As one of the largest retailers in the U.S., Target is no stranger to innovation. In recent years, the Minneapolis-based giant has been actively transforming its grocery operations by leveraging technology to improve both the customer experience and operational efficiency. From its adoption of artificial intelligence (AI) to omnichannel integration, Target is redefining how grocery retail operates in the modern age. This commitment to technology has fueled significant growth in Target’s grocery segment, making it a formidable player in the grocery industry.

Target’s food and beverage business has been a major growth driver for the company. Since 2019, sales in this category have increased by more than $8 billion, bringing the total to $24 billion in 2024. Digital grocery sales have played a key role in this growth, with online food and beverage sales growing more than tenfold over the past five years. In fiscal Q1 of 2024, Target’s digital comparable sales grew 1.4%, driven by its strong focus on same-day services, such as curbside pickup and delivery, which grew by nearly 9%.

Target’s success in this area stems from its integration of digital tools to enhance the customer experience. Its loyalty program, Target Circle, boasts over 100 million members and offers personalized deals and rewards, encouraging repeat business. By rolling out guided search features on its website and leveraging AI to improve product descriptions and search results, Target is helping customers navigate its offerings more efficiently. This digital-first approach has made the retailer a leader in omnichannel grocery retail, seamlessly blending online and offline experiences for customers.

In June 2024, Target announced a new generative AI tool called Store Companion, set to be deployed across its nearly 2,000 stores by August. This chatbot, available through handheld devices, helps store team members with real-time answers to operational and customer-related questions, such as how to sign up a guest for a Target Circle Card or troubleshoot a cash register.

The rollout of Store Companion reflects Target’s strategy of using AI to not only support its employees but also improve the overall shopping experience for customers. As Mark Schindele, Target’s Executive Vice President and Chief Stores Officer, noted, “Store Companion will make daily tasks easier and enable our team to respond to guests’ requests with confidence and efficiency.” This AI-powered tool is expected to free up time for store associates to focus on delivering better customer service.

Beyond Store Companion, Target has integrated AI to enhance its supply chain efficiency and predict consumer demand more accurately. By using machine learning algorithms to forecast trends, the company has improved its ability to keep popular items in stock and reduce out-of-stock scenarios, particularly in its grocery aisles. These tools help Target maintain its competitive edge in a crowded market by ensuring customers can rely on its inventory.

We’re continually experimenting with new tools to make it easier for our team to do their jobs and to bring more of what guests love about shopping at Target to life.

Target’s omnichannel strategy is one of the most comprehensive in the retail industry. By utilizing sortation centers, the company has optimized its delivery operations, ensuring faster fulfillment for online orders. These centers act as cross-dock facilities, collecting items from local stores and consolidating them for efficient shipping. This approach has reduced the strain on individual stores while improving the speed and accuracy of last-mile delivery.

In addition to its own logistics capabilities, Target continues to leverage its Shipt subsidiary to offer same-day delivery services, further expanding its omnichannel reach. Shipt recently opened an innovation lab focused on enhancing delivery experiences through technologies such as drone delivery, virtual shopping environments, and AI-powered personalization tools.

The introduction of Target Circle 360, a paid membership program launched in April 2024, also strengthens the company’s omnichannel presence. With benefits such as unlimited free same-day delivery and access to exclusive deals, the program is designed to increase customer loyalty and improve the shopping experience across all channels.

Target’s Good & Gather private label, launched in 2019, has become a key component of the retailer’s grocery strategy. Generating nearly $4 billion annually, this line of food and beverage products reflects Target’s commitment to offering high-quality yet affordable options. Good & Gather is complemented by Favorite Day, a line focused on snacks and indulgences, and Market Pantry, which serves as the entry-level price point in the grocery category.

These private label brands, along with exclusive partnerships with celebrities and emerging brands, have helped Target distinguish itself from competitors. By offering a diverse array of products that appeal to budget-conscious shoppers, Target has successfully gained market share in the grocery sector.

Target’s strategic use of AI positions the company to remain at the forefront of the retail industry in the coming years. In addition to Store Companion, the company is exploring dozens of other generative AI applications aimed at enhancing both team member efficiency and the guest experience. These AI-powered tools are expected to improve everything from supply chain management to personalized marketing, further solidifying Target’s status as a leader in grocery retail.

Brett Craig, Target’s Executive Vice President and Chief Information Officer, highlighted the transformative power of AI: “The transformative nature of GenAI is helping us accelerate the rate of innovation across our operations, and we’re excited about the role these new tools and applications will play in driving growth.” By continuing to invest in AI and other technologies, Target is well-positioned to meet the evolving needs of its customers and maintain its competitive edge.

Target’s approach to grocery retail is characterized by a relentless focus on innovation and a deep understanding of consumer behavior. Through its use of AI, omnichannel integration, and the expansion of private label brands, the company has transformed its grocery operations into a $24 billion business. As Target continues to invest in technology and digital solutions, it remains poised to lead the retail industry into the future, setting new standards for customer experience and operational efficiency.