When it comes to the retail industry, Target is, by all measures, an irrefutable giant. With stores scattered across urban areas in every state in the continental United States, you would be hard-pressed not to find a Target outlet nearby.
However, despite its strengths, the store also possesses some significant shortcomings as well as threats to its continued success. In this article on the Target SWOT analysis, we will examine the strength, weaknesses, opportunities, and threats to Target Corporation’s chain of department stores, as well as the top competitors to the retail behemoth.
History of Target
The chain of department stores known as Target is officially owned by the Target Corporation, which opened its first store in Roseville, Minnesota, in 1962. The company was originally known as Goodfellow Dry Goods, but after going through a series of name changes over the years, it finally changed its name to Target in 2000.
It is currently headquartered in Minneapolis, Minnesota, and is the 7th largest retailer in the U.S. The company currently operates 1938 stores all across the country with 409,000 employees. It is a publicly-traded company, and the current CEO is Brian Cornell.
Despite its classification as a department store, Target operates three primary types of stores. These variants help the brand penetrate a wider range of shoppers by offering unique services tailored to the particular needs and preferences of their customers.
- The first can be considered the classic discount Target store, which offers a range of high-end merchandise at discounted prices;
- The second is known as the SuperTarget store, which is a form of hypermarket (i.e., it combines the functions of a department store with a supermarket, including the sale of grocery items); and
- The last store type is a series of small-format stores which deviate from the more well-known large stores but still offer a range of services in inner-city regions where floor space is limited.
The story of Target within the business world is not without several controversies and challenges. However, the store has shown a continuous trend of strong upward growth over the last two decades or so. In 2021, it was the third-best-performing retail outlet worldwide in terms of revenue, with a net revenue of $106 billion, second only to other retail giants like Walmart and Costco.
The net sales of the company have shown a similar trend, increasing by almost 50% since 2015, accompanied by steady growth in the number of retail outlets. The company has been publicly traded since 1967 and has a market capitalization of about $70 billion.
Let’s examine some of the key advantages that Target has over its competitors.
- It offers a wide range of merchandise. By positioning itself as both a department store and supermarket, Target can offer its customers a wider range of both products and services. This includes clothing, pharmaceutical services, grocery items, home furnishings, food and beverages, and a wide range of other products. In 2021, Target’s largest sales share came from the sale of beauty and household essentials.
- Strong brand positioning and large market share. Target is a household name within the United States and enjoys a large market share of the retail industry and also a strong following by a loyal customer base. Originally, Target was positioned as a department store chain for middle to high-income earners. However, with the addition of pocket-friendly loyalty programs as well as the Target discount store, the brand has opened its stores to a wider range of shoppers.
- It leverages strategic partnerships. One way through which the target corporation has been able to steadily increase its sales revenue over the years is by employing useful partnerships with allied and non-allied industry giants. For example, Target negotiated a $1.9 billion deal with CVS pharmacy, which allowed the pharmaceutical company to take control of all pharmacies and mini-clinics within Target stores nationwide.
- Personalized branding efforts. As mentioned earlier, Target offers three different types of stores depending on the location and demographics of local shoppers. This allows the stores to effectively reach out to customers more by offering personalized services, which ultimately boosts customer experience. This strategy allows the brand to offer these high-end products at a lower price than similar competitors.
- Private label branding strategy. Target stores offer a wide range of private label branding products from different product channels through its Target Brands subsidiary. Some popular areas include clothing and apparel, food and beverage, value grocery services, a premium furniture line, outdoor camping goods, and so on.
- Dedicated loyalty program. In a bid to attract new customers as well as reward loyal customers, Target offers a range of loyalty programs and financial services, which are available through several financial and retail services like the Target REDcard (a type of credit card), the Target Debit Card, gift cards, and so on.
- Strong history of philanthropy. Through the Target Foundation, the company has been at the forefront of various charities and has supported a range of well-known causes, especially those concerned with children, ethnic minorities, or women. The foundation believes strongly in poverty alleviation, financial inclusion, and gender equality and donates 5% of its profits to various local charities and programs.
Here are some of the shortcomings of the business.
- Their products are perceived as expensive. Despite the existence of the target discount store, their products and services are believed to be primarily directed toward middle to upper-class income earners. This excludes a large share of the market and may then turn to stores that offer more discounted products, like Walmart and Costco.
- Various controversies and scandals concerning customer data use. Despite its widespread popularity, the Target brand is not without its Fisher of controversies. For example, in 2012, the store came under significant scrutiny concerning its customer data security policies as well as how it may have utilized customer information for various unethical marketing strategies and studies.
