AI Meets Retail: How Target and Foot Locker Are Innovating

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Target’s AI-Powered Shopping Enhancements

Target recently introduced its Bullseye Gift Finder, an AI-driven tool designed to make holiday shopping more personalized. Available on the retailer’s mobile app and website, this tool offers tailored gift recommendations for kids based on age, interests, favorite brands, and other factors.

• The Bullseye Gift Finder initially focuses on toys but will feature thousands of gift ideas for kids throughout the holiday season.

• Target is also testing a generative AI-powered Shopping Assistant, a chatbot designed to answer customer questions and provide product recommendations.

Beyond customer-facing tools, Target has implemented generative AI solutions for employees. Introduced earlier this year, these tools help store staff answer customer queries and navigate company policies more effectively. Employees have reported significant improvements in their ability to assist customers, making their day-to-day tasks more efficient.

Despite these innovations, Target’s Q3 financial performance fell short of expectations:

• Sales declined 1% year over year to $25.2 billion.

• Net earnings dropped over 12% to $854 million.

• Comparable store sales dipped by nearly 2%.

However, Target remains optimistic, emphasizing continued investments in AI to refine both in-store and online shopping experiences. The company has also enhanced its product display pages and summarized product reviews to make online shopping more seamless.

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Foot Locker’s Loyalty and Digital Transformation

Foot Locker’s Q3 2024 earnings call highlighted the positive impact of its revamped loyalty program, mobile app, and store refreshes. The FLX loyalty program, which simplifies in-store sign-ups, now accounts for over 25% of sales, up 4 percentage points from the same period last year.

• The retailer’s goal is to reach 50% loyalty penetration by 2026.

• The newly launched Foot Locker app features faster load times, enriched content, and enhanced features for tracking and redeeming loyalty points.

These advancements have driven increased customer conversions, with digital comparable sales growing 3.6% year over year. Leadership attributes this to improvements in user experience and greater loyalty engagement.

In-store transformations are also a key focus:

• By the end of 2024, Foot Locker plans to open eight "stores of the future," designed to improve navigation and the try-on experience.

• The company is refreshing 400 existing locations, including Kid’s Foot Locker stores, taking cues from the new store format.

• By the end of 2025, two-thirds of the retailer’s fleet will adopt this updated format.

Despite a 1.4% decline in total sales, Foot Locker achieved a 2.4% increase in same-store sales. The revamped loyalty program has been particularly impactful, with FLX members exhibiting higher average order values than non-members.

Leadership expressed optimism about ongoing initiatives:

• "We saw some of our highest conversion increases in stores year to date," said CEO Mary Dillon, emphasizing the success of enhanced product offerings, in-store experiences, and staff training.

• FLX signups have accelerated since the program’s June revamp, driving greater engagement across the customer journey.