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“That's what I think Target's gotten really good at, is speaking to that shopper the same way no matter how you want to shop.” — David Glaza, Founder and CEO of DIGITS
With 1,948 stores across all 50 states and the District of Columbia, 45 owned brands, and $106 billion in revenue in 2021, Target is one of the largest retailers in America.
Any brand worth its salt has to incorporate Target into its ecommerce sales strategy to achieve success on the digital shelf. However, the retail media opportunity Target offers is very different from Amazon, Walmart, and other big players. Understanding these nuances is critical to maximizing sales on this channel, according to David Glaza, a Target veteran and founder and CEO of retail media agency DIGITS.
Glaza joined a recent episode of the “Unpacking the Digital Shelf" podcast, “Driving the Digital Flywheel at Target,” to share his insights on what makes Target so unique and the core components of its digital flywheel that every brand needs to master to achieve digital shelf excellence.
Unlike Amazon, which doesn’t have a huge brick-and-mortar presence, local is a huge differentiator for Target. Glaza says local stores drive about 90% of the company’s digital business.
“The Target business, even digitally, is still heavily localized. The vast majority of those purchases are still happening within a five-mile radius of a Target store,” Glaza says. “And those shoppers — if they’re anything like me — sometimes you walk in the store and shop, sometimes you do a drive up, sometimes you do it shipped. You really mix out your wallet and your purchases across all of those touch points. That's what I think Target's gotten really good at, is speaking to that shopper the same way no matter how you want to shop.”
These habits mean brands have several ways in which they can interact with customers — a fact that has proven vital as companies have navigated massive disruption in retail over the last three years.
Target’s digital flywheel includes several important components:
However, Glaza says before brands try to understand this flywheel, they need to shore up two important things: investment and expertise. He says brands can make either a financial or resource investment to conquer this channel.
“That's sort of what everybody thinks about, right, is how much money do you have to buy media and/or help your digital at Target? For some brands, it's as low as 2% of their sales, and for some, it's as high as 20% or more,” Glaza says. “The other [investment] is in a team. So, how expert are you in Target? Do you have a local salesperson that understands their digital? Do you work with somebody like us? Do you have other agencies? How are you truly understanding the uniqueness of Target?”
Once brands have these two elements in place, they can begin crafting their ecommerce sales strategy and tackling Target’s digital flywheel. That starts with optimizing digital shelf content.
Compelling product copy, images, and reviews are all critical for converting customers, but Glaza says focusing on images can pay dividends for brands that want to accelerate their growth with Target.
“A lot of brands get caught up because they're so used to creating Amazon images, but Target's mobile hero image standards are quite different,” Glaza says. “Because of that, a lot of brands don't even create mobile heroes. If you search around at Target, you don't see them. You just see product shots. So Target does accept them, but they have special rules that you need to follow. They don't allow as much text, and they have other kinds of accessibility standards that are different.”
Reviews are another differentiator at Target. Unlike Amazon, Glaza says the quality of a brand’s reviews is more important than the quantity of them on Target.com. As a brand, you want to have a good review score, but you don’t need thousands of reviews. Even a few hundred is optimal.
The Target Circle Rewards program is the next component of the company’s flywheel.
Formerly called Cartwheel, the program holds special significance for Glaza since his team helped to launch the accompanying app.
“Because it's unique to Target, it's really forgotten by many brands,” he says. “It is the most robust digital coupon platform for any other sort of proprietary retailer.”
Glaza adds that most brands don’t have a dedicated ecommerce sales strategy for this part of Target’s flywheel, which is a missed opportunity. The channel offers so many personalization and engagement opportunities that brands can capitalize on.
“In our experience, Circle promotions are going to be your best return on an investment and really brands should be pushing as many dollars and energy into it as they can,” he says. “You can find and dedicate coupons to people that have bought your brand or haven't bought your brand or are category shoppers or aren't category shoppers. You can slice and dice and [be] really niche, but you have to devote the energy and time to do that as a brand.”
Next up is paid search. What makes Target really unique in this space is that the company doesn’t allow competitive bidding. For example, competitors of Tombstone Pizza aren’t allowed to bid on this specific keyword on Target.com. They can only bid on the term “pizza.” The decision likely costs Target millions of dollars in revenue, but it also creates a better online experience for customers.
“Target spends a ton of time trying to create the right assortment, and then they'll teach you about a brand. I think if a shopper is dedicated enough to type "Chobani" into the search engine, they don't want to see Yoplait items,” Glaza says by way of example.
“Target's always been very proud of their clean in-store experience and I think this is just their way of trying to make it that same way [online] — digitally clean, easy to shop and not trying to sell you something that you didn't say you wanted.” — David Glaza, Founder and CEO of DIGITS
Although Target doesn’t allow competitive bidding via search, brands can still do it through media or coupons. This is where developing a robust strategy around Target Circle can prove valuable, Glaza adds.
Through Roundel, Target’s traditional media offering, brands can tap into various online and offline media channels, including social, search, display, programmatic, and video.
“But the biggest bogie, and what’s sort of different at Target, is they have a large annual investment minimum for managed service,” Glaza says. “You can run Criteo programs starting at zero, essentially. But if you want a planned out off-site program, you can't do it unless you're spending hundreds of thousands of dollars a year.”
However, within the last year, Target has made all its inventory and audience data available through its demand-side platform [DSP] partners, which allows retail media agencies like DIGITS to buy placements for brands.
“You can't competitively conquer on search, but we could build you an audience of category shoppers in a certain brand that are defined at Target and run your media off platform to try to competitively conquer, if you will,” Glaza says.
Third-party media is the last element of Target’s digital flywheel.
Glaza says some of the traditional first-party retail media options aren’t yet fully digitally optimized, but third-party media is filling this gap. Glaza’s agency has DIGITS Media, which provides this service for brands. However, he says it’s ultimately most important for brands to evaluate their capabilities in this area.
“How are you running offsite media through your own DSP or your own planning in conjunction with Target or with Roundel or whomever?” he says.
Glaza adds that brands don’t necessarily have to work through a managed service program and can instead use an in-house agency or a third party that can work alongside their local sales or shopper teams to capitalize on the opportunities at Target.
In 2023, brands should really focus on understanding and optimizing Target’s digital flywheel — especially third-party media — and integrating all of this into their digital shelf processes, Glaza says.
They then should focus on establishing and tracking Target-specific key performance indicators (KPIs) to measure their success and identify areas of improvement. DIGITS, for example, tracks what it calls a retail media impact rate for each of its clients across Roundel and Target Circle. It also tracks total sales and overall Target channel growth rates.
There may be a lot of legwork involved to drive ongoing growth on this channel, but Glaza says the most important thing for brands is just to get started.
“It's more about the process; it's more about the consistency and really building it as part of your day-to-day job,” he says.
To hear more of Glaza’s insights on how to develop an effective digital strategy for Target, listen to the full episode.
