balance of temperature controlled storage and so on some of our most popular stores, you will see messages at sometimes during the day, the day that say, oops, sorry, our fridges are full because we can forecast and understand down to cubic space within a cooler, how many orders are picked and not yet picked up and how many are in the pipeline to be picked, where we know that the density within the coolers that we have at that store are going to be full and so now we automatically will pause, taking new orders until enough orders are picked up that we know we've relieved temperature space within that store and so little tweaks like that we continue to see because we are very space aware and very operationally aware that some stores behave very differently than other stores.
Nancy King 31:04
And so, we have to be able to nuance the experience at a very busy store in a different way than we do at a less populated one. The other thing related to space and like physical store layout that we really focus on is how we do path team members through the store, and how we pick so we have done tests to have let's call it a team member who specializes in apparel always be the one who goes and finds the apparel items in an order no matter what the traditional routing in another store would tell you because finding the women's blue size medium t-shirt on a rack of 50 shirts. For someone who's less experienced with, with apparel, it is really hard. It's like an Easter egg hunt and so we tried different models.
Michael LeBlanc 31:48
I think its volume to follow this too, right? I mean, it's, it's been said that, you know, when you've got more than a handful of orders that goes up to hundreds of orders, then you can, you can develop vertical expertise, right, and free up and dedicate resources to exactly what you're describing, right?
Nancy King 32:02
Yeah, and so like, just like the, the mantra of you know, let's, let's not aim for perfect right out of the gate, we are now testing different ways to go about fulfilling those orders in different locations that have different profiles and we know that one size won't fit all we start that way, because it's the simplest to learn and it doesn't burden a bunch of assumptions on how we think things will work, we let life actually show us how it should work and that has, that has proven very successful because now we've hit a point of maturity, where we can handle the nuance, like you have to nail the fundamentals before you try and get tricky with things and we really believe in that, like, get it out, make sure it will scale and it's rock solid, and then start figuring out where the value add additions go.
Michael LeBlanc 32:48
It's like a whole new chapter, that booked a goal where you're working on the Theory of Constraints, right, the key constraint turns out to be how much room is in the fridge.
Nancy King 32:56
Michael LeBlanc 32:56
As one of those things that probably didn’t, I don't know if it would have occurred to everyone at the beginning of that process, right?
Nancy King 33:03
Well, it's, it's funny, because when, when 2020 started, we had plans to roll out drive up across the nation, in a very different pace, it was going to take most of 2020 into a little bit of 2021 and we had lots of discussion on coolers and the cost of coolers and where to put them and where to reclaim space. And then the pandemic hit, and safety was number one for everyone. And people need a drive up to get their food for that week and all of the debate around where to put the coolers and how many to go kind of went out the window and we said we'll start with this and then we'll figure out where it's not working. And then we'll solve the problems where they're not working, and I think that was a really big lesson that we learned and then took with us going forward. We haven’t, we haven't let that revert back. You, you have to start somewhere and sometimes the easiest place is just to start with what you think is right, but not try and then assume what will come next.
Steve Dennis 33:56
But I'm curious and it's so fascinating. And you know, Michael and I often talk on the podcast about barriers to innovation. And even though it seems like you learned an awful lot along the way, it still seems as if you were signing up in the beginning. I mean Target in general, not you personally I guess but also the organization was signing up for a very massive amount of culture change process change, tremendous amount of investment. Did you, like what sometimes I talk about, like trying to understand the risk that actually it's more risky not to change then to change, but I'm just curious how In your world you perceive the risk of getting started on this because it seems like a pretty big leap that you made.
Nancy King 34:47
Yeah, it I would say again, it started before the pandemic and like when I think about technology specifically that started to drive some of the, the operational change. Target used to be very focused on flawless execution and making sure every store was perfect. When we started to make the changes in technology that we did seven years ago, it was because we, we knew that technology would play a significant role in business strategy and advancing capabilities forward. And doing nothing was riskier than doing something, even if something wasn't perfect.
Nancy King 35:27
We made significant changes in October of that year, which in the retail season is when you're kind of like shutting the doors and like getting ready to lock down for peak season because we recognize that we needed to make that change. The difference is, we have the agility so that if we do make a change, and it's not right, we can quickly respond to that and fix it and you can't have one without the other, you can't be ready to place big bets, if you don't have the ability to quickly change and respond to what you learn when you play set that. And so, I think it's both of those pieces together from a technology but, but also from an operational perspective and a business perspective, in how we work together. Those, those three pieces at scale at the scale of Target always have to be working in concert to really make any big change successful.
Michael LeBlanc 36:15
Well, we're closing in on our time together. And we typically would ask what's next, I mean, it sounds like everything is, everything is next at Target, you know, as you respond to evolving customer and team member’s needs. You mentioned a couple of really neat things from the stage. I think the stage Shop Talk, I think you talked even about returns are getting, getting my caramel macchiato while, I'm picking up my, my orders. Could you share a bit of insight as to what comes next?
Nancy King 36:42
Our, our number one request, we are finally going to deliver on that this year. When you place a drive-up order and you let us know you're on your way. You can also order a Starbucks beverage and we will bring out your order and we will bring that you know cold coffee or hot macchiato right to your car. We will be piloting this year; I don't know the markets yet and then we will be rolling out nationwide after that and the second big thing that we've gotten a lot of requests for is being able to do a return through a drive-up service. So, whether I purchased it online, in the store or through a same day fulfillment method, being able to pull up in the parking lot, no appointment necessary, and return your item to the store. Those are two things that we are actively working on right now, along with growing Ulta and our amazing beauty experience and then enhancing our in-store shopping, Disney Stores and all of the other great reasons on why people continue to come into the physical store while they still shop Target online.
Michael LeBlanc 37:43
No, it's fantastic and I love the idea of curbside return some of the retailers in Canada, particularly in the province of Quebec had to suddenly stand that up a couple of months ago, when the government said you must be vaccinated to go into their stores, which caught everybody by surprise and they're like, well, how do people do returns and it was quite,
Nancy King 38:01
It seems like it would be easy, just the opposite of what you currently do but it's a lot harder than that.
Michael LeBlanc 38:06
It isn't. As we all know, returns are never easy and they're such an important part of the customer journey, right? So that's, they always strike me as, boy you can really win with a customer, handling a return well. So, I wish you best of luck, but by the sounds of what you're doing, you know I have a lot of confidence it's going to be an amazing experience. Listen, on behalf of Steve and I really want to thank you for joining us on Remarkable Retail podcast and just such a, such a, an insight into what is a phenomenal retail story, probably one of the most impressive stories coming out of the COVID era. So once again, Nancy, thanks for joining us.
Nancy King 38:41
Thank you for having me. It has been my pleasure.
Michael LeBlanc 38:44
If you like what you heard, please follow us on Apple Spotify or your favorite podcast platform so you can catch up with all our great interviews and insights and new episodes will show up each and every week. Be sure to check out our YouTube channel and last but not least, tell your friends and colleagues in the retail industry all about us.
Steve Dennis 38:59
And I'm Steve Dennis, author of the bestselling book, ‘Remarkable Retail: How to Win & Keep Customers in the Age of Disruption’. You can learn more about me, my consulting and keynote speaking at stevenpdennis.com.
Michael LeBlanc 39:13
And I'm Michael LeBlanc, Producer and Co-host of the Conversations with CommerceNext podcast, The Voice of Retail podcast, keynote speaker and host of the all-new Last Request Barbecue cooking show on YouTube and you can learn even more about me on LinkedIn or meleblanc.co.
Michael LeBlanc 39:29
Have a safe week everyone!
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