Target Case Study: TARGETing The States

target case study

Background

Target Corporation is an American retail corporation. Being the eighth-largest retailer in the United States, Target is a component of the S&P 500 Index. Originally, in 1962, Target established itself as the discount division of the Dayton’s Company of Minneapolis, Minnesota. Following that, in the 1980’s, Target began expanding their store nationwide (as part of the Dayton-Hudson Corporation). Later new store formats were introduced under the Target brand in the 1990s. The company has found its competitive advantage and success as a cheap-chic player in the retail industry. Target’s parent company was renamed the Target Corporation in 2000, and rid itself of its final department-store chains in 2004. 

As of October 24, 2021, there are 1,924 Target locations in the United States. From founding in Minnesota in 1962 to the opening of their store in the 50th state — Vermont — in 2018, Target is proud to serve guests across the United States. After years of multibillion-dollar investments, Target emerged as a major e-commerce player during the pandemic. The company tripled its online business, and overall sales were up 20% last year. Its store brands, 10 of which are now billion-dollar labels, continued to catch on with shoppers even as Target made deeper inroads as a grocer. To maintain this momentum, Target plans to spend $4 billion annually in the next few years, opening more stores in city centers, remodeling hundreds a year, and expanding its e-commerce infrastructure. This year the company is ranked number 30 on the 2021 Fortune 500 list of the largest United States corporations by total revenue.

Fortune 500- Target ranks #30

Target has various retail formats. These include the discount store Target, the hypermarket SuperTarget, and “small-format” stores previously named CityTarget and TargetExpress before being consolidated under the Target branding.

FUN FACTS

  • 75% of the U.S. population lives within 10 miles of a Target store. 
  • Target employs 350,000+ team members
  • Since 1994, Target has been using the tagline “Expect More. Pay Less.” 
  • Target’s CEO since August 2014 is Brian Cornell. 
  • The Target Corporation also owns Shipt and Roundel.

CEO of Target

Brian Cornell who serves as a board chairman and the CEO of Target, is the head of the dynamic global team behind Target. Brian joined Target in 2014 and quickly established a strategic direction that set a foundation on the company’s strengths as a multicategory mass merchandiser. It built an excellent reputation for its shopping experience, design expertise, brand curation and brand development. Brian and the Target team have made enormous investments in digital, data and supply chain capabilities, and have focused on placing the company’s fleet of popular stores at the center of both physical shopping and digital fulfillment. The 2017 acquisition of Shipt redirected Target into a leadership position in the same-day, driving the company’s strongest growth trends in its 60-year history. Brian knew that the Target team and culture were central to success, Brian invested numerous funds as well as resources into increasing employee wages, benefits, and providing the team the proper training and development needed to successfully run Target. He has maintained diverse and equitable representation as well as a corporate culture that helps all team members care, grow and win together.   

Prior to joining Target, Brian earned a bachelor’s degree from UCLA in 1981 and attended the Anderson School of Management. He spent more than 30 years in various leadership positions. His roles include: Chief Marketing Officer at Safeway Inc. as well as CEO at Michaels, Sam’s Club and PepsiCo Americas Foods. His work took him from North America to Asia, Europe and Latin America where he received an international experience that has allowed him to gain insight that he leverages at Target today.

A career-long advocate of diversity and inclusion in corporate leadership, Brian is a board member for Catalyst and served on the Council for the Smithsonian’s National Museum of African American History and Culture. The Network of Executive Women honored Brian with the William J. Grize Gender Diversity Award, and he also received the Yale Legend in Leadership Award.

Target’s Accomplishments

In recent years, Yahoo Finance named Target the Company of the Year, and CNN named Brian the Top CEO of the Year. Target was also named Retailer of the Year by Mass Market Retailer and is currently ranked second on Fortune’s Best Big Companies to Work For. 

Target’s Competitive Advantages 

1. Extensive Nationwide Presence

Target has established an extensive network of more than 1,900 stores situated in every one of America’s 50 states. As mentioned previously, 75% of Americans live within 10 miles of a Target store. Target has dedicated much time and effort to optimizing its own eCommerce platforms, and has benefited by being assisted by 44 distribution centers operating across the nation.

Walmart has been able to equally maintain an overwhelming nationwide presence generating profitable income; however, with Target locations being far more spread out, Target has much more room to expand strategically.

2. Target’s Loyal Customer Base

With the tagline ‘Expect More. Pay Less’, Target has been a prominent figure in America’s retail sphere for over one hundred years. American shoppers turn to target because of the company’s combined quality and affordability.

The quality of Target’s products is far more in touch with current fashion or homeware trends which is just one of the reasons customers tend to prefer Target stores in comparison to Walmart stores. That, as well as the overall cleanliness and organization of the stores.

 3. Small Stores, Busy Locations

One competitive advantage that Target has is its operation of small-scale stores which are strategically placed in busy locations.

