Target (NYSE:TGT) can't afford to make any mistakes this holiday shopping season. The discount retailer suffered last year after a failed redesign of its e-commerce site confused consumers ahead of its all-important Black Friday shopping event. Additionally, Target is still recovering from the massive security breach that occurred between Thanksgiving and Christmas last year, which left tens of millions of Target customers vulnerable to credit card fraud. Moreover, the discount chain's balance sheet took a $148 million hit during the second-quarter because of outstanding costs related to the breach.
Target hopes to finally put these missteps behind it, with a new CEO at the helm and fresh initiatives for the 2014 holiday season. However, fierce competition from more nimble competitors like Amazon (NASDAQ:AMZN) could make it a tough win for the bullseye brand. Let's look at three key ways Target plans to dominate the holidays, and how its efforts measure up to Amazon's holiday plans.
Using its broad store base as a competitive advantage
In an Amazon-driven world where consumers can order nearly any product imaginable and still enjoy free two-day delivery, free shipping is no longer a value creator; it is a given. Therefore it's hardly surprising that Target is offering customers free shipping through Dec. 20. The real competitive edge that the big box chain has over an online-only retailer like Amazon is in-store pickup.
This year, Target is using its massive store base of roughly 1,934 locations in the U.S. and Canada to its benefit by offering free in-store pickup on tens of thousands of products available at Target.com. Even more appealing is the fact that Target promises to fill as many as 80% of orders within one hour. This in-store pickup offer is available to shoppers now through Christmas Eve. As an e-tailer, Amazon can't compete with the convenience of one-hour in-store pickup because, well, Amazon doesn't have physical store locations like Target or other big box retailers.
Digital tools make shopping even more convenient
Another surprising way Target is honing in on the holidays is through unique digital offerings like its new Wish List app. This app lets mobile savvy kids curate a Christmas wish list of items they want, and allows parents to easily share the list with friends and family. For an added bonus, users can save 10% on their Wish List purchases on one day of their choosing before Nov. 26. That should be a compelling promotion for many shoppers, as it allows them to lock in deals on their own schedule.
On top of this, the app provides an augmented reality feature that works with Target's Kids' Gifting Catalog -- making it even easier for customers to find what they are looking for. The app is available for Apple and Android devices. Separately, Target's Cartwheel app will offer daily deals from Nov. 2 through Dec. 24, as well as 50% off a select toy every day. As for Amazon, it boasts a few mobile apps of its own that make shopping on Amazon.com from a mobile device quick and easy. However, it doesn't have an app specifically dedicated to kids and their holiday wish lists.
Designer collaborations and exclusive partnerships
The third and perhaps most exciting way Target plans to beat the competition this holiday season is through designer collaborations and exclusive product offerings that guests will only find at Target stores. TOMS for Target, for example, is one brand collaboration that promises to be a big hit with shoppers this season. The popular one-for-one shoe brand designed 50 unique pieces for this limited edition collection, which will only be available at Target stores and Target's e-commerce site beginning Nov. 16.
Ultimately, this gives Target a competitive advantage over Amazon and other rivals, because consumers will only be able to purchase these items from Target. The charity angle is another reason this "for Target" line of gifts should be a hit with shoppers: Target will donate blankets, meals, or shoes to people in need for every TOMS item purchased during the promotion. Target says its TOMS for Target initiative has "the potential to provide more than 11 million meals, blankets and shoes to those in need."
Unlike Amazon, Target does a great job of making people feel good about shopping at its stores. In fact, Target is the only big box retailer that gives 5% of its profit to local communities every day.
What's more, TOMs for Target isn't the company's only online exclusive collection this holiday shopping season. Target also teamed up with Renee Ehrlich Kalfus, the costume designer for Sony Pictures' upcoming remake of the family classic "Annie", to launch a limited-edition girl's fashion collection inspired by the movie. All of the Annie for Target products will be available for less than $30 beginning Nov. 16.
The discount chain is also offering exclusive online collections, including a limited-time-only line of American-made scarves, throws, and purses by Faribault Woolen Mills. This collaboration will be available exclusively on Target.com as soon as Nov. 2. In addition to these special offerings, Target will also have exclusive toys for sale, including Disney Frozen My Size Dolls, Wubble Bubble Ball, Zoomer Dino Boomer, and more.
What it all means....
From exclusive product offerings to one hour in-store pickup and convenient digital shopping apps, Target is giving consumers more than a few reasons to do their holiday shopping at its stores this year. The holiday season is the most important time of the year for retailers like Target, with most stores generating between 20% and 40% of their annual revenue during the holidays. In fact, November and December sales typically account for 20% of U.S. retailers' annual profit each year, according to the National Retail Federation.
Therefore, having a winning retail strategy in place ahead of the holidays is critical for Target. Fortunately, it seems the big box chain has learned from last year's mistakes. On that score, Target is also more prepared to compete with rivals like Amazon this year by offering free shipping, convenient in-store pickup and exclusive products that consumers won't find on Amazon.com. This should prove a winning strategy for the retailer this holiday season.
Tamara Rutter owns shares of Amazon.com and Target. The Motley Fool recommends Amazon.com. The Motley Fool owns shares of Amazon.com. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.