Target Case Study

Best in Marketing Group Project

Casey Cassidy, Hayden Long, Jenna Donnelly, Kevin Doucette,

Leslie Embree, and Vivian Allen

Marketing 3000 | November 4, 2021

 PART 1: Presentation of the Facts Surrounding the Case and Initial SWOT

Customers

Who are they? What are they like? Who is the target market?

As of 2021, Target’s leading customer base is women ages 18 to 44, and female shoppers

make up 60% - 64% of Target's customer base. Their average income is $65,000 per year, and

they usually are individuals looking to buy higher-end products at a lower cost. Approximately

25% of Target customers earn over $100,000 annually, and 60% of Target customers earn over

$50,000 annually. Target typically promotes to more affluent customers than Walmart because

its goods and products commonly cost more than Walmart. Target has demonstrated success at

marketing to young women, usually outperforming other competitors like Walmart. The majority

of Target's customers are white or Caucasian, although recent data show a 20% rise in Latino or

Hispanic shoppers (Thomas, 2021). Additionally, according to data from the analytics firm

Numerator, nearly eight out of 10 consumers in the United States are Target customers (Reuter,

2021).

Company

What are the Strengths, Weaknesses, Opportunities, and Threats (SWOT)?

Strengths • Target offers a wide variety of product lines and merchandise

• Target has a unique market position
• Target’s customers are passionately loyal
• Target customers have a positive shopping experience
• Target offers an array of private-label brands
• Target appeals to younger consumers
• Target has expanded upon more digital and online services
 Weaknesses • Targets prices are typically higher than competitors
• Target has fallen victim to data security problems
• Target has a minimal international presence
• Target faces competition from smaller and local businesses
• Target has made encouraging progress but still struggles with online
sales
• Target lacks some product line diversity

Opportunities • Target could open more smaller footprint stores

• Target could increase and enhance its use of customer loyalty
programs
• Target could expand same-day delivery
• Target could magnify its private label brands
• Target could position its marketing to the urban segment

Threats • Target continues to encounter heavy market competition

• Target could fall victim to an overall decline in consumer buying
power
• Target’s online shopping experience is still weaker compared to other
retailers
• Purchaser and consumer preferences are continually changing
• There are few to no barriers to entering into this competitive market
(Gaille, 2021)

What is the history? What is our market share, growth trends, and past financial

performance?

Target was started in 1902 by George Draper Dayton when he purchased land in

Minneapolis and formed Dayton Dry Goods Company - known today as Target Corporation.

Following Dayton’s death in 1938, his son - George Dayton, is named president of the Dayton

Company (Target History Timeline, 2020).

In 1954, Daytona's first branch location was opened in Rochester, Minn. At this point,

Dayton was a commercial interior department company that offered furnishings, fabrics, and
decorations for businesses and public institutions (Target History Timeline, 2020)

In 1962, the icon was born. Stewart K. Widdess was the Director of Publicity and was

tasked with naming the new retail store. Out of 200 possible names, Target was selected (Target

History Timeline, 2020).

Target does not explicitly represent one market. Like Walmart and Amazon, they are

heavy contributors to several different markets. Those categories are listed below for sales

market share by product segment (Ward, 2021).

● Apparel and Accessories - 16%

● Beauty and Household - 26%

● Hardlines - 18%

● Food & Beverage - 20%

● Home Furnishings & Decor 20%

The total sales growth increased in 2020 by 16.2%, or $15 billion. This is due primarily

to high foot traffic which increased by 15%. Net sales in 2020 reached $92.4 billion. This

amount is more considerable than the previous six years combined. In addition, the company

plans to open 30 new stores in 2021 and remodel over 130 locations (Monteros, 2021).

Context

What is happening in the industry that is shaping Target’s future?

Target strives to deliver a positive in-store experience, a consistent and effective online

experience, and to make critical investments in the company and community inclusivity and

equity, all while nurturing a solid foundation to “bring joy” (Target, 2020). While being focused
on its primary audience and driving sales, Target also is keen on sustainability. Target is

committed to being a net-zero enterprise by 2040. Target strives to meet its business objectives

and landmarks by planning and running overall efficient operations in its buildings and office

spaces, using resources conscientiously, reducing and eliminating waste, and minimizing its

greenhouse gas footprint (Target, 2020a). By being aware of the environment and realizing its

impact on society, Target helps to change how big corporations operate in the future.

Collaborators

Who are Target’s suppliers, channels, and key partners?

