ROTMAN DESIGN CHALLENGE

SEEING & TOUCHING PRODUCTS IS HERE TO STAY

“I come in needing one specific item, then I end up shopping for more.”!

In Store Online

Shopping PreferenceThe Converged Lifestyle, KPMG

55%

30%

RELEVANCE AND ACCESS DRIVE PURCHASE DECISIONS

2013 2012

Preference for LocalPWC Reta i l Trends Repor t

33%18%

“I live in the area and love seeing if there are any good deals while I am walking by.” !

2013 2012

Preference for LocalPWC Reta i l Trends Repor t

33%18%

SHOPPING SHOULD BE BOTH FUN AND PRODUCTIVE

“I go to Target because I enjoy it while I get stuff done.” !

Lifestyle Everyday

Planned PurchasesConnected Consumer, Oracle Retail

65%50%

Lifestyle Everyday

Planned PurchasesConnected Consumer, Oracle Retail

65%50%

Problem Framing

Field & Desk Research

Concept Testing & Finalization

Synthesis & Ideation

Moms

Millenials

Outliers

Current core customers Future core customers Shoppers outside the norm

Problem Framing

Explore three customer groups

Targetin-store

intercepts

Field & Desk Research

Retail observations

Synthesis & Ideation

In-depth interviews

Locavore

Teen shopper New mom Mother of six

Target lover

In-store shopper

Digital shopper Target hater

Synthesized research insights

Generated dozens of ideas

Clustered similar concepts

Synthesis & Ideation

Brainstorming a mock-up Market-testing the idea Rendering the concept

Concept Testing & Finalization

Target has an opportunity to lead a retail disruption

Make It Fun

Get Urban

Be Seamless

Design Principles Seeing & touching products is here to stay

Relevance and access drive purchase decisions

Shopping should be both fun and productive

What is it? Here comes the neighborhood Urban customers trust Target for everyday items and lifestyle products, but big box stores don’t make sense for their lifestyle or their location

Get Urban

What did we hear?

“It’s hard to find sheets in Brooklyn.”

“I used to go in high school. It’s too far away now.”

“I’ll stop in and shop for clothes and home stuff.”

Bright!by Target!Get affordable, design-focused lifestyle goods in smaller (20-40k sq. ft.) urban stores

Stop in and pick up something for your apartment, the party you’re off to, or for your weekend away

Get Urban

Get the Target brands you love and trust right near where you live and work

Target now distributes affordable, high-quality everyday items through local, small-scale convenience stores

Target at Your Convenience!

Get Urban

What to test first? Consumer Desirability!Run focus groups and pop-ups of new concepts

Financial Viability!Test product mix based on margins/desirability Project volumes by location

Technical Feasibility!Build upon Target Express pilot Assess supply chain delivery

Get Urban

What’s the impact?

Rev/Sq. Ft.: $600 2x Target’s $300 – between Urban Outfitters and CVS Size: 30,000 Sq. Ft. About half the size of a City Target

Total Rev per Store: $18.0 million

4-Wall EBITDA: 20% 10% Target Corp adjusted up for corporate G&A, etc.

Earnings per Store: $3.6 million

Leading lifestyle retailer for urban dwellers!4-6 Bright by Target stores in every major "US metro area !Up & Up is the ubiquitously available brand for affordable everyday items !Significant penetration across local networks of stores in key markets

Bright by Target: Store economics

Get Urban

Future Experience! Financial Considerations!

What is it? More fun at the all-in-one Large stores serve an important need for Target’s core demographic. But customers increasingly expect a more engaging shopping experience

Make It Fun

What did we hear?

“Local producers are awesome. I don’t want the same thing as everyone.”

“It’s hard to pick when there are so many brands. I worry about being cheated.”

“Big purchases are an investment. I want reviews and expert opinions.”

The Local Hub!Made Local, Made In America (or Canada). Spend your morning at Target checking out interesting local products that fit your lifestyle

Target now offers new product lines incubated through the Target Saturday Marketplace

Make It Fun

Check out that new product you’re considering in our Product Petting Zoos

Search and sort features and reviews right in the store

Out of stock? Scan the tag and get it shipped for free

Make It Fun

Up the in-store & bring in the online!

