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How Target Used AI To Become A Retail Giant

They never shied away from using the cutting edge technology and today are at the forefront of AI adoption in the retail sector.

Target, the Minneapolis-based retail giant, has undergone 5 redesign since 1962. Not only have the designs changed but they have also introduced a new world of retail with the help of AI. They never shied away from using the cutting edge technology and today are at the forefront of AI adoption in the retail sector. Target achieves its target by helping customers experience a whole new shopping experience with AI. 

Early AI Implementations

Target’s journey with AI began over a decade ago when the company started building a vast data warehouse and implementing extensive data-mining approaches. By assigning each shopper a unique Guest ID number linked to their credit card, name, or email address, Target created a comprehensive database storing information on purchases and demographic details. This robust dataset formed the foundation for predictive analytics, allowing Target to uncover subtle patterns and correlations in customer behavior.


Source: ebay

One significant early use of AI at Target was to forecast customer pregnancies. Andrew Pole, Target’s statistician, discovered numerous significant patterns suggesting a customer’s pregnant status after meticulously analysing past purchase data. For example, an increase in the purchase of unscented lotion during the second trimester proved to be a reliable signal. Furthermore, the increasing consumption of supplements such as calcium, magnesium, and zinc during the first 20 weeks became a critical indicator. Other obvious signals include the unexpected purchase of scent-free soap, larger bags of cotton balls, hand sanitizers, and washcloths, which frequently indicate an upcoming delivery date. This feature enabled Target to offer highly targeted coupons and promotions based on certain phases of pregnancy, illustrating the value of AI in personalised marketing.

AI for Enhanced Customer Experience

As AI technologies evolved, Target expanded its use to improve various aspects of the customer experience:

Personalized Shopping: Target uses AI to create personalized shopping experiences for customers both online and in-store. The company leverages its loyalty program, Target Circle, and AI algorithms to help customers find products and deals most relevant to them.

Improved Product Search: Target has implemented AI-powered guided search on its online store, allowing customers to use more conversational language in their searches. For example, instead of searching for specific items like “napkins” or “plastic forks,” customers can search for broader concepts like “summer party” and receive a wide selection of relevant products.

Enhanced Product Descriptions: Generative AI is being used to improve product descriptions on Target’s website, providing more detailed and relevant information to customers.

Review Summaries: AI is employed to summarize customer reviews, making it easier for shoppers to quickly understand product feedback.

Recent Breakthrough with Generative AI: Store Companion

In a significant recent development, Target announced on June 20, 2024, the rollout of a new generative AI tool called “Store Companion” to all of its nearly 2,000 locations in 400 stores. This innovative chatbot application will be available on store employees’ handheld devices, providing immediate answers to questions about processes and procedures. 

“The tool frees up time and attention for our team to serve guests with care and to create a shopping destination that invites discovery, ease and moments of everyday joy,” said Mark Schindele, Target’s executive vice president and chief stores officer.

Key features of Store Companion include:

Target’s Store Companion offers on-the-job process guidance, including questions like “How do I sign a guest up for a Target Circle Card?” and “How do I restart the cash register in the event of a power outage?” Additionally, the tool serves as a coach for new and seasonal team members, assisting them in learning on the job. Store Companion assists with various aspects of store management.

Target’s Chief Information Officer, Brett Craig, emphasized that the goal of Store Companion is to empower the team and enhance their ability to engage effectively with customers. The tool is expected to free up time for employees to focus on providing better customer service and creating a more enjoyable shopping experience.

Source: Target

Supply Chain and Innovation

Target used both strategy and technology to improve supply chain efficiency.

Target uses sortation centres to speed up the process of fulfilling and shipping online orders. These centres eliminated the sorting process from retailers’ backrooms and aggregated order traffic in a specific market by serving as cross-dock facilities for products from 30 to 50 local merchants. 

​​The corporation intended to enhance its investment in robots and automation, which it had tested independently during the previous year. One option, dubbed Auto Re-bin, which classifies individual products, has already been implemented in three warehouses, with plans to add two more by the end of the year. “The robotic solution we’ve developed in the Minneapolis market over the past few years is designed to sort and organize millions of individual units,” said John Mulligan, COO at Target. “It fills boxes with the exact amount of product needed in a store, ensuring shelves remain stocked and backrooms stay organized.”

Additionally, Target is expanding the use of its robotic ship sorter, which handles everything from individual item boxes to entire cases of products, Mulligan added.

Sortation Centres. Source: Target

Impact on Growth and Revenue

The company’s U.S. revenue was forecasted to be 85.98 billion U.S. dollars in 2025. 

“Our first quarter financial performance met our expectations on both the top and bottom lines, aligning with the trajectory projected for this year and setting the stage for a return to growth in the second quarter,” said Brian Cornell, chair and chief executive of Target Corporation. “Revenue performance improved for the third consecutive quarter, driven by growth in our digital business, particularly through our same-day fulfillment services. The newness and value provided throughout our shopping experience continue to attract consumers, and early success from the Target Circle relaunch is encouraging. Looking ahead, guests will be served with lower prices, a seasonally relevant assortment, and enhanced ease and convenience. Investments in strategic and efficiency initiatives will continue, aiming for sustainable growth and the achievement of our longer-term financial goals.”

Conclusion

Target’s journey with AI, from early data mining efforts to the recent launch of generative AI tools like Store Companion, demonstrates the company’s commitment to leveraging technology for business growth and customer satisfaction. As AI continues to evolve, Target is well-positioned to further integrate these technologies into its operations, potentially driving even greater efficiency, personalization, and revenue growth in the future.

Picture of Anshika Mathews
Anshika Mathews
Anshika is an Associate Research Analyst working for the AIM Leaders Council. She holds a keen interest in technology and related policy-making and its impact on society. She can be reached at anshika.mathews@aimresearch.co
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