Target works with suppliers across the globe, with more than four thousand registered

manufacturers selling products at its stores. Target’s vendors range from the largest companies

on the planet to local pop-up businesses selling new and innovative products. Some examples of

large suppliers are Apple, Colgate, Hershey, and Kellogg’s (Target, 2021).

Target channels many different consumer needs. Target acts as a one-stop shop for most

daily necessities like food and clothing, and other desired products. Consumers can also splurge

at Target, like upgrading a television or even purchasing patio furniture.

Target recently built a long-term partnership with Ulta Beauty to build shop-in-shops

within select Target store locations called Ulta Beauty at Target. A portion of the Target store

will be set up as a beauty landscape where customers can find many of their beauty and cosmetic

needs in one place. These partnerships offer Target a chance to provide better products to

customers with an already established retailer (Target, 2020b).

 Competitors

Who must Target consider, and how will they likely react?

Target's most prominent competitors to consider are Walmart, Amazon, and Costco.

Target distinguishes itself from its competitors in several ways. Target’s focuses on

sustainability and promoting eco-friendly operations among employees and provides the means

for recycling, electricity consumption reduction, food waste lessening, and other

environmentally friendly plans. Target also endorses wellness campaigns supporting physical

fitness and anticipatory healthcare as part of its corporate social responsibility outline. Target

differs from its competitors by offering separate brands for its apparel retail lines versus

marketing as one brand for all products. Target can grow its online presence as it is still not as

robust as Amazon or Walmart, which puts Target at a disadvantage due to the recent growth of e-

commerce retail sales (Hughes, 2021).

PART 2: Identification of the Key Issues

Target is more expensive compared to its major competitors.

Target’s products are higher-end but made to be sold to consumers who cannot afford the

high prices of typical department stores. This presents several challenges for Target. The most

significant hurdle this problem presents is reaching customers in their favored demographic,

which includes young professionals ages 18-44 (Thomas, 2021). An article from Business

Insider shows a study done by statistical data group ‘LendEdu.’ This study compares prices of

different items from three retail giants, Target, Walmart, and Amazon. The study confirmed that

Walmart offered the lowest prices, but Amazon and Target were relatively close behind. Target
won in the grocery department, but it was the only category Target was not falling significantly

behind. The study proves that Target is the most expensive out of its competition (Rosmarin,

2019).

Target lacks in the grocery sector of a superstore

One of Target's critical issues in 2021 is its lack of grocery stock at most stores.

Competitor Wal-Mart has almost every food item a typical customer might look for when

shopping for other supplies. If Target can find strong retailers to supply their stores with

perishable foods, Target would capitalize exponentially.

A Fortune article posted a couple of years stated, “Target has struggled mightily with its

decade-long push to become a go-to grocery destination for shoppers. Target sits in the middle of

no man's land among grocery competitors, Target COO John Mulligan has admitted, because it

lacks the quality and selection of Whole Foods and has higher prices than Walmart and Aldi”

(Tuttle, 2016).

With foot traffic down 2.2%, one might assume that this may be linked to the lack of

grocery items compared to competitors. If Target can add this to its repertoire of items sold in

stores, it may contend more with other competitors in the market.

Target could open more smaller footprint stores

To take advantage of upcoming opportunities, Target is in the works of opening smaller

footprint stores. Target has already started on this new strategic plan. In 2020, approximately 30

new stores that Target opened were small-format stores or reduced-size locations on college

campuses (PYMNTS, 2021). According to Target, these small-format stores are the company's

most productive. Target is good at knowing who its audience is and caters to that audience. For

example, in college towns, Target’s shelves are stocked with dorm necessities. Other businesses
such as Amazon and Walmart have experimented with smaller stores but have not seen Target's

success with its strategy (Aten, 2021).

Target could increase and enhance its use of customer loyalty programs

Modern loyalty programs have been around since the early 1970s. However, stated to

have been invented in the late 1800s, most known loyalty programs took stride in the late 1980s

and early 1990s. Target's loyalty program, Target Circle, debuted in 2019 as a free downloadable

app. It intends that customers will download the app, further retaining loyal customers through

mobile devices and online purchases. Although loyalty programs from competitors have seen

recent success in branding and consumer retention, Target has seen below-average data

compared to what was expected and projected. This is likely due to Target seeing the majority of

its revenue come from walk-in traffic. The problem with expediting a loyalty program for a

company that sees its revenue generated from wall-in traffic is that if the consumer is willing to

walk in and buy the product, they are less likely to use the app and online/pickup services

(Barretta, 2021).