- Lapses in user data security. The company faced a large-scale cyberattack in 2014, which resulted in the theft of the credit card and debit card details of 40 million customers. Though the company quickly offered a statement and warned customers of the potential dangers, they still had to pay an $18.5 million settlement. However, this was only the tip of the iceberg as the company still had to deal with the significant damage to its reputation that the event caused, causing its earnings to fall by 46% following the attack.
- Lack of international presence. Despite all the success the company has enjoyed locally over the years, they virtually lack an international presence. Their first significant foray into the international market was through the opening of the Target Canada subsidiary, and that resulted in spectacular failure, with the brand losing over $2 billion in investment.
Despite their strong growth, there is still much-untapped potential left within the target business structure. Some examples of the way the company can leverage these prospects include:
- Building further partnerships and branding opportunities. Though the company has built several useful partnerships with other businesses like Starbucks and CVS pharmacies, there’s room for further expansion and acquisitions to increase the range of services it can offer to customers.
- Expanding their small-format stores. One of the disadvantages of the big-box department store style of most Target outlets is that there is little available floor space for such structures in densely populated urban centers like cities. Due to this, the store lacks a significant presence in such urban areas. However, with the introduction of new small-format stores (which may be as little as ⅓ of the size of their normal stores), Target can expand to major city centers and cater to a wider customer base.
- Expanded loyalty programs. Further expansion of the target credit card and debit card program is a great way to attract new customers to the business by offering them rewards such as cashback bonuses for shopping using Target’s financial services.
- Further room to develop their e-commerce department. Even though the platform was early to adopt a dedicated e-commerce service and has seen significant growth in that department, less than 20% of their sales share in 2021 came through online sales channels, leaving significant room for growth. Their same-day delivery services reported 80% fulfillment, so improving on this statistic is a great way to start by further leveraging on their same-day grocery delivery service Shipt as well as adding more Drive Up for grocery pickup centers.
- Build up their private label brands. The revenue from their private label brands is a significant source of income for Target. It also serves as a way of setting them apart from other retailers and ensuring that their customers receive the best goods and services. Therefore, expanding on these private label brands is a great way for the company to boost revenues as well as further cement its reputation as a high-value yet customer-centric brand.
- Become more eco-friendly. Target has always had a reputation as an eco-friendly brand. This can be shown by the steady reduction in its carbon footprint over the last five years, even as the company expands its services and opens more stores across the country. Leveraging this is a great way to improve brand reputation and awareness, attract more customers, and help save the environment from the effects of climate change.
Here are some potential threats to the company.
- Increased competition. Despite the steady growth of Target over the last few years, it still faces significant competition from both old and new players in the department store and supermarket retail industry. This only serves to further increase the competition for market share within a low-margin industry like retail, pitting the company against giants like Walmart, Amazon, Costco, Kroger, and so on. This is especially worrying due to the fact that the online video industry has a particularly low barrier to entry.
- Consumer shift towards online shopping. As we mentioned earlier, there has been a strong shifting consumer sentiment toward e-commerce and online shopping. Even though Target has made great strides towards keeping up with this trend, other retail giants such as Amazon are a significant threat to the significant logistical and technological advantages they have in this area, leaving Target with a relatively small share of the market.
- The threat of a failing macroeconomic environment. Target operates primarily within the United States and is vulnerable to economic downturns such as a recession. Also, the shrinking purchasing power of the middle class (which makes up the majority of the customer base) will likely lead to reduced revenue for the business.
- Failure to differentiate themselves from their competition. In the current business environment, differentiation and specialization are quite necessary if your business wishes to succeed and sets itself apart from competitors. Failure to differentiate and create a particular niche for itself may lead to problems for Target in the future.
- Negative reputation and a tainted brand image. Target has always been a brand at the very forefront of social issues such as LGBTQ+ and climate change. However, this does not show the platform from some of the controversies and criticisms surrounding these topics, and the company has received its fair share of scandals with regard to animal rights, LGBTQ+ rights, and gender inequality. They have also struggled with scandals concerning customer data, customer experience, political leanings, and safety regulations.
Conclusion on Target SWOT Analysis
Target is, without a doubt, a giant in the retail industry within the United States. However, a sealer to diversify their services as well as expand their markets internationally may pose a significant threat to further growth. This is especially true due to rising competition, especially in e-commerce, from other brands within the United States.