Target Corporation (NYSE: TGT) is a leading mass merchandiser in the United States. Founded in 1902, the company operates 1,897 stores and headquarters in Minneapolis, Minnesota. It sells general merchandise products, including clothing, shoes and accessories, home fashions, housewares, and food items through its discount retail stores.
The company’s strategy has been to satisfy its customers’ needs for quality merchandise and services at the right value by offering a broad assortment of products through multiple store formats in all markets. It primarily operates discount retail outlets, such as Target, SuperTarget, and City Target.
In 2020, Target recorded sales amounting to 93.6 billion, becoming the 3rd largest general merchandise/discount store globally after Costco Wholesale and Walmart.
Target’s Business Strategy
Target’s business strategy is to offer customers a broad selection of quality merchandise at everyday fair prices. The company focuses on its long-term financial strength and strives to enhance the value of its brands.
With the outstanding performance in the 2020 financials, target hopes to open more stores soon. Moreover, it has adopted a new strategy to re-balance its portfolio of stores to ensure each region’s assortment is targeted at that region’s customers.
Target heavily invests in Tech improvements. Through the Target App, the company aims to provide customers with a seamless shopping experience when on the go. They actively embrace new ways of thinking and working. This includes using technology as a catalyst for growth, which will drive them into the future with great ideas.
In 2015, Target entered an agreement with CVS Health to control all Target Pharmacies and clinic businesses. This collaboration enables Target to pursue growth opportunities for retail clinic businesses and frees the company from responsibility for pharmacy fulfillment.
As an outcome of the skilled workforce, they have a strong culture of excellence that has delivered more than $12 billion in adjusted earnings since 2005. They understand the needs of their customers and how to manage their high-quality team members to drive results for Target Corporation.
Target’s SWOT Analysis
- Extensive Product Line: While the company has a large and diverse product line, they are most known for their variety of quality apparel items. Target’s pricing is generally right between Walmart’s low prices and Amazon Prime’s convenience.
- Strong Brand Recognition: The target brand is synonymous with quality products and fashion at an affordable price. This strategy has worked well, as the target consumer base is loyal to the brand and regularly ready to purchase more than just their traditional apparel items from Target’s aisles. Moreover, Target’s branding is consistent across all platforms, including store inventory, advertisements, and packaging of goods sold within its stores.
- Strong strategic partnerships: By leveraging strategic partnerships with brands like Starbucks, Target can provide a large variety of consumer goods that meet the needs of its customers. This partnership has been successful for both parties as they constantly release new products based on customers’ demands.
- High prices: Due to its commitment to high-quality products, Target has generally higher prices than other stores such as Walmart. Although the company does offer a variety of lower-priced items and values their customers who prefer saving money on everyday purchases, it may be difficult for some individuals to afford Target’s inventory of moderately priced goods.
- Limited International Presence: Although Target continues to expand internationally, it’s only present in 27 countries. This leaves much growth potential in more countries, especially in Asia and Africa.
- Growing Online Presence: Target’s online presence is growing but still not at the same level as Amazon, Walmart, and several other stores. With only 17.9% of Target’s purchases made online in 2020, there is plenty of room for growth with developing an even more robust e-commerce platform.
Room for Expansion: With room to expand internationally, there is an opportunity to increase revenue per store and expand their targeted customer demographic. At the same time, the domestic expansion will help Target continue to grow online with a broader reach.
- Competition in the Retail Industry: With the rising popularity of e-commerce, retailers are increasingly struggling to keep their brick-and-mortar businesses relevant. Target has a growing online presence but is still not as large as Amazon or Walmart. This puts them at a disadvantage because customers might choose to make all their purchases through one platform, significantly reducing their options.
- Volatile Economic Environment: Target receives a lot of revenue from customers looking to save money on everyday purchases. Exposure to an unstable economy, Target can lose potential customers and struggle to retain its current customer base.
