Target Corporation: Business Model and Supply Chain Management

Target Corporation

Target is a name almost everyone can recognize, even from a young age. If you have never heard of Target before here are some of the spaces the are involved in. Grocery, apparel, household just to name a few. Target is the eighth largest retailer in the United States and has a huge impact in general merchandise retailer market and I can understand why. NRF (2018). Everything you would need from clothes to hammers to candy to baby strollers are available to be purchased at Target. Just from personal experience alone, I know people including myself that go there to shop multiple times a week. One day will be spent grocery shopping, then a couple days later you realize you need a birthday present and bathroom cleaner. Then in a couple more days you have to go back because you are already out of bread and dog food. Very easy to spend three days a week there even if it is to quick run in and grab a few things.

Business Model

Target has recently come up with a new business model to include opening small store concepts and to revamp around 325 existing stores. They want the customers to have a new experience. In early 2017 the company launched a major, multi-year set of initiatives to remodel stores, improve store operations, expand omnichannel capabilities, increase the number of small-format and campus stores, and introduce dozens of new owned brands. Hewes, K. (2019). The new, remodeled, and re-fixtured stores, all with new marketing and visual merchandising, are a big improvement over the “old” Target packages. There is a noticeable difference from the minute you walk into a store this year compared to last year. Several of the stores have changed the way they display items. The items are lower so you have to look down, higher so you have to look up to make them appear brighter or right at eye level to grab your attention right away and make you think you need to buy that right now. Many of the aisles are now shorter in height and length and not all are parallel. Looks more like a high-end supermarket than a Target. The displays and décor seem to be aimed right at the customer and where they are in their life. I have seen people walking their dogs, their children playing outside, dad grilling on the grill. Normal everyday things. I had never noticed the music before in Target, but now the music is much louder to the point where you can’t help but sing. The total effect is that the store is more attractive, more fun and easier to shop. The Super Target where I live in Minnesota went through a huge revamp last year. Everything including adding a liquor store had changed. The flow of the store, the lights, the brands, the customer service and the products offered are just some of the things I have noticed. Target wants to have an upscale feel while still offering low prices on their products. Beside the liquor store being a great addition to the Target by my house, they also added a Starbucks right in the Target. It’s nice for grabbing a cup of coffee right when you walk in to go shopping, but it’s also a nice space to meet with people and catch up. There is a nice big seating area so you can have the coffee shop feel while still being in a Target. You can sit down and enjoy your coffee, catch up with a friend and then go shopping all in one trip.

Targets market share is currently at 2.09%. CSIMarket, (2019). This number seems to be in line with them being the eighth largest retailer in the United States. This number is bound to change based on region. Where I live in Minnesota there are a lot more Targets than Walmart’s. This is not true for southern United States where Target does not really have a presence. Target currently has 1822 stores compared to Walmart’s 6363 stores. You can see why Walmart is the number one retailer by far over anything else.

I was surprised when I looked and found out who the average Target shopper was. Females are the first thing I noticed because that is the most notable trait among Target shoppers. When compared to competitors Target draws women, particularly younger ones. While Walmart, Kohl’s and Kmart all have a majority of female shoppers (>50 percent), Target’s base shoppers are 60–63 percent female, on average. When I am shopping at Target, I have notice it is a lot of moms with their children doing their shopping. In my family, I know Target like the back of my hand so it’s easier for me to be the one who does all the shopping there. Target shoppers are also a bit younger: 58–62 percent of Target’s shoppers are between the age of 18 and 44, as opposed to Walmart, where that age demographic represents about 48 percent of shoppers; Kohl’s, where younger consumers make up about 44 percent of the customer base; and Kmart, which only draws 34 percent of its shoppers from the millennials/young Generation Xers. I find this fact interesting because usually in that timeframe of life people are looking to save money and Walmart or Kmart would be the better options if someone was looking to do that. Walmart and Kmart’s prices are cheaper but I have found the quality is not always the best. Target also has the smallest number of consumers that are age 65 or older, as that is about 12 percent of its customer base. Pymnts.com, (2019). I feel this to be true. I shop at target about twice a week and I can say it is very rare I see someone older than 65. I do not think Target is trying to reach the older consumers though. The younger generations are where they make their money so Target is doing the smart thing by aiming to please that age range of people. Their clothing, bright lights, displays and louder music do just that. Another thing to note about Target shoppers is income. On average, 25- to 34-year-olds who shop at Target make about $12,000 more a year more than their counterparts shopping at regular stores, with an average annual income around $65,000. Target also generally leads with more affluent consumers, among those who make over $100,000 a year, Target is far and away the favored retailer, with 25 percent of its shoppers reporting that much income. Shoppers are willing to pay more for a better-quality product, and if they have more money then it’s easier to spend. Consumers who make more than $50,000 per year represent over 60 percent of Target’s consumer base (by comparison, that same demographic is about 45 percent of Walmart’s.) pymnts.com, (2019). The bad news is that Target’s core demographic is the same as Amazon’s by age, gender and income. This means it is more exposed to Amazon than its counterparts at Walmart, because if you are shopping at Walmart you are less likely to shop online and have things delivered to your house or want to learn how to do that. Pymnts.com, (2019).