Target Circle includes several benefits such as personalized coupons, exclusive deals up

to 50% off, and early access to significant sales throughout the year, such as Black Friday

(Barretta, 2021). The Target RedCard is a company store credit card. Target Circle was to take

the place of the RedCard due to the card only being used in-store or online with a 5% off

purchase. There was confusion over the varieties of RedCard with an elective out of store option.

Company credit cards have become more popular over the last ten years. The pro to using

both the RedCard and Target Circle is that the consumer can “double-dip” on the percent off

retail price discount. If the consumer uses the credit cards in their Target Circle app, they are

essentially getting 6% off every purchase.

 Target can continue success by utilizing its mobile app options for customer loyalty

programs by developing more effortless ways to sign up for RedCard access and allowing the

app to pay for purchases rather than inserting card and ACH transactions. If there is the ability to

deposit money into mobile cards, that would require less frequency of the RedCard and draw in a

younger market.

Target’s online shopping experience is still weaker compared to other retailers

The recent investments that Target has made in brick and mortar store renovations, same-

day delivery, and curbside order pickup have been beneficial for the company (Perez, 2020). In

the past, Target has struggled to rank in the top 10 among U.S. e-commerce sales; however, in

2021 has now broken into this elite group of organizations ranking in the No. 6 spot, which ranks

the retailer ahead of companies like Best Buy and Costco. However, the overall portion of the

U.S. e-commerce market that Target has secured remains slight compared to other competitors

like No. 2 Walmart and No. 1 Amazon’s e-commerce domination. Amazon’s online sales are

forecasted to reach more than $386 billion in 2021, with Walmart at $67 billion and Target’s at

$18 billion. While $18 billion is still an impressive number, it pales compared to its two top

competitors (Grill-Goodman, 2021).

PART 3: Listing Alternative Courses of Action That Could Be Taken

1. Stay the course

If Target were to stay the course, they would just continue to use the methods they are

currently using. Target is a successful company that generates a lot of revenue, so there is no

significant risk to continue with business as usual.

 2. Invest and improve the online shopping experience

Target could invest in new technology to support the online shopping experience, digital

sales growth, and alternative distribution and fulfillment methods to grow e-commerce demand

capabilities and reduce costs. Target CFO Michael Fiddelke agrees, stating, “we have been

investing and planning the capability to support this online volume” (Repko, 2020).

Cyber and digital transactions should not be solely measured in just sales dollars online.

For example, when customers opt to use Target’s curbside or in-store pickup service online, they

may end spending more at Target in stores as well. When consumers engage in different

fulfillment options, they become more vital customers of Target in general. The organization can

build relevance with the customers base in total (Repko, 2020). Investing and improving the

online shopping experience could improve online revenue and in-store sales concurrently.

3. Open smaller footprint stores and focus on brick and mortar shopping experience

Target could be more effective in downsizing its stores to pay less in real estate costs and

focusing mainly on brick-and-mortar instead of online growth. By concentrating on in-person

shopping, Target could capitalize on what customers are looking to buy in-store, make customers

happy in-person, and encourage customers to come back and shop.

4. Lower prices to align more closely with competitors

Compared to competitors Walmart and Amazon, Target typically has the highest prices in

all major categories, including home goods, kitchen and appliances, technology and

entertainment, and miscellaneous items. Target was only less expensive than competitors in the

food and beverage category (Rosmarin, 2019). One could argue that Target is losing customers

to competitors due to higher prices and that Target could gain market share and increase sales if

it lowered prices in all major categories. The price point for goods and products and the pricing
strategy is an essential competitive resource for any organization (Lamb et al., 2020).

PART 4: Evaluation of Alternative Courses of Action

Alternative Course of Action Pros (Reward) Cons (Risk)

Stay the course • Generates the same • Loses out to

income competitors who take
• Limits risk to the the risk
unknown • Loses the reward of
• Knows what the branching out and
customers want reaching new
customers
• Not staying up to date
on recent trends that
could positively
impact the business

Invest and improve the online • Generate more • Lack of personal

shopping experience revenue relationships with
• Reach a more customers
significant consumer • Online shopping is
base population competitive
• Reduce real estate • Online shopping can
costs affect buying and
sales decisions