What to test first? Consumer Desirability!Pilot Target Saturday Marketplace in high-density suburbs

Financial Viability!Assess Target Saturday Marketplace visitor volume Gather data from local merchants

Technical Feasibility!Pilot successful Target Saturday Marketplace merchandise in regional stores

Make It Fun

What’s the impact?

Target as a creative hub for communities!Saturday Marketplace and local product sections at every suburban store, with local business growth spurred by incubation from the Saturday Marketplace. !Leading in-store experience retailer!Increased frequency of store visits and larger average basket size

Make It Fun

Future Experience! Financial Considerations!Saturday Marketplace!Logistics coordinator Reduction in parking capacity Increased number of vendors to manage !In-Store Experience!Technology development Reduced floor space

What is it? Seamless Shopping Customers are diversifying the ways they shop. Target brings the in-store fun online by creating a seamless, delightful shopping experience that offers customers transparency, immediacy, and personalization

Be Seamless

What did we hear?

“The website used to tell me if certain items were available... it doesn't now.”

"There's no free shipping on the Target website. "

“Too many things are out of stock too often.”

Shop the world !

Be Seamless

Take a photo of something you like and get suggestions for Target products that fit your style

Target is redefining ���e-commerce as a leader in ���interactive content

TaskRabbit !for Target!Get same day delivery from your local Target

Team up with an online community of individuals willing to make a Target run for you when you can’t

Be Seamless

What to test first?

Be Seamless

Consumer Desirability!Test beta app in control group Build TaskRabbit network at sample store

Financial Viability!Assess usage of beta app before full build Consider revenue share model with TaskRabbit

Technical Feasibility!Analyze build vs. buy/partner strategy for delivery

Where will it take us?

Target brings its incredible in-store experience to the smartphone!Significant adoption by both core customers and millennials who use the app to drive increased online and in-store purchases; new channel for customer data and analytics Target-TaskRabbit network used as primary on-demand channel Last-mile delivery handled by distributed network of Target TaskRabbits

Shop the World!Technology development !TaskRabbit for Target!If Build: Need to establish two-sided market and monitor/manage requests added and fulfilled. Consider pre-signing interested parties before launching the platform If Buy/Partner: Would need to work with TaskRabbit to create functioning "networks around Target locations

Be Seamless

Future Experience! Financial Considerations!

“I’m a little obsessed with Target. I go there tode-stress. I just love it.”

“The highlight of my life is going to Target.”

Disrupt retail Make It Fun!Get Urban! Be Seamless !

APPENDIX!1)  Customer Lifetime Value Segmentation

2)  Customer Journey Map

3)  Concept Deep Dive

4)  Additional Concepts

5)  Future Impact Detail

Our strategy is rooted in building loyalty to capture the full lifetime value of a customer as they move through different"life stages.

Recommended shopping experience  

Existing shopping experience  

LOYALTY CURVE: LIFE STAGES, LIFETIME VALUEFr

eque

ncy

of T

rips

OR

Cus

tom

er S

pend

ing

Pow

er

Length of Relationship

Teens College Young Adult,Young Family Empty Nesters Senior

Citizens

RedCard Users

Active, Loyal Active, LoyalActive, Non-Loyal Active, Loyal Inactive, Loyal

RedCard Users

Ideal Curve

Existing?

Opportunity to intercept and

establish loyalty, increase frequency of trips to Target,

and increase share of wallet

Loyalty Curve: Life Stages, Lifetime Value

Moo

d

TimeEnter Store

Look for items

Browse

Compare prices, look for coupons, do research

Test items

Purchase

Zero Moment of Truth

Search and Sort Discovery

Touchscreen

Personalized Offers

Inventory Track

Product Petting Zoos

Interactive, Immersive

eCommerce

PainlessCheckout

In Store Checkout

Saturday Marketplace

As Alice moves through the store, she is greeted with a seamless shopping experience.