Target Competitor Analysis
The company has strong brand recognition and a virtually flawless reputation as an honest business operator. It competes with big players such as Walmart, Amazon, Costco, Dollar Tree, and Dollar General
Walmart is a multinational retail company based in the US. It has its headquarters in Bentonville, Arkansas, with over 10500 stores distributed worldwide and 4743 in the US. Walmart is the largest U.S.-based retailer and the largest retailer globally by revenue, with $559.2 billion in 2020 and assets totalling 252.5 billion.
Target competes directly with Walmart in many areas across the globe, but especially in the US, where both companies are dominant forces and battle for consumer market share every year. Although Target offers higher-quality goods than Walmart’s budget-priced options, customers might opt to shop at Walmart instead because they are more likely to be incentivized by savings than brand recognition.
Walmart.com controls about 5.3 percent of the online retail market for products sold in the USA, far less than Amazon’s 38.7% market share as of February 2020. However, it boasts about 34.27 million fans on Facebook and 1.24 million followers on Twitter.
Its main competitive advantage over Target is its alignment with a broader omnichannel approach and focus on customer value. Staying competitive with Walmart will require Target to base its business strategies around similar consumer trends, such as technological advances in data analytics to drive better customer experiences.
Amazon is the largest Internet-based retailer in the world by total sales and market capitalization. Launched in 1994, Amazon is now a leader in e-commerce and cloud computing. With a revenue of $386.064 billion in 2020, the company controls roughly 38.7 percent of all online sales in the US, accounting for over 1.298 million jobs worldwide.
In contrast to Target, Amazon has no physical stores. Instead, they operate out of massive fulfillment centers that can be as large as one million square feet. Target’s main advantage over Amazon is its ability to provide customers with a service offering similar to what they would experience in-store.
Amazon has undergone significant changes recently under the leadership of new CEO Andy Jassy. Recent acquisitions of Whole Foods Markets and Ring have transformed the company into a major seller of groceries and home security systems. This has put Target in competition with Amazon in food, electronics, and home security.
While Amazon’s main competitive advantage over Target is its ability to provide consumers with goods at a lower cost than Target, it also offers other advantages. Being an e-commerce business allows Amazon to pay less for inventory and distribution, offering customers low prices on various goods while maintaining profitability.
Costco is an American multinational corporation that operates a chain of membership-only warehouse clubs. Costco has over 804 locations in the United States, Canada, Mexico, UK, South Korea, Taiwan, Australia, Spain, Iceland, France, and China. Costco’s main competitive advantage over Target is providing customers with massive savings on products through bulk purchasing.
Customers can find products at lower prices than those offered by competitors due to low overhead costs. By purchasing many goods in large quantities and distributing them through their outlets instead of manufacturers’, Costco passes these savings onto its members, who pay annual fees for access to the club.
In addition to being cheaper than other retailers like Target and Walmart, Costco offers value-added services, including free samples of items that customers might want to purchase. The company is also known for its various employee benefits such as stock options, paid vacations, and money towards college tuition.
Costco’s competitive advantage over Target does not translate into direct sales advantages compared to other competitors since many like Walmart shoppers are willing to pay a premium in exchange for the convenience of physical retail locations. However, Costco has maintained an average gross profit margin of 11.09 percent in seven years. This demonstrates that while the company may be offering low prices relative to other chain retailers, it can still earn substantial profits year after year by selling high volumes of items.
Costco currently has about 273,000 employees and approximately 105.5 million members. In 2020, it recorded a revenue of $166.76 billion and boasts total assets worth about $45.40 billion.
4. Dollar General
Dollar General is a chain of discount variety stores that sells merchandise at meager prices. Since its founding in 1939, the company has grown to over 16278 locations. Dollar General’s competitive advantage comes from offering customers competitive prices on goods and services.
Their low costs have allowed the company to offer lower prices than competitors such as Target, Walmart, and Dollar Tree on some of their products.
Dollar General offers customers a variety of goods that rival Target’s offerings. These include clothing, personal hygiene products, household items, and other consumer goods. This allows them to compete with retailers like Walmart and Target regarding sales volume while still maintaining profitability.