Open smaller footprint stores • Customized • Increased operating

and focus on brick and mortar shopping experience overhead (Rent,
shopping experience for customers Permits and licensing,
• Marketing focused etc.)
on a smaller • Less time to focus on
demographic online sales
• Personalized • Smaller stores are not
customer service able to offer a large
• Establishes variety of product
commitment to the • Higher insurance and
community and maintenance costs
builds credibility
• Opportunities for a
more diverse base
 Lower prices to align more • Lowering prices • Potentially risking
closely with competitors keeps business profits by lowering
competitive with prices
similar stores • Unsustainable for a
• Increases consumer long-term solution and
confidence. goes against Target's
• Improved sales and reputation as an
store traffic affordable upscale
• Competing prices retailer
open store to more • It could make
customers shopping at target less
attractive to its target
demographic
• Will encourage
unpredictable
shopping behavior,
possibly damaging
long-term pricing
strategy

PART 5: Recommendation of the Best Course of Action and Second SWOT

Invest and improve the online shopping experience

Target will improve and invest in its online shopping experience by setting up its stores

as potential fulfillment centers. This is a strategic move that competitors are also taking with the

demand for online sales increasing and supply chain management becoming more practical. In

2020, Target saw its sales skyrocket due to the pandemic. Although online shopping contributed

to this growth, the primary sales were still made in stores. Target plans to revisit its backroom

stocking facilities to allow for more hub inventory. Hub inventory is to take place from shelves

in distribution centers/warehouses. Doing this will enable more products to be available to the

consumer and at a faster rate. This distribution system has been around for years. Companies like
O’Reilly Auto Parts and AutoZone have been competing in this area for a long time. Building

out hub stores allows consumers to have a wider variety of products available online that can be

picked up in the store. In a way, this is combining the in-store and online orders but overall

enhancing the online experience. It is also crucial that Target liquidates its inventory at a faster

rate. Target can keep up with trends and rotate stock within their hubs, allowing for more rapid

transitions to how the consumer market reacts to the products being sold.

For the consumer, ordering online and picking it up in-store is cheaper than purchasing

online and shipping it directly to their home. This new method saves for the customer and

Target. The curbside pickup has also increased online sales as consumers no longer have to walk

in the store if they do choose.

Target plans to invest $4 billion annually to accelerate industry-leading capabilities that

offer customers a differentiated shopping experience. When it comes to utilizing the marketing

mix in pursuing an improved online shopping experience, Target will adopt the following:

1. Product - online websites and mobile apps need to be rebranded into virtual

shopping/fulfillment centers. This requires breaking down the user’s ability to search,

select, modify and confirm purchases with little to no obstructions.

2. Place - already determined that hub stores and fulfillment centers will increase inventory

capacity with newer logistics planning programs. This allows employees and supply

chains to maneuver and operate at a maximum level and change the density of a store at

any given time.

3. Promotion - This will require internal marketing to empower employees to promote the

strategic plan. Embracing ‘walk-in’ consumers with viable and reliable apps for user

ability to target circle and the red card program.

 4. Pricing - This will require CI marketing managers to determine the needs and wants of

the consumer. By keeping inventory low, will allow Target to make snap changes to

inventory management. Simple design changes to gondolas, planograms, and end caps

allow the ‘walk-in’ consumer the best experience. Pricing this inventory will need to be

competitive to the manufacturer and the market competition.

Strengths, Weaknesses, Opportunities and Threats Analysis

Strengths • Target offers a wide variety of product lines and merchandise

• Target has a unique market position
• Target’s customers are passionately loyal
• Target customers have a positive shopping experience
• Target offers an array of private-label brands
• Target appeals to younger consumers
• Target has drastically invested in and expanded its digital and online
services

Weaknesses • Targets prices are typically higher than competitors

• Target has fallen victim to data security problems
• Target has minimal brick and mortar international presence
• Target faces competition from smaller and local businesses
• Target has recently invested more resources in online sales, but it will
take time to build the infrastructure to compete with major online
competitors
• Target lacks some product line diversity

Opportunities • Target could open more smaller footprint stores

• Recently revamped customer loyalty programs still have kinks to work
out to ensure a smooth customer experience
• Target is struggling to expand same-day delivery in all major metro
areas in the U.S.
• Target could magnify its private label brands
• Target could position its marketing to the urban segment
Threats • Target continues to encounter heavy market competition
• Target could fall victim to an overall decline in consumer buying
power
• While investments have been made, Target’s online shopping
experience is still weaker compared to other retailers at the moment
• Purchaser and consumer preferences are continually changing
• There are few to no barriers to entering into this competitive market
(Gaille, 2021)
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