Home furnishings giant to offer its first branded credit card
Ikea Group will launch a co-branded rewards credit card, and also a private-label card that will provide financing options for major home projects.
Alliance Data Systems Corp. has signed an agreement to provide branded credit card services in the United States for Ikea. Alliance Data will create a loyalty-driven credit card program that combines customer insights and industry benchmarking to develop a customized rewards and benefits package tailored for Ikea’s customer base.
The co-branded rewards card, which can be used for both Ikea purchases and for everyday spending needs, will incorporate custom program perks designed to recognize customers for their loyalty. There will be no annual fee for the card.
In addition, Ikea U.S. will offer a private-label credit card, Ikea Projekt Card, that will serve as a store-branded financing solution for qualified customers doing major home decorating and renovation projects, such as a dream kitchen. The private-label card will provide special financing options, allowing customers to pay for larger purchases over time.
“Making life better and easier for the many people drives everything we do at Ikea, and we were looking for a like-minded credit marketing partner that is passionate about the same values,” said Jacqueline DeChamps, COO, Ikea U.S. “Alliance Data really understands our company and will deliver meaningful credit and loyalty programs, while constantly innovating based on our customer needs. Leveraging Alliance Data’s skillset in loyalty and marketing, we are excited about how this new partnership will enhance our customers’ shopping experience across channels with added convenience and benefits.”
Ikea operates 47 stores in the U.S. and a total of 362 in 29 countries around the world.
Target joins the party with strong holiday gains; raises full-year forecast
Target Corp. has joined the ranks of Macy’s, J.C. Penney, Kohl’s and other retailers in reporting robust holiday sales. The discounter also raised its fourth-quarter and full-year guidance.
Target’s same-store sales in the combined November/December period rose 3.4%, better than the expected range of 0- to 2%. Comparable sales across all five of the company’s core merchandise categories – home, apparel, food & beverage, hardlines and essentials – were positive and accelerated from the third quarter, reflecting strong traffic growth, positive store comps and continued strength in digital sales, Target said.
The retailer said it now expects 2017 will be the fourth consecutive year in which its digital sales grow more than 25%.
“We’ve positioned our stores at the center of a continually expanding suite of convenient fulfillment options and made significant investments in our team, which enabled our stores to fulfill 70% of all digital orders in the November/December period,” said Brian Cornell, chairman and CEO, Target.
As its look to 2018, Target said it plans to launch more exclusive brands, enhance our digital capabilities, open approximately 30 small-format stores and, as previously announced, triple the size of our remodel program to more than 325 stores.
“We will also remain focused on rapidly scaling up new fulfillment options including Same Day Delivery, which will be enabled by our acquisition of Shipt, and our recently launched Drive Up service,” Cornell said.
In a note to clients, GlobalData Retail managing director Neil Saunders commented that digital was an “undoubted success, with robust online growth underpinning performance.” But he said the chain suffers from some deficiencies in execution — especially in stores.
“The new own-label (Target’s private brands) ranges in apparel and home are compelling and provided a strong point of difference across the holiday period,” Saunders said. “However, in many stores, the impact of these collections was minimized by poor merchandising and display. This reduced both conversion and sales and created many lost selling opportunities.” (For more, click here.)
The strong holiday performance has led Target to raise its earnings forecast for the fourth quarter to between $1.30 to $1.40 per share, up from the previous range of $1.05 and $1.25. It also boosted its overall earnings expectations for 2017 to between $4.64 and $4.74 a share, up from an earlier projection of $4.40 to $4.60.
Analysis: Target needs to make its stores more compelling
While Target’s holiday growth is respectable and makes it a holiday winner, we believe that performance should and could have been better. Prior year comparatives, when same-store sales fell by 1.3%, are very weak and since that time Target has undertaken a raft of initiatives that should have boosted performance.
All that said, the growth does indicate that Target is on the right track and that its various ventures are starting to pay dividends. However, we believe that it also highlights some deficiencies in execution – especially in stores.
The new own-label ranges in apparel and home are compelling and provided a strong point of difference across the holiday period. However, in many stores, the impact of these collections was minimized by poor merchandising and display. This reduced both conversion and sales and created many lost selling opportunities. Performance online, where these ranges are easier to shop, was much stronger.
Target’s holiday focused Wondershop is another example of a lost opportunity. Like last year, Target’s range of holiday decorations and sundries was comprehensive and, in our view, one of the best in the market. However, also like last year, Target buried this offer at the back of the store and, as a consequence, lost customers. We note that more effort was made to signpost the collection this year, but this proved to be inadequate.
Food performance was reasonable, and our data suggest that sales growth was supported by lower price points. However, seemingly little effort was made to push holiday food and drink, especially at the premium end of the offer. In our view, Target’s holiday food proposition was extremely lackluster compared to competitors.
Digital was an undoubted success with robust online growth underpinning performance. We are encouraged to see stores fulfilling 70% of digital volume over the period, and believe this will allow for a better margin outcome. However, we also think Target needs to make stores more compelling so that those customers collecting items in shops browse and buy more while doing so.
Overall, this is a positive outcome. It shows Target is doing the right things and that its ideas have merit. However, it also indicates the need for more care in execution, a faster roll-out of the initiatives, and a greater sense of ambition. Ultimately, Target is doing well, but it could be doing better.