Fast Five Shorts | Buy Or Sell: Target Cutting Its Production Lead Time
In the latest edition of Omni Talk’s Retail Fast Five, sponsored by the A&M Consumer and Retail Group, Mirakl, Simbe, Ocampo Capital and Scratch Event DJs Chris Walton and Anne Mezzenga are joined by co-hosts from the Alvarez & Marsal Consumer & Retail Group, Kelly Carey and John Clear. In this clip, the group discusses: If They're Buying Or Selling: Target Cutting Its Production Lead Time
For the full episode head here: https://youtu.be/s3yeI48E9A0
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Transcript
Target has said that it has cut its go to market timeframe from seven months to eight weeks, according to Retail Dive.
Speaker A:Rick Gomez, the chief commercial officer at Target, told an audience last Monday at the National Retail Federation's Big show conference that Target has shortened its go to market cycle to eight weeks, down from 27 weeks for specific trending items so they can reach shoppers faster.
Speaker A:Quote, not everything is in eight weeks, Gomez explained, but the things that are trending and that we're seeing that are going viral, that we want to be in market ahead of the competition, we've created an operating model that enables us to do that, end quote.
Speaker A:John, we're going to go to you again on this one.
Speaker A:Are you buying or selling?
Speaker A:Target's announcement of cutting its product lead times from seven months to eight weeks.
Speaker A:And what, if any, impact will it have on Target's overall business performance?
Speaker B:Yeah, I mean, to answer the first question, I think I'm a hold right now because I'm not quite, to be honest, it's, it's, I don't know, it's kind of, it's, it feels like a very exciting announcement, right?
Speaker B:We're going to do stuff in eight weeks and we cut it down from seven months.
Speaker B:And like all those numbers sound great, but I'd have a couple of like, first of all, concerns about impacts this could have on Target operationally, right?
Speaker B:So first thing is that historically, I mean, say historically, over the last number of years, Target have mentioned inventory issues a lot in earnings calls, right?
Speaker B:That they've had too much inventory of the, the wrong items, they've gotten hit by markdowns, it's driving some of their underlying underperformance.
Speaker B:I only see this exacerbating that issue, right?
Speaker B:If you're, if you're changing and saying, hey, this is a big deal and we're going to go after it in eight weeks, but you choose the wrong thing, suddenly you've got a ton of like, quote, unquote trendy inventory that actually nobody wants, which is not probably going to solve Target's underlying issue.
Speaker B:And if they currently have forecasting issues at a seven month lead time, I don't see how that's suddenly going to get better in an eight week lead time.
Speaker B:So that's my first kind of operational concern I would have from a, from like kind of a merchandising ops perspective.
Speaker B:The other thing I would say is like, I don't think that this gets at Target's underlying problem of underperformance, right?
Speaker B:So we know that they're constrained on basically price.
Speaker B:I mean is the big issue that the stick that's being used to beat Target all the time, having a trendy, I think bow that is one of the examples that they use.
Speaker B:Having a trendy bow in time for holiday seasons is not going to change that.
Speaker B:There's a little bit of maybe additional incremental sales you can gain, but I don't know if it's going to change it.
Speaker B:The other thing is eight weeks I was trying to think through in the year right.
Speaker B:Where eight weeks could actually be helpful for you on a trend.
Speaker B:So if you see a holiday trend, it's probably going to come in maybe mid October to early November.
Speaker B:You're already past the holidays at eight weeks.
Speaker B:If you see a back to school trend, which I thought was maybe the closest I could get, you might see it in June and you hit stores in September.
Speaker B:But we all know in real life, in retail, back to school is done by September.
Speaker B:Right.
Speaker B:You're into Halloween.
Speaker B:So I don't see how this actually helps them from that perspective.
Speaker B:And the final point I'd have is like eight weeks is still way behind the market leaders of like real quick turn.
Speaker B:So Zara is two to two to four weeks.
Speaker B:Right.
Speaker B:And so that's kind of our benchmark.
Speaker B:It's not the exact same model, but I still think it doesn't think it brings it quite there.
Speaker B:So it's actually funny having started from a hold and then work my way through those three points, I'm probably on a not buying situation right now.
Speaker B:I just don't see how it trains to their actual solves the problems.
Speaker B:And I think that the thing that Target's always been known for is kind of storytelling, building a brand that tells a story that you can rely on, that's consistent that you know what you're going to get.
Speaker B:Yes, there's some kind of trend on trend moments that they've had, but it's not their usp.
Speaker B:So I, I think it sounds great, but I don't know what it's driving at to solve for for them.
Speaker A:Kud.
Speaker A:Kudos to you, John, because I was gonna, I was gonna hammer you over the head with.
Speaker A:So you're a hold on this, huh?
Speaker A:But no, you, you switched me, I.
Speaker B:Think with me on my feet.
Speaker B:Chris, it's good you do.
Speaker A:Yeah, yeah, right.
Speaker A:You switch mid diatribe.
Speaker A:All right, so and the other part too that you know, that we.
Speaker A:You didn't mention was if depending on the degree to which you try to do this, it's Going to have a sizable impact on your product margins as well.
