The past number of years haven't exactly been kind to physical retailers. Growth in the e-commerce space was already pushing some retailers toward the edge of extinction before the pandemic began. But the events of early 2020 only made an already dire situation for retailers even worse.
Despite all of that upheaval, big-box retailers have largely managed to hold their own. And that's a good thing for retail REITs, which rely on big-box stores to serve as shopping center anchor tenants. It's a good thing for retail stock investors, too.
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But there's one player in the big-box field that really stands to dominate this year -- Target (TGT -0.70%). Here's why Target is poised for a great year -- and solid longer-term growth.
1. It's taking steps to address labor shortages
Many companies are bemoaning the fact that workers have become much harder to hire and retain. Target is actually doing something about it.
The big-box giant is changing its wage structure so that workers will earn a minimum of $15 to $24 an hour, depending on role and market. In fact, the company plans to invest $300 million in its workforce this year alone. At a time when employee retention has become such a challenge, that's a wise investment.
2. It's expanding its in-store Ulta shops
Shopping at Target has increasingly started to mimic the mall experience -- only under one roof. That's a good thing for the big-box giant. And now, it's taking that concept one step further by expanding its partnership with Ulta Beauty (ULTA -2.08%) .
So far, Target has seen great success with its in-store Ulta shops. And so now, it has plans to add more than 250 Ulta Beauty at Target locations in 2022, with the goal of opening 800 in total.
So far, Target has found that guests are buying items from its Ulta shops -- but not at the exclusion of other beauty items they'd normally purchase. Or, to put it another way, Ulta's presence within Target is leading to extra sales, not replacement sales. And it's also likely to draw in more customers as Target grows that partnership.
3. It's adapting to changing times
The pandemic caused a shift in consumer behavior that resulted in a digital sales boom. As such, retailers have had to step up their delivery and fulfillment game. And Target has, so far, done a great job in that regard.
During the pandemic, Target enhanced its curbside pickup options to address consumer safety concerns. At this stage of the game, consumers want the option to retrieve purchases curbside not so much due to COVID-19 fears, but due to the convenience factor.
Target clearly recognizes that and is taking steps to offer an even wider range of curbside options. For one thing, it will start allowing consumers to do curbside returns. And to sweeten the deal, it will also, in some markets, allow consumers to retrieve a Starbucks (SBUX 1.00%) order curbside for ultimate convenience.
Target's enhancements of its curbside offerings, known as its Drive Up service, align with the retailer's strategy to use its giant stores as fulfillment hubs. Target's online sales have more than doubled in the course of the last two years. To address that shift, it's doing its part to ensure that consumers are able to enjoy same-day order fulfillment.
Target isn't the only retail giant that's switched gears in response to consumer patterns over the past few years. But it's definitely doing a great job of adapting. And that's something stockholders and real estate investors alike are apt to benefit from.
