With every new piece of technology or emerging business trend, some companies rush headfirst into the muck, hoping to grab as much cash or market share as they can — at least in the short term.
Target Corporation (TGT) is definitely not one of those companies. For better or worse, the retailer has traditionally adopted a highly deliberative approach to its business, that sometimes bordered on tin-eared perfectionism.
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Take the white hot business of retailers directly selling digital ads to vendors on its website and mobile platforms. Amazon Inc. (AMZN) and Walmart Stores Inc. (WMT) are already generating billions of dollars from their retail advertising networks.
Target, however, doesn’t even show up on eMarketer’s chart on the top 10 companies with the fastest growing digital ad revenue over the past year — Walmart leads the pack with 42%, Amazon trails behind with 19%.
Great growth and profit potential
However, Target has been signaling that it will move faster with its ad network called Roundel, which it first rolled out four years ago.
“Since 2019, our media company, Roundel, has grown significantly with great additional growth and profit potential on the horizon,” CEO Brian Cornell recently told investors. “It's sought after by advertisers for its relevance and reach, and it's growing each year because our guests appreciate the engagement and the value it delivers.
“Roundel makes for more deeply engaged guests and partners,” he said. “And because it gives us better understanding of our guest preferences, it makes us an even better and more profitable retailer. So we intend to place additional emphasis and investment towards … Roundel in 2023, given the growth potential they'll unlock.”
The company hasn’t disclosed specific numbers about Roundel except to say that business is “extremely” profitable and has grown 60% over the past two years. (That’s actually a relatively small number, compared to what Amazon and Walmart have done.)
But Target has made it clear that the company doesn’t see Roundel as a mere cash grab. Under Cornell, the retailer has worked hard to see the big picture, how physical stores and digital operations can seamlessly work together to build long term relationships with consumers.
And that’s how they see Roundel. The trick is not to just sell ads to vendors but also craft ways to get consumers to buy more stuff at Target and do it more often.
Roundel is More Than Just Ads
“To us, Roundel is more than a digital advertising platform or another revenue source” in the profit and loss statement, Target executive vice president and chief growth officer Christina Hennington told investors. “The goal is for our guests to have a tailored, relevant experience, while helping our vendors reach the guests who are most likely to be interested in their products.”
That’s why Target has moved more slowly on digital advertising than its competitors.
“This is why our approach to digital advertising looks different than others,” Hennington said. “We put our guests at the center of this strategy, just as we do in every other aspect of our business.”
So what might Target do with Roundel? The company has left some clues.
In remarks to investors, executives have consistently mentioned Roundel in the same breath as Target Circle, the company’s newish loyalty/rewards program. So it’s a good bet that the retailer will use digital ads to drive more people to sign up with Target Circle, perhaps by crafting ads that highlight deals Target Circle members can get with specific vendors.
And in highlighting Roundel in 2019, Target cited a specific holiday candy campaign with MarsWrigley that performed well.
Is The Future Shoppable Television?
One former top Target executive thinks another emerging technology might flourish on the retailer's ad network: shoppable television.
Gene Han is Target’s former chief strategy and innovation officer who oversaw new ventures, accelerators, and enterprise partnerships. He currently works with Sway Ventures, advising the venture capital firms’ startups.
Han told TheStreet he believes that the time is ripe for shoppable television, in which consumers can directly purchase items on video content, to appear on retail ad networks.
One reason brands are flocking to retail ad networks is because there’s too much noise around Internet searches, he said. You can Google men’s dress shirts and see tons of information that may or not be relevant to you.
Shoppable television is already popular in Asia. In China, where shopping on the live streams of popular influencers has become mainstream, live-commerce purchases reached $170 billion in 2020, driven by the apparel/fashion and beauty categories, McKinsey said.
Placing shoppable television on retailer websites and mobile sites can offer consumers more curated, engaging content plus the opportunity to quickly purchase items with a press of a button, Han said.
With shoppable videos, “consumers go from ‘product/brand awareness’ to ‘consideration’ to ‘purchase’ much faster in those experiences,” he said. “Also, the dwell time consumers spend engaging with the videos inherently makes the website they are on more valuable to potential advertisers.”
Target has already experimented with a kind of shoppable television in Bullseye University. And Amazon this week launched its Amazon Anywhere platform in which video game players can directly buy physical merchandise in the game itself.
In short, Target may lag behind Walmart and Amazon in capturing ad dollars. But the retailer is working thoughtfully and purposefully to maximize the value of Roundel.
“Target is quietly getting it right,” said DeAnn Campbell, chief strategy officer for Hoobil8 consulting firm.
