How Stores Like Target Use Your Data to Sell You More

For the past three quarters, Target store sales have decreased as consumers have been shopping at competitor Walmart (WMT.N), Temu (PDD.O), Shein, and other direct-to-consumer retailers searching for better deals.

Target's Retail Media Growth and Advertising Expansion

Target, a Minneapolis-based company, anticipates mediocre comparative sales this year, either flat or up 2%.

However, Target CEO Brian Cornell stated during Target's March 5 analyst day in New York that the company's retail media unit-which produces and sells advertisements-grew by more than 20% in its fiscal year that concluded on February 3.

According to projections from market research firm Emarketer, goods manufacturers and other marketers are anticipated to spend a total of $60 billion to advertise on the media networks of U.S. retailers in 2024. More shops, including Macy's and Home Depot as well as Walmart and Amazon, are placing their money on advertising income.

Executives from four advertising firms that specialize in consumer products said marketers are keen to learn from shops like Target as digital giants like Google are becoming more controlling when it comes to third-party data sharing with advertisers. More than 250 million people visit Target's physical locations and internet annually.

Cara Sylvester, Target's chief guest experience officer, said the company works with 2,600 businesses in total to create product promotions that are shown to specific Target customers on social media and streaming services. Enfamil and Apple are two of these brands.

For example, Apple and Roundel collaborated on a Christmas campaign last year for the Apple Watch Series 9, according to Sylvester. The campaign brought in a lot more new customers than Apple had previously done with Target, including those who did not use the app or website. Apple stated that it collaborated with Target on the advertisement, but it would not elaborate.

Leveraging Customer Data for Effective Campaigns

Reckitt (RKT.L), the developer of Enfamil, sought to target young parents, so Target used its own customer data to identify a group of probable purchasers. It focused on Target customers who had either purchased NeuroPro formula or infant supplies during the preceding year. It then used its continuing relationships with manufacturers of smart TV sticks, such the Roku Streaming Stick and Fire TV stick, to show the advertisement to the intended audience, complete with a scan-to-buy QR code.

According to Nich Weinheimer, executive vice president of strategy at Skai, a marketing firm with clients like Sony (6758.T), Kellogg (K.N), Philips (PHG.AS), and other companies, advertisers view Target as a prime channel for connecting with new mothers and heads of households who purchase clothing, accessories, and household goods.

A research company that monitors consumer behavior, Numerator, reports that the majority of Target's customers are female and white, reside in suburban or metropolitan regions, and make between $40,000 and $125,000 each year.

According to a Target representative, Target offers aggregated consumer data-which excludes personally identifying information-rather than giving its advertising partners access to individual shopper data.

Investor Huntington Private Bank is pleased with Target's lucrative advertising business and anticipates that Target will utilize the money it receives from sales of advertising to reduce the cost of the goods it sells both online and in-person.

Enfamil claimed to have spent a six-figure amount on the campaign, which lasted from the middle of June until the end of July. A Target case study that summarizes the campaign's outcomes states that Target oversaw the whole endeavor.

According to Target's campaign synopsis, 15.8 million consumers saw the advertisement. According to the case study, Target's approach of promoting the formula to previous buyers of baby products produced an approximately 31% higher return on Enfamil's advertising investment than if Target had limited the advertisement to previous buyers of NeuroPro.

Enfamil declared that it will collaborate with Roundel on further advertisements in the future. However, three advertisers informed Reuters that, in comparison to competitors like Amazon and Walmart, who both run far larger retail media departments, Roundel gives them less authority to oversee their own advertising campaigns.

This year, Target introduced a new component to its ad company that, when advertisers buy search advertising, provides them with more control over their campaigns and improved access to some of its consumer data and marketplace vendors. When consumers conduct internet searches with keywords like "best coffee" or "men's bodywash," so-called sponsored product adverts appear.