Target.com Case Analysis
Target.com
Case Study Analysis
MG 448 - E-commerce, Systems &Web Design
Jerry Orozco
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Target.com Case Analysis
Table of Contents
Abstract…………….…...................................................................................................................3
Target’s Mission Statement………………………………………………………………………4
About Target ……………………………………………………………….……………………..4
Target’s “guests”……………………………………………………………………...….5
Brand Value (Proposition)………………………………………………………………5
Brand Awareness……………………………………………………………………….. 6
Competitors……………...……………………………………………………………… 6
Target and the transition to ecommerce……………………………………………………….. 7
How does Target.com operate.…………………………………………………………. 7
SWOT Analysis………..……………………………………………………………………….…8
Strengths………………………………………………………………………………….8
Weaknesses……………………………………………………………………………….9
Opportunities…………………………………………………………………………….10
Threats……………………………………………………………………………………12
Business Strategies ……………………………………………………………………………….13
In Conclusions ………………………………………………………………………………….....14
References………………………………………………………………………………………….16
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Target.com Case Analysis
Abstract
The intent of this paper would focus on Target, an American retailer and its consolidation
in the United States’ market as the second largest retailer and discount store. In the last
years, just as business technologies has rapidly changed consumer’s purchasing habits and
preferences, Target has made great efforts on integrating their e-commerce business
segment. We would evaluate their progress through several analyses, starting from
exploring their company’s foundation more than 100 years ago to their expansionary quest
to international markets.
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Target.com Case Analysis
Target’s Mission Statement
Our mission is to make Target your preferred shopping destination in all channels by
delivering outstanding value, continuous innovation and exceptional guest experiences by
consistently fulfilling our Expect More. Pay Less. ® Brand promise. (Target, 2015)
About Target
Target Corporation is a well-known American retailer chain. Retailing abroad of
merchandises, such as: apparel & accessories, appliances, home furnishings, toys, sporting
goods, entertainment gadgets, jewelry and cosmetics.
Originally founded since 1902 in Minneapolis, Minnesota and has been in business
for more than hundred years providing American households innovative and affordable
products. In 1962, before it acquired the name of Target was called Dayton’s Dry Goods
Company due to his founder, George Draper Dayton. Opened their 1st store in Roseville
and the president was the grandchild’s founder, Douglas Dayton. Target Corp has several
others subsidiaries under its parent company, such as: Financial and Retail services (FRS),
Target Sourcing Services (TSS), Target Commercial Interiors, Target Brands ( Owned
Brands & Exclusive Brands) and their most recently e-commerce end, Target.com
Currently, Target Corp has a total of 1,799 stores combined (Target, PFresh, Super
Target, City Target, Urban Stores, Target Express ), in addition to 38 distribution business
centers (DBC) that supplies their online orders , and operates in 49 states of the U.S.
Employs more than 347,000 team member worldwide. In addition, as of today Target is
ranked 36th on the Fortune 500 list as of 2014 and ranked 29th on Fortune’s World Most
Admired Companies List.
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Target.com Case Analysis
Target’s “Guests”
Target refers to its customers as “guests”. Primarily, their customer base are median
household earners who make approx. 60,000 yearly with a median age of 41, and which
42% have children living at home and 57% have completed college. Xxxxxx
Brand Value (Proposition)
Understanding their customer needs, Target has always focused on providing
exceptional customer service with their simple, modern, innovative and high quality store
owned brand and exclusive supplier products. Through Target.com the retailer has
continued offering customers the same concepts without breaking their piggy banks while
doing it from the comfortability of their home.
Currently, the company has more than 15 Owned Brands and an approximately 25
Exclusive Brands. (See diagram 1.0 & 1.1).