Target has successfully spotted a niche sector in the discount store market. Target has also significantly slimmed down stores to about one-third of the original size to suit their constantly changing business model. Stores are usually established in densely populated areas such as  city blocks and college regions.

Target targets more urbanized consumers which consists mostly of students, and millennials who already anticipate paying a higher price for products when they enter the store.

Target continues to stock their stores with merchandise that meets the community’s demand and asks. For example, school supplies in university areas.

Target also prioritizes the needs of online shoppers with their online order, in-store pickup option. This gives consumers the leisure they desire by providing them the opportunity to pick-up their orders at a central Target location or even receive same-day delivery!

4. Target’s Competitive Pricing

Target is known to hike up the prices of their products in wealthier areas, particularly when shopping online. Aside from that though, when comparing the prices of general merchandise between Target, Amazon, and Walmart, you’ll hardly see a difference. 

Target is known for offering discount prices yet charging a couple of dollars more than Walmart due to their strategic philosophy and the diverse demographic that they serve. 

When compared to Walmart, Target has generated better gross margins of 31.15% (Walmart: 25.35%). In the long run, Target’s competitive pricing advantage has made them slightly more profitable than Walmart.

Target also works to minimize its overhead. Rather than offering a vast variety of products like Amazon or Walmart, Target sells a limited  assortment of private and company-owned labels.

Target also goes above and beyond to best price-match any products on the market. Customers can even price match merchandise within 14 days of purchase.

5. Increasing In-Store Fulfillment

Approximately 25% (around 460) of Target’s stores have the capacity to facilitate online order fulfillment. Target’s promises to ship online orders to customers’ homes across the nation within just two days. Target works with UPS who collects and distributes orders after being packed by cross-trained staff members. Fulfillment capabilities facilitate same-day delivery, contributing to a $15 billion increase by the end of 2020 (a figure more significant than Target’s collective growth over the previous 11 years).

6. Employee Satisfaction At The Heart Of Target

Target understands that each successful company starts with one employee. A strong employee culture is one of the keys to Target’s core. While Target boosts its starting wage to $15 an hour, Walmart remains at $11 hourly. According to Glassdoor, 59% of Target employees rated their positive business outlook 12% greater than Walmart employees rated theirs.

Target’s employee benefits include:

  • Target Flex
  • Buying or selling extra holidays
  •  Sick pay
  • Childcare vouchers
  • Employee discounts at a wide range of retailers
  •  Private medical insurance
  • Subsidized gym memberships

 7. Enticing Concessions In-Store

Target has also taken on a new approach by offering a ‘shop-in-shop’ experience where Target teams up with big brands such as Ulta Beauty, Apple and Disney. This concept has changed consumer perception of discount brick and mortar stores. Not to mention the branded concessions offered at Target such as Starbucks. Starbucks works wonders for Target’s brand equity by optimizing their market reputation. While Walmart has relied on partnerships with fast-food mega-chains such as Subway and McDonald’s, Target went another direction, with a Starbucks’ partnership which started in 1999. Since then, a Starbucks café has made its way into more than 1,300 of the retailer’s 1,924 stores. 

8. Broad Selection Of Private Label And Exclusive Brands

When you shop at Target, you’ll have access to 48 unique brands that are either privately owned or exclusive to the company. Target is most known for the sale of groceries, apparel, household essentials, electronics, home decor, appliances, and baby products which are sold under a Target-owned brand.

Unique brands generate more appealing margins than big third-party retail brands for Target, but national brands also generate significant sales for the company. Target has also been known to partner with designers and known brands to launch products exclusively found at target.  Since it launched this concept in 1999, it has rolled out more than 175 different partnerships. Examples of this include their selection of Lilly Pulitzer household items, a clothing line with Victoria Beckham, a homeware collection designed by Chip and Joanna, and a clothing and swimwear collaboration with Vineyard Vines.

9. Easy-to-Navigate Layout

Target wants to make it as easy as possible for its customers to find what they need and purchase products, that is why the layout of stores is such an important factor to the company. As seen in the picture above, there is always signage to guide you. Once you find the section you’re looking for, most will have an expert sales adviser of some sort on hand to give you guidance. These in-store services give Target a competitive advantage against online stores such as Amazon. 

10. Strong Marketing Campaigns

Operating a solid marketing campaign is an essential source of competitive advantage for any retail brand. In 2019, Target invested about $1.65 billion in advertising using both traditional and digital promotional methods. Additionally, its movement into populated areas depicts the store as better quality earning organic attention.

For example, more often than not, when a consumer catches a glimpse of a red ad, they most likely associate the bold color with Target’s color scheme and/or the brand itself.

Target has also taken advantage of major social media platforms such as Twitter where they post announcements informing customers of limited collaborative collections. Target has also been quite active on Instagram, taking advantage of Instagram’s eCommerce resources.

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Target Case Study: TARGETing The States Target is probably one of the most successful and popular retailers in the US in this post, we're exploring some of its marketing strategies.
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