Target’s Business Strategy – A Study

Target’s Business Strategy – A Study
Target's Business Strategy

The seventh largest retailer in the United States and a component of the S&P 500 Index is the Target Corporation headquartered in Minneapolis, Minnesota. By the year 2020, the Fortune 500 listed Target as number 37 of the largest US Corporations by revenue. In 2021, Target Corporation recorded a revenue of USD 93.56 Billion from 1909 stores.

About
Growth
Business Strategy
Conclusion

About

The Target Corporation as it is known today was established in 1902 by George Dayton as Goodfellow Dry Goods. The company changed its name to Dayton’s Dry Goods Company in 1903 and later the Dayton Company in 1910. It again changed its name to Dayton Corporation in 1962 and it was then, that Target was established as the discount division of Dayton’s department store in Minneapolis, using the concept developed by an employee, John F. Geisse.  The name ‘Target’ was the brainchild of Stewart Widdess, Publicity Director of Dayton, to prevent consumers from associating the discount chain with the main department store.

The discount chain stores proliferated, becoming the second largest privately owned department store in the country by 1964 and recording its first profit of USD 39 million in 1965. In the year 1969, the Dayton Corporation merged with the J.L. Hudson company, based in Detroit, and became the Dayton-Hudson Corporation. The new Dayton-Hudson Corporation consisted of five major department store chains – Target, Dayton’s Diamonds, Hudson’s, John A. Brown, and Lipman’s and was the 14th largest retailer in the US.

Growth

By the year 1975 Target had opened 49 stores spread over nine states in the US and was clocking USD 511 million in sales. By the next year in 1976, their total stores had grown to 53 units and sales figures had grown to reach USD 600 million. The next two years saw Target increase its store presence to 80 units in eleven states clocking total sales of USD 1.12 billion. The same year, in 1980, the Dayton-Hudson Corporation acquired 40 stores of the Ayr-Way discount retail chain which were re-opened as Target stores in 1981. In addition, it also opened fourteen new Target units strengthening its presence to a total of 151 stores and reaching sales figures of USD 2.05 billion.

Over the next two decades, Target kept growing and expanding its presence across the United States through various acquisitions and by opening more units. At the turn of the century, Dayton-Hudson Corporation changed its name to Target Corporation. By the 2000 year end, Target’s store presence had increased to an impressive 977 stores spread over 46 states which were generating sales worth USD 29.7 billion. Target continued its expansion through the internet and e-commerce revolution by separating its e-commerce operations from the retail division. Over the decade, Target continued its growth reaching a total of 1488 stores with annual sales touching USD 59.4 billion. It also built its first food distribution center which began operating in the year 2008. By 2009, Target began its expansion outside the US by opening two stores in Hawaii and two in Alaska simultaneously. It also began adding a fresh produce department in numerous locations.

Target expanded into Canada in the year 2011 and by 2013 opened its first store which quickly grew to 133 stores. However, the company’s Canadian foray ran into substantial supply chain issues raking up a total loss of USD 2.1 billion in a short span of time, leading to Target announcing the closure and liquidation of all the stores by the end of 2015. The Canadian and US media termed it ‘a spectacular failure’ and ‘an unmitigated disaster’.

Why Target Failed In Canada

Despite a few more setbacks over the years, the company has continued to grow to reach a total revenue figure of USD 93.56 billion from 1909 store units. The supermarket store stocks and sells products across various categories including beauty and health products, bedding, clothing and accessories, electronics, food, furniture, games, jewellery, lawn and garden, pet supplies, shoes, small appliances, and toys. It also boasts several in-house brands that its department stores stock and sell.

Target - Seventh Largest Retailer in the United States
Target Corporation also known as Target, is an American department store chain. It was set up in 1962 as a division of Dayton’s department store.

Business Strategy

For a company that essentially began as a small branch of a larger department store, Target has grown to be present in all 50 states of the US as an independent brand. Over the decades, the brand has focused on growth and market stability. In an era of e-commerce, Target’s continued success combines its marketing strategy, design partnerships, and store layout.

Marketing & Advertising

From the get-go, Target has positioned itself as a high-end discount store and strategized itself as a ‘cheap-chic’. Its strategic choice to position itself as a mass merchandiser of affordable chic goods has fuelled its steady growth and also earned the nickname of ‘Tar-zhay’.

Design Partnerships

This is a concept that plays a huge role in the success of the retailer. At any given time, one-third of the store’s inventory is exclusive to them through private labels. The brand also partners with designers for a time-limited design collection. These time-capsuled collections act as a marketing gimmick creating a perception of the store as being high-end.

Store Layout

The brand is focused on the aesthetics of its store and the way the products are laid out inside. Product categories like apparel, home goods, and electronics are displayed lavishly with specialized lighting and displays. Yet not too far away, the standard merchandise is displayed under uniform fluorescent light replicating a regular department store. The idea behind this is to further the ‘cheap-chic’ module giving the feel that customers are getting value for their spending. It also encourages the customers to buy impulse goods which generates a higher profit for the retailer.

Target stores also handle the dual responsibility of fulfilling online orders. The company has not invested huge amounts into building warehouses which eventually adds to operational costs. Instead, it has successfully utilized its existing stores towards e-commerce orders by having a staff known as fulfillment experts. These employees are either working at the backend packing online orders to be delivered or going across the store to gather order items and scanning and pack them which are then picked up by the customers in the store’s parking lot. This tactic has proven to be hugely successful for the retailer, especially during the covid-19 pandemic.

Conclusion

Target has undergone many transitions over the years, changing store layouts, designing creative advertising campaigns, and acquiring various businesses under its brand. The company is vigilant of changing consumer preferences and quickly adapts to market needs. Through the years, the brand has maintained its image of ‘Elevated brands at bargain prices’. The customers are given the experience of an elevated discount store, leading to a high brand and store recall over and above its competitors.

FAQs

What is the target market for Target Department Store?

Target Department Store's target market is middle to upper-income households, including families and young adults seeking value, convenience, and a high-quality shopping experience.

Target offers a wide range of product categories, including clothing and accessories, home decor, furniture, beauty and personal care, electronics, toys and games, groceries, and healthcare essentials. They also have exclusive brands and partnerships with designers and celebrities.

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