Target Owned Brands
Archer Farms® Spritz™
Wine Cube®
Threshold™
Simply Balanced™ CHEFS®
up & up®
Circo®
Sutton & Dodge®
Merona®
Embark®
Boots & Barkley®
Gilligan & O’Malley®
Xhilaration®
Market Pantry®
Room Essentials®
Smith & Hawken®
Target Exclusive Brands
Assets® by Sarah Blakely
C9 by Champion®
Carlton®
Chefmate®
Cherokee®
Converse® One Star®
Fieldcrest®
Genuine Kids from
OshKosh®
dENiZEN™ from Levi’s®
Harajuku Mini for Target®
Kid Made Modern Kitchen
Essentials® from Calphalon
Nate Berkus for Target
Nick & Nora®
Shaun White
Simply Shabby Chic®
Just One You made by
Giada De Laurentiis™ for
Carter’s
Target®
Mossimo Supply Company
Liz Lange® for Target
Sonia Kashuk®
Thomas O’Brien®
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Target.com Case Analysis
Brand Awareness
According to a 2003 Target market study, “Ninety seven percent of consumers in
the United States recognize the Target Bullseye logo”. In 1962, what was originally
intended by the Dayton’s public relation division to differentiate them from its predecessors
and competitors has become their brand signature logo, the red Bulls eye. (Target, 2014)
Target has focused in partnering with designers and innovative suppliers to promote brand
awareness. In 2013, However, Target reported one-third of their sales were from owned and
exclusive brands. (Target, 2014)
Competitors
Target is positioned as a discount / retail business on the retail industry, competing also in
the bricks-and-clicks model with fellow competitors, Walmart and Kmart. Target uses its online
distribution channels continuing as well its storefront operations. Currently, Target ranks second
with the most stores in the United States, not too far away from industry leader, Walmart. The
integration of Target.com has also sparked competitors with their respective websites to follow,
as
Walmart
(walmart.com)
and
Kmart
(Kmart.com).
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Target.com Case Analysis
Target and their e-commerce transition
Target entered in the e-commerce segment in the early 2000s. Their first efforts, started
with Target.direct, now known as Target.com. Originally, Target’s online operations were
completely separated from their retailing division thanks to the third party marketing
affiliates. However in 2002, following their initiatives of exploiting their market
capabilities joined forces with Amazon.com’s subsidiary division, Amazon Enterprise
Solutions. Target saw a great opportunity for growth in which Amazon.com would provide
support on areas as order fulfillment and “guest” services in exchange for fixed and
variable fees. Just until 2004, the company was able to obtain the whole domain rights,
switching from target. Direct to Target.com. The customer reception was positive,
according to a Compete.com survey, it attracted more than 288 million users by the end
2008. In 2009, Target’s announced their partnership with Amazon would end, taking full
control of the platform, however it really ended two years later in 2011. In the transition
Target worked very closely from 2009 until 2011 with experts and key contributors
rebuilding the website such as IBM, Oracle, Endeca, Autonomy, Sapient, Sterling
Commerce, just to name a few.
How Target.com does operates…
Internet sales and orders from Target.com, are processed in their fulfillment centers.
This massive warehouses are geographically located throughout the United States, such as
in Woodbury, Minnesota, Savannah, Georgia, California, and Tucson, Arizona. Recently,
Ontario’s facility was closed after Target exited their Canada’s segment in 2013. Although,
in the last couple of years Target have adopted quicker turnaround times to fulfill online
orders. Online orders have the option to get pick up at the nearest Target Store, Target City
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Target.com Case Analysis
or Super Center Target based on their location, not only giving customers the flexibility to
have their merchandise at their will.
SWOT Analysis (Target.com)
Strengths
Brand recognition: Throughout Target’s history, the retailer has worked furiously to
distinguish themselves from competitors with their owned and exclusive brands. Starting
from their company’s values and logo design, their merchandise displays in the stores to a
very interactive and attractive online store.
