Businessmodel of Target

Customer Segments

Target’s broad product catalogue caters to a diverse spectrum of customer demographics within the general consumer population. The Company, however, is presented principally as a lower price retailer, targeting lower and middle income families and individuals. A recent survey found that a typical Target shopper is a married woman of between 25 and 44 years of age with a salary of between $35,000 and $75,000 per year. Despite this, the Company attracts consumers across all ages and income brackets, with its online platform attracting a substantial number of customers.

Target operates a large network of retail stores across its native US, which continues to be its core market. The Company serves customers across all 50 US states, as well the District of Columbia. In particular, the Company has a significant operational presence in Texas, Florida, California, and Illinois. While the Company does not have any significant international operations, it does offer international shipping in some jurisdictions, including the UK.

Value Propositions

Target provides value to its customers in the following ways:

• Its industry standing and brand recognition, with the Company established as one of the leading retail groups in the US, with a recognisable and respected brand image and a track record for providing reliable products and services;
• Its extensive product catalogue, with the Company offering its customers broad range of products, spanning a wide spectrum of product categories, including clothing, shores, accessories, electronics, toys, personal care, and groceries;
• Its multi-channel sales model, with the Company operating more than 1,700 strategically placed physical retail outlets across the US, as well as an online sales channel, enabling customers to utilise the Company’s service easily and conveniently;
• Its extensive distribution infrastructure, with the Company operating an extensive network of distribution and logistics facilities, enabling the Company to serve both its own stores and customers efficiently; and
• Its industry experience and expertise, with the Company employing specialist retail personnel led by an experienced team of industry executives. ### Channels

Target operates a website at www.target.com, through which it provides information on its product range, its store locations, and its corporate activities. This website also serves as the Company’s online retail portal, which allows customers to browse products, purchase products, and track orders. The Company also offers a mobile app with similar functionality that is available on iOS and Android devices.

Target’s principal sales channel remains its physical retail outlets, which number more than 1,700 and span all 50 US states. The Company employs dedicated sales and service staff across these outlets who are in place to serve and assist customers directly.

The majority of Target’s merchandise is distributed to its stores through its own network of 40 distribution centres. This is supported by certain common carriers that ship general merchandise to and from the Company’s distribution centers, while vendors or third party distributors ship certain food items and other merchandise directly to the Company’s stores.

Customer Relationships

Target sells many of its products to customers on a self-service basis through its online retail platform. This digital sales channel allows customers to browse the Company’s product catalogue, place purchase orders, track deliveries, and manage account details without interacting directly with the Company’s sales and service personnel.

Target offers a more personalised service through its network of retail outlets, with its in-store sales and service staff interacting directly with customers, and providing tailored assistance in relation to queries, complaints, and product returns. The Company also operates a dedicated customers support team, primarily for its online customers, which customers can contact over the phone or online in order to access personalised support with various issues.

Target additionally maintains its customer relationships online, offering a range of web-based support resources, such as shipping and billing guides and FAQs, which can be accessed independently. It also operates several social media accounts, including with Facebook, Twitter, Instagram, Pinterest, YouTube, and Google+, through which it is able to interact directly with its customers.

Key Activities

Target operates as retailer of general merchandise in the US. It offers a broad product catalogue of everyday essentials and merchandise to its customers through its physical and digital retail channel.

The Company’s general merchandise stores offer an edited food assortment, including perishables, dry grocery, dairy and frozen items, as well as items categorised as clothing, shoes, homeware, toys, video games, electronics, and sports equipment. The Company’s digital channels include a similar range of general merchandise, including various items found in its stores, as well as exclusive online deals.

Target operates more 1,700 stores across all 50 US states, targeting general consumers across urban and suburban communities. The Company’s brands include Archer Farms, Market Pantry, Threshold, Simply Balanced, Merona, Room Essentials, Wine Cube, Circo, Embark, and Sonia Kashuk.

Key Partners

Target works closely with various companies and organisations to ensure that its customers receive a high-quality service. These partners can be organised broadly into the following categories:

• Supplier and Vendor Partners, comprising suppliers of products and merchandise that is resold by the Company online and through its retail stores, as well as suppliers of services, technologies, and equipment that are utilised more broadly across the Company;
• Distribution and Logistics Partners, comprising various distribution providers and carriers that support and extend the Company’s own logistics and distribution operations, ensuring that the Company delivers its merchandise quickly and efficiently;
• Design and Innovation Partners, comprising various original equipment manufacturers and designers that assist the Company in developing and designing products for sale across its stores;
• Social and Community Partners, comprising non-profits and charitable organisations with which the Company collaborates on social and community projects, primarily in the US; and
• Strategic and Alliance Partners, comprising market-leading companies across multiple business sectors with which the Company cooperates on branding, marketing, and other joint projects. Target has agreed a number of partnerships in recent years. The Company has community partnerships with Common Threads, Alliance for a Healthier Generation, and Just Keep Living Foundation. It has also partnered with Dwell Magazine to launch a new line of furniture, and has partnered with VF Corporation to promote sustainable manufacturing practices.

Key Resources

Target’s key resources are its intellectual properties and brands, its catalogue of products, its supply chain and distribution infrastructure, its online sales platform, its IT and communications infrastructure, its physical retail outlets, its partnerships, and its personnel.

Target owns and or leases large portfolio of physical properties across the US. This principally incudes its 1,792 retail outlets, the majority of which are owned, as well as its 40 distribution centres. The Company also owns several offices in the US.

Cost Structure

Target incurs costs in relation to the development of its original products, the procurement of merchandise and products, the procurement of professional services, the development and maintenance of its online sales channel, the maintenance of its IT and communications infrastructure, the operation of its physical retail chain, the operation of its distribution infrastructure, the implementation of marketing and advertising campaigns, the management of its partnerships, and the retention of its personnel.

In 2015 Target’s largest expense came in the form of cost of sales, which amounted to $52.00 billion for the year. The Company also recorded selling, general, and administrative costs – including compensation and benefit expenses and occupancy costs – in the amount of $14.67 billion.

Revenue Streams

Target generates revenue through the sale of general merchandise across its retail outlets and digital sales channel. The majority of the Company’s revenue is derived in the form of point-of-sale fees, as well as in the form of additional charges, such as shipping fees.

In 2015 Target generated net sales for the year of $73.79 billion, up slightly on the $72.62 billion recorded by the Company in 2014. Almost all of the Company’s revenue was generated in the US, with a small portion of revenue attributed to the Company’s discontinued operations in Canada.