As stated before, Target is the eighth largest retailer in the United States. Their revenue in 2018 was $75,000,000. This was a 3.6% growth from the year prior. Target Brands, Inc., (2019). Target still has a long way to go if they are going to catch up to their biggest competitor Walmart. Walmart is the largest retailer by roughly $300,000,000. Another competitor is Amazon. They have the same consumer base and sell all the same products. They are just slightly above Target bringing in $89,000,000 last year. I think this says something about Target. Anyone can shop on Amazon, you shop online from anywhere, any time. You have to physically go to the store within the hours of operation for Target. It’s good to see stores not being taken over by the online world quiet yet.

Supply Chain Management

In 2018 Target changed the way do supply chain management. In the past, Target would replenish shelf stock by sending cases of items on trucks to the stores. For example, if a store placed an order for shampoo, they would receive a case of shampoo. Naturally, not all the shampoo in a case is going to fit on a shelf, which means extra cases of items waiting to be shelved in back rooms. The new system, however, replenishes store supply on an individual basis. Employees can pick orders for multiple stores at a time without leaving their workstations, making the packing facility much more efficient. Essentially, a tote for an individual store will be conveyed throughout the different workstations, allowing pickers to place items for that store into the tote. When full, it's a 'mixed bag' of items, however, it matches the store's exact order for what they need to restock. Afflink, (2019). I think this would be nice for employees when stocking the shelves because they only need to stock what is needed and when. This will leave time for employees to be cashiering or interacting with customers, which I have notice a lot more of this past year. This will keep the back room clean and make less waste of products also. The only downside I see with this is that if someone happens to buy all of something on the shelve then other customers will have to wait for the shipment for that product to come back in stock. Target is modernizing their operation and physical models right now so this isn’t an exact science yet.

Customer Relationship Management

Along with the revamp of the supply chain management model, Target also changed their customer relationship management model as well. There are a few things they want to be different from right when you walk in the doors of Target. Top-to-bottom overhauls, with new design/style elements and product presentations (based on what customers said they liked about Target’s new stores). Two entrances, one that promotes exclusive and seasonal items, the second for Online Order Pickup and quick purchases, such as for groceries. More attractive merchandise presentations, including updated mannequins and fixtures in apparel, home and beauty. Easier in-store shopping flow, with aisle modification designed to encourage customers to browse through apparel, accessories, and other products. Updated, more engaging grocery department, with “grab-and-go food and beverage options”, with fresher products, more choices, and greater convenience. Target’s Online Order Pickup located at front of store, for faster, more efficient, check-out. Wine and beers shops inside the store. Lowenstein, M. (2017). I have noticed all of these things in the two Target stores in my city. Even the employees seem to be different, more friendly and helpful. The two things I have trouble with, is the new “flow” and the apparel department. I still don’t understand the new flow and why the main aisle is so large and all the other aisles are so small. I have never bought anything from the huge main aisle, so I feel that it is a waste of space. As for the apparel department, you cannot bring your shopping cart in while looking at clothing. There is barely room for your body. It’s nice to have more selections but I would like more room to shop as well Target also has a CRM system that hold all customer information that they have found out about someone. They take information of purchases in-store and online, the target application, Facebook, web cookies and web searches. The information is stored in one system and used for predictive analytics. They will then send you promotions on products they think you might like to buy. I see this with myself all the time. I receive email and push notifications letting me know of things I have purchased before that are on sale now. From dog treats to their photo department. I do have a profile with them, shop online with them and use the cartwheel app, so I am an easy target.

Target has done a full revamp of their business model, systems and in store experience in the last year. They are trying to keep up with their competitors while still trying to grow profits. Their growth went up 3.6% last year so I think their efforts are working. Next time you are in a Target, try to notice the differences from last year. Clothing, food, displays, lights, music and general flow of the store. I think the revamp is a work in progress but will pay off in the end.