Innovative and high quality: The retailer has always focused on offering luxury looking
products with very competitive pricing. As highlighted on the article “Target, Walmart, and
Kmart: Who has the best deal?” by Raechel Conover about Target “While its prices are
modestly higher on many items, "Tar-zhay" enjoys a reputation for relative quality and attention to
design, particularly in areas such as apparel and home goods. Consumers gravitate to Target's
clothing lines for their fashionable styling and durability. (Conover, 2012)
Good Relationship with Suppliers: Exclusive partnership with designers & suppliers has
been another key denominator to Target’s success. Target possesses more than 40 brands
(Circo, Cherokee, Mossimo, Merona, Up & up, etc ) and as they proudly announce in their
corporate website “Our owned and exclusive brands let us bring guests national-brand (or
better!) Quality for less (usually a lot less!) and help set Target apart from other retailers.
(Target, 2015)
Weaknesses
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Target.com Case Analysis
Customer ratings: Interactivity between customers and sellers it’s crucial on e-commerce,
since there is not physical interaction between both parties, good communication channels
are key in a good business relationship. On this area Target.com has mix approaches.
Online ratings from user reviews at yahoo.com, has the retail website with a 2.5 stars from
a possible five star rating. While “Guests” believed the website design, quality of the
products and prices have done well with an average of three or more stars; other areas such
as the shipping process, expected time of arrival and customer services inquiries have
greatly failed with one star. Conversely, trustpilot.com another user-content review online
website has Target.com and Walmart.com both tied with a 6.7 from 10 possible rating, but
giving the edge to Target 38.2% with five stars vs. Walmart. 36%.
Inventory Control: Asset utilization ratios demonstrates how a company successfully
exploits it assets to obtain sales. In Target’s case, as a retailer is crucial their turn around
efficiency to stay in business. Target has done an okay job in this area compared to its
store’s operations, but there are important improvement coming along. On a recent report
on ZDNet, by Natalie Gagliori: Keri Jones, Target's EVP of global supply chain operations,
announced the RFID implementation to improve inventory management and it’s expected
that once completed in 2016, the rollout will be one of the largest implementations of RFID
in the retail industry. She adds, “In addition to improving inventory in-store, would impact
on its e-commerce operations as well. Jones said the smart tags could help the retailer better
fulfill online orders placed for store pickup, which she said account for fifteen percent of
Target.com purchases”.
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Target.com Case Analysis
Data security controls: In 2013 Target was victim of a major cyberattack. An approx. 70
million customers had their credit card information compromised. Even the data breach was
to a grand majority cards presented at store only, it revealed the lack of security controls
from the retailer in general. The scandal not only costed a significant drop of their market
shares, the exit of then CEO Gregg Steinhafel, and gained customers ‘distrust but also a 10
million class action settlement for the victims. (Forbes, 2014)
Low performance on sales: Overall, E-commerce (goods and services) in the U.S has been
in a rise, a 2011 report estimated an approx.14% of growth in the industry and consequently
a 10% per year until 2016. (Laudon & Guercio Traver, 2013). In a closer look, Target’s ecommerce end hasn’t performed as well compare to Walmart’s. In a 2011 poll of the top 25
online retailers by online sales; Target ranked 23rd place (1.5 billions) compared to Walmart
3rd place ($4.9 billions). However, it’s necessary to highlight that Walmart’s global (Reach)
commercialization has no boundaries, vs Target that only operates in the United States.
Advertisement not efficient: Targeting the right customers and richness of content is very
crucial in the e-retail industry reason why Target’s has always focused on promoting its
brands, yet the company has still struggled on creating certain brand loyalty through its
material leading to low online sales (previously discussed). Based on statistics from the
online portal statista.com; Target has spent on their advertising from 1.35 to 1.68 billion per
year, an increase of 25% from 2009-2014. On the contrary, Walmart has done the opposite
by gradually decreasing 7.2 % its Ads spending during the same time from 2.09-1.94. In
comparison, Target has maintained a more conservative and cautious trend, Walmart had a
more aggressive and proactive approach from the beginning that has showed better results
at the long term.
