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Target unwraps its plan to win the holiday season

Target hasn't had much to brag about over the past few months. But as it gears up for the critical fourth quarter, the savvy-yet-stylish retailer is hoping to tap into the same magic that helped lift its comparable sales last holiday season, while plugging some of the holes that have sprung up in 2016.

After generating more than two straight years of same-store sales gains, that metric flipped negative in the three months ended July 30, as fewer shoppers visited its stores. Target at that time lowered its guidance for the fiscal year, citing a "difficult" retail environment.

While sales across the industry remain challenging, particularly in categories like apparel, a flurry of holiday forecasts are calling for growth between 3 and 4 percent. The National Retail Federation predicts revenue will grow at a faster clip in November and December, rising 3.6 percent.

Like the NRF, Target CEO Brian Cornell pointed to a healthier economic backdrop — which includes low fuel prices and more robust employment — as two signs that shoppers will be ready to spend this holiday.

"I think we're entering the holiday season with a consumer who is feeling good about the state of play," Cornell said.

Here are six ways that Target plans to beat the competition.

Ramping up the exclusives

With millions of products available at the click of a mouse, Target wants to stand out from the competition by offering 1,800 exclusive toys this holiday — up 15 percent from last year, and the most it's ever had. This exclusive assortment includes more than 100 unique "Star Wars" items, and throwback games including The Oregon Trail card game.

Target is carrying the idea of one-off partnerships through to its other major departments, including apparel, home, and food and beverage. It's more than doubling its roster of craft beers, wines and spirits, from 700 to 1,500.

"We've got to deliver a unique, differentiated experience," Cornell said.

Extending the free shipping window

Target's blanket free shipping offer helped the retailer notch a 34 percent increase in its digital sales last holiday. Starting Tuesday, the company will once again eliminate its minimum spending requirement to qualify for free shipping. And because Hanukkah runs though Jan. 1, Target will extend this promotion an additional week this season, to end on New Year's Day. This should help relieve stress on both customers and its systems, Cornell said.

A rendering of Target’s Wondershop.
Source: Target
A rendering of Target’s Wondershop.

The company has meanwhile rolled out the ability to ship from its stores to an additional 600 locations, to shorten its delivery window. And with 35 percent of its online orders getting picked up in-store, Target has built more clear, attractive signs to signal these areas to shoppers.

"Last year we saw a huge surge leading up to Christmas," Cornell said. "We expect the same type of surge this year."

Improving the electronics department

Electronics weighed heavily on Target's revenue during the fiscal second quarter, with comparable sales in the category sliding double digits. That included a 20 percent dip in Apple products.

Target is trying to breathe life back into the category this holiday by highlighting virtual reality products including PlayStation VR and VR One Plus, as well as new connected-home products such as Google Home. It's also invested heavily into Apple products, including the new Apple Watch.

Speaking more about value

Since Cornell came on board at Target, he's focused on bringing back some of the "wow" factor the brand lost when it focused too much on price. But he has admitted this year that the company's messaging has now skewed too far away from value.

While style will still take a front seat in much of its messaging this holiday, 60 percent of its marketing will be focused on value. That's an increase of about 20 percent from last holiday. As part of this initiative, Target will offer $10 off a $50 purchase in a different category each week, including home and apparel.

It will also repeat a promotion that offers a deal on a different item for 10 days, and highlight more low-price items at the end of its aisles.

Upping the ante on visual merchandise

When Target rebranded the low-cost merchandise featured at the front of its stores into Bullseye's Playground, comparable sales in the area grew more than 25 percent over the prior year.

Target is once again tapping into that strategy with an upgraded presentation for its seasonal items, which it's dubbed "Wondershop." These shop-in-shops will sell 2,000 new holiday products starting Nov. 1.

Leaning in on successful categories

Fresh off its best year in more than a decade, Target is playing up its home decor and entertainment categories, in an attempt to make its stores a one-stop shop for party planning.

It's also added 1,000 new products to its Cat & Jack kids' apparel line, which launched in July and has been posting double-digit growth "week after week," the company said.