Target’s Strategic Repositioning in the digital retailing age
The beloved ‘cheap chic’ brand found its bullseye once again with data-driven customer experience.
Founded in 1902 as Dayton Dry Goods Company, Target started its first store in 1962 in Minnesota. In 2002, the Minneapolis-based Target Corporation surpassed Kmart to become the United States’s second-biggest discounter behind the $218 billion giant Walmart. Exclusively serving the America market, the retailer was hit harder than Walmart by the 2008 U.S. financial crash. After six years of struggling to compete with Walmart and the giant online retailer Amazon, Target’s new CEO Brian Cornell announced a plan to transform the flailing business. This plan included a roadmap to ramp up its e-commerce capabilities, to refocus on its most successful merchandise in Style, Baby, Kids and Wellness, and to invest in supply chain and sourcing efficiencies to support its operation of more than 1800 stores (Target, 2015).
Dual Strategy of Cost Leadership and Differentiation Advantage:
One of Target’s main strategies to renew its standing as the cheap-chic retailer was its e-commerce capability. While 2013 painted a bleak financial picture for Target, its online business increased nearly 30 percent between 2012 and 2013 (HBS, 2018). At its peak success in the late 1990s and early 2000s, Target never achieved the same economies of scale as Walmart (HBS, 2004). Instead, Target focused on creating its own range of private label brands to position itself as an alternative to Walmart’s price leadership. As of 2014, Target’s owned brands in clothing, baby and wellness accounted for more than a quarter of Target’s sale (Target, 2015).
The company has invested heavily in its distribution centers, as well as its company-owned facilities to produce its branded merchandise. Target takes pride in providing the best product quality and competitive pricing. The company regularly runs further discounts and additional perks like free shipping through its customer loyalty program — the Red credit and debit cards.
Strategic Repositioning and Renewal
In his 2018 case study, Harvard Business School Professor Srikant M. Datar credited Target’s recent success to its utilization of data analytics. Target was able to hire data experts such as Paritosh Desai to grow the analytics team to interpret the growing amount of data from its online customers (HBS, 2018). Coupled with its loyalty card program, Target was able to better predict customer trends, and needs in stores and online.
Target continued to innovate to provide customers with the best fulfillment options such as Shipt delivery, Order Pickup and Drive-Up for same day services. Furthermore, Target has constantly remodeled its stores while expanding its 46 “owned brands” (Target, 2018). As a result, the company reported a strongest finish since 2004 in the fourth quarter of 2018 with 5.3 percent increase in comparable sales. Its adjusted EPS (Earning per share) of $5.39 at 2018 Q4 was an all-time highs for the company (Target, 2018).
Because of its renewing efforts in brand loyalty and customer experience through technology and efficient supply chain, Target has done particularly well in 2020, a year in which the pandemic has caused bankruptcies of many iconic retailers such as J.C. Penny, Neiman Marcus, J. Crew, Brook Brothers, etc (Retaildive, 2020). Its digital sales grew 155%, same day services grew 217 % and store sales grew 9.9 % in 2020 Q3 (Target, 2020).
In conclusion, Target is representative of a firm that has pivoted using its data analytics and digital sales to remain competitive in a changing retail industry. Target’s dual strategy of differentiation and cost-saving has contributed to the company’s success as the leading alternative to its main rivals, Walmart and Amazon.
Resources:
- Target Shares Roadmap to Transform Business. (2015, March 3). Target Corporate. https://corporate.target.com/press/releases/2015/03/target-shares-roadmap-to-transform-business
- Team Target Has Come a Long Way! CEO Brian Cornell Reflects on 2018 and What’s Next for the Bullseye. (2018). Target Corporate. https://corporate.target.com/article/2019/03/brian-cornell-fcm
- A Closer Look at Target’s Q3 2020. (2020, November 18). Target Corporate. https://corporate.target.com/article/2020/11/q3-2020-earnings
- The running list of 2020 retail bankruptcies. (2021, February 5). Retail Dive. https://www.retaildive.com/news/the-running-list-of-2020-retail-bankruptcies/571159/
- Barwise, P., & Meehan, S. (2004). Bullseye: Target’s Cheap Chic Strategy. HBS Working Knowledge. https://hbswk.hbs.edu/archive/bullseye-target-s-cheap-chic-strategy
- Gederman, D. (2018, November 28). On Target: Rethinking the Retail Website. HBS Working Knowledge. https://hbswk.hbs.edu/item/on-target-rethinking-the-retail-website