Customer Journey Map

Recommended shopping experience  

Existing shopping experience  

Why Urban? Why Target?

"I love Target because I can get food, clothes, shoes, bathroom items, everything there. And it's so bright and cheery inside!”

Millenials have high lifetime value as customers

Target is loved for affordable, stylish products

Low-cost, private label brands are respected

Huge opportunity in grocery space

1 of 3

Why does it matter? Consumers are less satisfied and purchase less when they are overwhelmed by options.!!Consumers do not shop at locations out of their way.!!Consumers prefer to shop in curated, boutique environments.!

2 of 3

What has to be true? Curation & Location

High-Volume Urban Areas

Optimize Inventory

Data collection + real-time crowd-sourced

Inventory Management

Focus on designing for see-feel-touch in-store

Experience Enhancement

Beyond just opening a new store, Target can lead a category

New Revenue Source

3 of 3

Why Local? Why Target?

Increase loyalty through local community tie-ins

Capture all leads through on-demand order and shipping

Gain trust through a more curated selection

Stop showrooming with product petting zoos and free shipping

“I wish Target had more local, organic and chemical free children's products besides Johnson & Johnson.”

1 of 3

Consumers have a higher willingness to pay and preference for custom lifestyle products that are unique and local. !!Consumers get stressed when having to sort through too many products and make a decision. !!Consumers value reviews and research prior to purchasing big ticket items. Providing this on-site can reduce showrooming. !

Why does it matter?

2 of 3

What has to be true? Immersive & Local

High-Volume Surburban Areas

Introduce New Products

To relieve the tension between local versus mass purchases, give local options

Differentiate, Boost Sales

Bring out products for consumers to try and get shipped right away

Experience Enhancement

Source profitable new products with little risk and cost

Act As An Incubator

3 of 3

Why Seamless? Why Target?

Build loyalty by catering to customer expectations for immediacy

Create delight by offering personalized discovery

Gain trust through transparency and customer service online

Build brand equity by becoming a content creator

“I hate going onto a website and being bombarded. I return most stuff I buy online since I can’t tell if I’ll like it or not.”

1 of 3

Online is perceived as a resource the complements the in-store experience. !!Shipping costs is a deal breaker for shoppers who prefer the in-store experience.!!Out of stock items can result in lost sales!

Why does it matter?

2 of 3

What has to be true? Seamless & Immediate

Anytime, Anywhere

New Technologies

Provide personalized product recommendations and delivery through mobile

Curated, On Demand

Bring in-store online through immersive, interactive experiences

Make Online Touchable

Integrate with existing Target app to make shopping carts social

Fuel Social Shopping

3 of 3

Immersive e-Commerce!Interact with products, watch videos, and chat with experts. Target can redefine ecommerce by becoming a leader in interactive content and customer service

Additional Concepts

Fewer Choices, Easier Choices!Consumers get overwhelmed by too ���many choices and feel manipulated. Make shopping easier by offering high-quality store brands and cut down on selection for a curated experience

Additional Concepts

Future Impact: Where do these concepts take us?

Target at your Convenience!

Bright !by Target!

Small number of slightly scaled-down urban stores

Leading lifestyle retailer for urban dwellers!4-6 Bright by Target stores in every major US metro area !Up & Up is the ubiquitously available brand for affordable everyday items !Significant penetration across local networks of stores in key markets

Where we’re starting What we propose Where we’ll go

Where we’re starting What we propose Where we’ll go

Up the in-store & bring in the online!

The!Local Hub!Continued growth of

showrooming resulting in lower sales of research intensive purchases Risk of store visit experience becoming irrelevant and commodified Overwhelming selection of parity products competing with increasingly respected in-store brands

Target as a creative hub for communities!Saturday Marketplace and local product sections within every suburban store !Leading in-store experience retailer!Increased frequency of store visits and larger average basket size

Fewer Choices,!Better Options!

Future Impact: Where do these concepts take us?

thank you!