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Target.com Case Analysis
Opportunities
Social Media technologies: Target.com has come a long way from working closely with
online pure e-commerce experienced merchandiser like Amazon to key infrastructure
partners like IBM most recently before it was launched on its own in August 2011. In
addition, the integration of social media tools like Facebook, Twitter and mobile
technologies has revolutionized the way companies promote their services and products.
Therefore, companies worldwide have gone from 2.34 billion per year to 24.91 and it’s
expected to increase more. Please see the diagram below. (eMarketer, 2015)
Present in Special Events: As a traditional American retailer for more than hundreds years
their products have been present in millions of households. Thanks to this many consumers
have chosen Target.com and its stores to be their favorite sign up place to their registries,
for baby showers, graduations, weddings and many more special moments. Having a more
robust website (personal shopper) could facilitate the online store to go potentially from a
regular online merchant and offer more personalized services to assist “guests” on planning
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Target.com Case Analysis
social events. Customers would appreciate since it would save them time. Since Target
Owns and has the Exclusivity to several brands customization to its products is another
capability that could be exploited for customers
Threats
High reliance on American median household earners:
As we previously discussed Target’s
targeted audience or “guests”, are median income earners. According to recent article “What the
New Census Data Show about the Continuing Struggles of the Middle Class” By Keith Miller and
David Madland on Tuesday, September 16, 2014 there has been a trend decline in wages and
consequently their disposable income. “ In 2013, the typical middle-class household earned an
income of $51,939, which was a statistically insignificant $181* above their inflation-adjusted 2012
income level but still nearly $4,500 below what they earned before the start of the Great Recession
in 2007.”(Miller & Madland, 2014). Consequently, this could have a domino effect on customer’s
purchasing disposition as costs of living would rise.
Heavier competition from fellow e-retailers: On this end Target.com is pretty vulnerable
as the barriers to entry in the online retail industry is zero to none, thanks through the
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Target.com Case Analysis
internet customers have unlimited options to shop around. However, the biggest
competitors directly to compete one to one are Walmart and Kmart. Lack of compatibility
between browsers to view a product or negative review not properly resolved could be the
difference to a shopper decision to shop somewhere else.Walmart.com match pricing
regardless of the source or Kmart.com’s Layaway program are great options consumers
don’t ignore.
Business Strategy
Target’s corporate governance is currently lead by the recent appointed Chief
Executive Officer and Chairman Board of Directors, Brian C. Cornell. In a highlight, Mr.
Cornell came in after the 2013 data breach scandal, replacing former Gregg Steinhafel.
Curiously, ever since he came in board the company’s market share has recovered
notoriously going from $59.85 to $78.61 per share. According to the New York Times,
published on March 5,2015 this is Target’s upcoming strategy for 2015 are to invest
billions of dollars, streamlining its operations, opening more small stores and creating a
product mix designed to appeal to a younger, broader consumer demographic. In other
words, Target would nurture a more diverse customer base in addition to a $1 billion in
technology (RFID implementation) and supply chain innovation to help boost its digital
capabilities (online segment). The changes would also improve inventory management.
Unfortunately, Target also has plans to cut “several thousand” jobs in the next three years at
its headquarters to cut operational expenses and make the business more lean.
Then again, Target’s strategy would also to focus primarily on their domestic
performance in the U.S. The company learned a valued lesson with their Canadian segment
closure in 2013, which finalized in 2014.
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Target.com Case Analysis
In conclusion
There is no doubt Target has rebounded pretty well in the last couple of years, in
general mending the company’s image and customer’s trust after the data breach in 2013.
The company has settled with its victims and has moved on the next chapter. Currently,
financially Target’s earnings per share are higher than its leading competitor, Walmart.
Showing growth, stability and a positive sense that the company is on the right track.