Speaker A:Like incredibly sizable.
Speaker A:Yeah, Kelly, so I was going to bring you in on this now.
Speaker A:So, so what's your take?
Speaker A:Are you, are you equally skeptical?
Speaker A:Not as skeptical.
Speaker A:More skeptical.
Speaker A:What do you think here?
Speaker C:I'd say I'm, I came in maybe less skeptical.
Speaker C:And John has, has fully talked me into the selling as well.
Speaker C:Uh, margin was exactly where my mind went when I read this headline.
Speaker C:Um, one the eight weeks.
Speaker C:Like John said, not as fast as your competitors in the apparel space are doing, if that's really who you're looking to play against.
Speaker C:They, they talked about cherries and, you know, I'm, I'm seeing cherry pajamas for Valentine's Day.
Speaker C:So I get it.
Speaker C:I, I, I've seen the trends.
Speaker C:But if you're really looking to do it that fast, I question how much of that development they're actually doing internally with their merchandising team versus going, you know, to the A vendor, and you're going to lose margin on that.
Speaker C:So if they're not able to figure that mix out effectively, they could run the risk of buying a lot of more expensive product that they're trying to push for trend.
Speaker C:And then to John's point, you know, if it's the wrong trend or you miss the sale, not only are you inventory bloated, but you also have less profitable inventory on hand.
Speaker A:Right.
Speaker A:And the other point that you bring up to Kelly is you're probably not doing this through your own brands, which has always been a pillar of Target strategy as well, if you're trying to chase business.
Speaker A:But, and at the end of the day, too, is it isn't what he's describing just good, good merchandising?
Speaker A:Like, you're always trying to capture the trends and get products in as quickly as you can.
Speaker A:Right?
Speaker D:Yeah.
Speaker D:I mean, I'm not a merchant, but I've spent the last 10 years with you, and we've interviewed plenty of merchants at this level.
Speaker D:And that was the first thing that I saw when I heard this.
Speaker D:I was like, isn't this just what you're supposed to do as a merchant?
Speaker D:Like, capture the trends and figure out what makes sense for Target to invest in.
Speaker D:But, Chris, I think, I think they're hitting.
Speaker D:There's a bigger issue here.
Speaker D:Like, I don't think this is an issue for Target.
Speaker D:Target.
Speaker D:I mean, Kelly, I'm not going to go to you and John on this one because I don't think you're probably buying a lot of your clothes or fill in items at Target.
Speaker D:But like Kelly, do you feel like, I feel like Target's already hitting on the trends.
Speaker D:Like if you need something like that's been Target's cachet all along is that they have great products that's on trend at a lower price.
Speaker D:Would you agree with that, Kelly?
Speaker C:I would agree.
Speaker C:Yeah.
Speaker C:You know, go to any store, back to school, you're going to find something.
Speaker C:Oh, cute.
Speaker C:Do I need this?
Speaker C:No.
Speaker C:Does it kind of hit the mark for the moment?
Speaker C:Yeah.
Speaker A:Ah, interesting.
Speaker A:Yes.
Speaker A:Right.
Speaker D:So I think like to me it's really, this really is like throwing tech at a problem or an investment at a problem that they don't need to solve.
Speaker D:Right now I'm giving a quick plug for our show, Fashion's missing middle.
Speaker D:Like we were going, we, we have Target in the plan because they are serving people at a price point where you can get affordable on trend.
Speaker D:Fashion like this is not an issue.
Speaker D:And if they miss one bow trend or they miss one cherry trend, like they still have plenty of other assortment that people are already going there for.
Speaker D:I think they need to find a new problem to solve.
Speaker A:Yeah.
Speaker A:Okay, so I, I mean I agree with all of you and I think I'm going to be the most skeptical one here.
Speaker A:I mean I, I, I, I, I actually question how much investment is actually really even being put into solving this at the end of the day.
Speaker A:Because I think it's, I think it's code for pure window dressing at a large industry conference when you have nothing else substantive to talk about.
Speaker A:That's what I think.
Speaker A:I mean, come on, the things you're selling, you're selling on stage are buying into cherries and bows at the hot, you know, around the holiday season.
Speaker A:I mean, come on, like that's going to have no material impact on your business.
Speaker A:It's just what Target always is trying to take credit in the media for something that you should already be doing.
Speaker A:Anyway, to your point and your point, San, about, you know, why do you really go to Target and Kelly too, like it's the things you, you don't expect to find.
Speaker A:It's not necessarily that you want to go find the thing that's going viral on TikTok.
Speaker A:It's the things that just surprise and delight you every single day.
Speaker A:So I don't know, it's.
Speaker A:Once again we've talked about the old adage and you and I talk about this quote all the time.
Speaker A:Honesty is not synonymous with truth.
Speaker A:From the Departed, one of my all time favorite movies.
Speaker A:It's not synonymous with truth.
Speaker A:And.
Speaker A:And that's.
Speaker A:That's what they're doing here again, so.
Speaker A:I don't know.
Speaker A:I'm glad we all feel the same way about this, relatively.