Their main competitive advantage over competitors like Walmart is smaller store designs at a lower cost than larger department stores. This keeps overhead costs down, allowing for more profits on each sale. In return, customers pay less money for the same or comparable quality of products. Due to population density and higher labor costs, the company has benefited from operating in rural areas where other major retailers cannot.
In 2019, it recorded a revenue of $27.8 billion with a net income of $1.712 billion. It has 143,000 employees and boasts total assets worth $22.825 billion.
5. Dollar Tree
Dollar Tree is a chain of variety stores across the US that operates similarly to Walmart by offering customers discounted goods in bulk quantities. Founded in 1986, the company has about 15,288 stores with headquarters in Chesapeake, Virginia.
Dollar Tree specializes in selling products for at most $1, hence its name (Dollar Tree). Like Walmart’s other competitors, Dollar Tree has achieved market dominance by providing customers with low prices relative to other retail chains and convenience locations. The company also provides value-added services such as gift wrapping and checkout services for customers who pay with cash or debit cards.
Dollar Tree’s competitive advantage over competitors focuses on high volume sales rather than higher margins per sale. This means that it keeps costs down by charging a minimal amount for items rather than making a hefty profit off of each item sold, which is what Walmart also does. This delivery model allows it to generate profits while still offering cheap goods at competitive prices.
It boasts about 193,000 employees and $6.480 billion in revenue for the quarter ending April 30th, 2021, with an operating income of $0.520 billion, a 42.09% increase year over year. Its total asset for the same period was $21.081 billion.
How Target Stands Out Against Its Competitors
Target differentiates itself from its competitors by being unique in many ways. This includes its focus on sustainability and encouraging eco-friendly practices amongst employees. The company provides resources for recycling, lowering electricity consumption, reducing food waste, and other environmentally friendly initiatives. Target also promotes wellness campaigns promoting physical fitness and preventative healthcare as part of their corporate social responsibility agenda.
One more difference between Target and other retail giants is that it has separate brands for its clothing lines rather than selling through one brand for all products. It has the “All in Motion” label where men and women can purchase athletic apparel at affordable prices. This allows customers to shop at one place for price-conscious, eco-friendly products while still offering value on clothes and accessories.
Also, its success comes from winning the market share of low to middle-income households in major cities that can afford essential goods but need a lot of them. This is why its prime locations are in downtown areas where the cost of living tends to be higher and minimum wage employment opportunities are available within walking or public transportation distance.
Not to forget that Target actively acquires new brands, as seen from its recent acquisitions of Shipt and Slumberland. With the Shipt acquisition, Target can offer same-day delivery for customers in select markets. This is another way Target stays competitive with other companies that provide fast and efficient shipping services, such as Amazon Prime.
With Slumberland, Target creates a new vision for the bedding industry by offering an affordable alternative that does not skimp on quality materials in providing its customers with comfort and luxury. These additions allow Target to be more than just a retail store; it now offers customers easy access to products previously inaccessible because of their high prices and needs for physical locations.
Target Competitor Analysis (FAQs)
Question: Who is Target’s Biggest Competitor?
Answer: The biggest competition that Target faces is from Walmart. It has over 4743 retail stores in the US and more than 5,000 through its international subsidiaries. Another major competitor is Amazon, which has millions of customers through its e-commerce portal and Amazon Prime member base in the online space.
Question: What makes Target different from its competitors?
Answer: In the past decade, Target Corporation has been able to gain its competitive advantage over its competitors by offering unique and diverse products at an affordable price. It has been able to provide high-quality products through its wide variety of brands while keeping prices low.
Question: Does Target use a differentiation strategy?
Answer: Its differentiation strategy has proven to be a successful way to differentiate itself from the competition. The use of branded products and in-house media studios (Roundel) has sparked more interest in the community on its products.
Target’s focus on sustainability and eco-friendly practices, along with its unique offerings in the clothing industry, has set it apart from other retail giants. With these competitive advantages that are difficult for competitors to replicate or emulate, Target is poised to continue a strong growth trajectory for many years.