However, there is still a lot of progress to be done on their e-commerce segment. The
integration of more efficient and synchronized tracking inventory control systems could
give the robust support that the chain merchandiser has needed to make the difference for
online customers. This process could mean cutting the waiting time of products to be sent
to their address, real time tracking and even forecasting the urgency of certain products
accordingly based in their geographical location. Target has very solid business
relationships with its designers, suppliers, with more than 40 dependable brands and
competitive prices, so everything comes back to the online experience. The mix reviews
and ratings on content user websites and boards could be a flag of concern for Target’s
management and executives. The same exceptional service they proudly announce in their
mission statement should be their number one goal, facilitating all the possible online tools
to buyers. Also, while they already provide fashion and luxury looking products,
customization and a more personalized shopping experience options could be an alternative
to consider. Lastly but not least, Target has shown they are great innovators, with their
brands, stores’ appearances and products but conversely they aren’t promoting efficiently
their e-commerce. Customers aren’t responding to the billions spent annually on marketing
ads meaning there is disconnection or misusage of resources to reach customers.
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Target.com Case Analysis
References
Conover. R (2012, Nov 19) Target, Wal-Mart, and Kmart: Who has the best deal? Today Money.
Cheapism.com. Retrieved September 21, 2015 http://www.today.com/money/target-wal-martkmart-who-has-best-deal-6C9676427
Target. (2014) Bullseye Love: The History of Target's Logo. Retrieved September 22, 2015
https://corporate.target.com/article/2014/04/bullseye-love-history-of-target-logo
Gagliori. N (2015) Target will roll out RFID price tags to improve inventory management.
Retrieved September 22, 2015 http://www.zdnet.com/article/target-will-roll-out-rfid-price-tags-toimprove-inventory-management/
Target (2015) Target Owned Brands & Target Exclusive Brands, Retrieved September 22, 2015
https://corporate.target.com/about/design-innovation/owned-brands/
Trustpilot (2015) (n.d) Retrieved September 22, 2015 from
https://www.trustpilot.com/review/www.walmart.com
Target (2015) Target Corporate, Retrieved September 22, 2015
http://pressroom.target.com/corporate
Forbes. Target Data Breach Spilled Info On As Many As 70 Million Customers.( n.d). Retrieved
September 22, 2015 from http://www.forbes.com/sites/maggiemcgrath/2014/01/10/target-databreach-spilled-info-on-as-many-as-70-million-customers/
Yahoo Shopping.(2015) Target.com ratings Retrieved September 22, 2015, from
https://shopping.yahoo.com/merchantrating/?mid=885
Statista Portal. (2015) Target Corporation's advertising spending in the United States from 2009 to
2014 (in billion U.S. dollars) Retrieved September 22, 2015, from
http://www.statista.com/statistics/192136/us-ad-spending-of-the-target-corporation/
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Target.com Case Analysis
Statista Portal. (2015) Mobile advertising spending worldwide from 2010 to 2017 (in billion U.S.
dollars) Retrieved September 22, 2015, from http://www.statista.com/statistics/280640/mobileadvertising-spending-worldwide/
Statista Portal (2015) Walmart Stores' advertising spending in the United States from 2009 to 2014
(in billion U.S. dollars) Retrieved September 22, 2015, from
http://www.statista.com/statistics/192068/us-ad-spending-of-walmart/
Miller K.and Madland.D (2013) What the New Census Data Show About the Continuing Struggles
of the Middle Class Retrieved September 22, 2015, from
https://www.americanprogress.org/issues/economy/news/2014/09/16/97203/what-the-new-censusdata-show-about-the-continuing-struggles-of-the-middle-class/
Halzack. S (2015) Target’s new strategy: We need more than just minivan moms Retrieved
September 22, 2015, from http://www.washingtonpost.com/news/business/wp/2015/03/04/targetsnew-strategy-we-need-more-than-just-minivan-moms/
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