The sprawling Target Stores headquarters building, spanning an entire block of downtown Minneapolis, is an ostentatious display of wealth. Art lines gallery-like hallways. Luxurious offices look like rooms torn from the pages of Veranda. Sleek, modern chairs are placed just so in front of a glowing gas fireplace in the cavernous lobby. Fresh flowers sit on vases in the company cafeteria.
The confident elegance speaks volumes about Target. Rival Wal-Mart logs six times the sales ($47 billion vs. $285 million), but what Target lacks in scale is more than made up in bravado. In a series of exclusive interviews with the retailer's top marketing and creative executives, one thing was abundantly clear: Target's team thinks it's invincible.
The retailer's bullish plans for growth include opening 120 more stores in 2006, bringing its store count to 1,520 (compared to Wal-Mart's 3,000) with a plan to top 2,000 by the end of the decade.
And Target dismisses the mimicking of its high-end strategy by Wal-Mart as a mere nuisance. "I don't spend a lot of time or energy on it," said Michael Francis, exec VP-marketing. "We've tried not to be distracted by knee-jerk reactions to anyone else's shift in strategy."
Perhaps a bit of smugness is in order. After all, aren't Wal-Mart's upscale ambitions the equivalent of, say, J.C. Penney Co. courting Prada?
Target's brash, push-the-envelope aesthetic, in fact, may not be chutzpah but the key to future growth. "How much better can things get for Target?" asked Goldman Sachs retail analyst Adrianne Shapira in a recent research report, before dubbing Target "today's new department store" and arguing that "Target's continued success has been a function of a strengthening strategy that gains momentum over time."
That momentum has certainly paid off for the Target shareholder. In the past 10 years, the overall stock market is up 112%, Wal-Mart Stores is up 254%, but Target stock has rocketed 721%.
Mr. Francis' Target shares have likely already made him a multi-millionaire, too. He began his career as an executive trainee with Marshall Field's in Chicago in 1985. Sticking with a brand that 15 years ago had a fraction of current sales has been a good thing judging from his corner office, which has more windows than walls and overlooks the Minneapolis skyline. Compare that to the offices of his counterpart, Wal-Mart CMO John Fleming, whose windowless office is decorated with hand-me down furniture.
Inside Mr. Francis's office, giant, red lacquered letters spell out RED behind his desk, where he sits wearing a funky plaid blazer over an avocado green sweater. From this perch, Mr. Francis oversees marketing for what Interbrand recently dubbed the No. 1 retail brand in the U.S., manages an advertising budget of $904.1 million and can reach designer Michael Graves on his speed dial.
Mr. Francis has the advantage of a team that doesn't just know one another, but has decades of experience working side by side (whereas Wal-Mart's team has been embroiled in turnover). Mr. Francis credits the success of Target to several things, but foremost, the surprisingly limited turnover and the fact that "we've got department stores in our DNA."
Consider Minda Gralnek, VP-creative director and 15-year veteran of Target. Her counterpart, Eric Erickson, joined 14 years ago, but spent his early years dating back to 1981 with Ms. Gralnek at Dayton Hudson Department Stores. Then there's Karen Gershman, VP-marketing under Mr. Francis, with the longest tenure on the team, starting as a proofreader in 1972. The least senior member is director of interactive marketing, Will Setliff, who joined a year and a half ago.
"We kind of can't look to other places for talent," said Ms. Gralnek, who wears a T-shirt with a Goofy silkscreen and a fashionable denim jacket. "The thing about Target is we don't think anyone is doing anything like us. We don't want to do anything like anyone else."
Mr. Francis credits Target's buzz and media impressions on doing the unexpected, from replacing bed linens at the Ritz Carlton in New York City with the chain's own 400-thread count sheets to an exclusive online Issac Mizrahi trunk show.
It's why Mr. Francis feels he doesn't need to work with outsiders to get that buzz. "We've chosen to create our own," he said. "We are really more interested in crafting our own brand moments, and we can control our own fate, and we are not at the whims of producers or networks or anyone else."
Yet, despite all the emphasis on buzz, nontraditional media, pop-up stores and guerilla marketing, Mr. Francis still calls the Sunday circular Target's "most potent weapon."
The chain has 54 million circulars inserted nationwide each week. And the not-so-sexy direct-mail channel is receiving more attention. A campaign aimed at moms-to-be will be stepped up after having proved itself in ROI.
One thing that is out at Target is reality TV. "We were one of the first ones in on `Survivor,"' Mr. Francis said. "We were one of the first on `The Apprentice,' but when it became what it is today, which is a better platform for branded entertainment, that really didn't have any interest to us. We were in it when it was a surprise." Mr. Francis added, "It goes back to our philosophy of bold moves and uniquely bold exits."
Despite the endless experimentation and we-don't-need-anyone-else philosophy, some analysts and retail watchers argue Target is far from invincible.
There are those pesky, fast-growing copycat competitors to worry about, including Costco, Kohl's, Bed Bath & Beyond and J.C. Penney. And the energized collective of Wal-Mart critics could turn its aim at Target. After all, like Wal-Mart, Target has a non-unionized work force and isn't exactly known for its great hourly pay and health-care plans.
There's also some concern that the store experience won't deliver on the advertised promise. "You don't get the same experience in the store that you have reading their print or watching their TV," said Gary Stiebel of New England Consulting. "The advertising is far better than reality."