Target Case Study Online Free
| Target Corporation| Market Research| | Jon A Goad| 9/25/2011| Oklahoma Christian University ABSTRACT The purpose of this paper is to summarize the considerations that Target Corporation must take into account to determine the market feasibility of opening gourmet restaurants inside its stores.
A brief history of the corporation will provide the reader with some general information about the company’s early years. A situation analysis will then address much of what the Marketing Department must consider, including trends, product life cycle stage, opportunities and threats, as well as potential strengths and weaknesses.The paper goes on to discuss Target’s customer profile, and how that will be a determining factor in the decision. A summary concludes the paper by discussing a couple of options, why they should or should not be considered, and what the author thinks is the best option in the current environment. | Background of Target Corporation Target Stores, since its founding in 1962, has been a dynamic leader in the American retail industry.
A division of Target Corporation, its office is headquartered in Minneapolis, and the company currently operates over 1,700 stores in 49 states with over 355,000 employees (http://sites. arget. com). It is known, along with Wal-Mart and K-Mart, as one of the “Big Three” in US discount retailing. The company is known for its offerings of brand-name merchandise at discounted prices, and its famous “bulls-eye” logo is indeed synonymous with the idea of bargain shopping.
A look back at Target’s early years indicates that the chain had anything but humble beginnings. Dayton’s department store chain, during the early 1960’s, was looking for ways to re-emerge as a top retailer, as well as to enhance the shopping value for its customers. So it began moving towards a new concept at the time: mass-market retail.The idea was to combine the fashion, quality, and service of a department store with the value of discount stores to create a “super-store. ” Although that label did not stick until decades later, it is essentially what was born out of this idea. The first store opened in Roseville, Minnesota during spring 1962, and by the end of the year Target had opened 3 more locations in the Minneapolis area.
Throughout the 1960’s and 1970’s, the chain grew to 74 stores in 11 states, and in 1979 celebrated for the first time achieving the milestone of $1 billion in annual sales (http://sites. arget. com). In 1994, the retailing giant unveiled the trademark slogan that remains today: “Expect more. Pay less.
” The slogan exemplifies the company’s drive to offer guests value, quality, and great service. Situation Analysis Trends: Wal-mart has agreements with multiple food-service chains to operate within its stores, including McDonald’s, The Taco Maker, Subway, and Fazzoli’s. K-Mart Corporation typically will have an in-house deli in its stores, and many have agreements with Little Caesar’s Pizza.Many of these in-store food service venues are profitable. Bill Lowery, McDonald’s vice president in charge of company owned Wal-mart stores states that the Wal-Mart-based McDonald’s “remain very strong, are profitable and continue to grow” (Dow Jones News). Additionally, a Wall Street Journal article notes that within three years Subway has gone “from a lone restaurant inside a Wal-Mart in Ozark, Ala.
, (it) has quickly overtaken McDonald’s as Wal-Mart’s primary fast-food concessionaire across the United States” (Wall Street Journal).It is highly unlikely that Subway would continue to open more Wal-mart venues if they were losing money. Stage in industry/Product Life Cycle: Although the concept of having an in-store restaurant is not new, the life cycle for this particular product would seem to be lengthy. Customers will continue to shop at discount retailers for the foreseeable future, and the opportunity to offer food service will remain as long as shoppers are coming to the stores. Opportunities and Threats: The most significant opportunity for Target is the creation of additional revenue streams through 5-year leases.While Target certainly would want the restaurants to be profitable, its revenue is generated through the “opportunity” for the restaurant to do business, not through the restaurant’s performance.
Conversely, the most significant threat is simply the lost opportunity if a restaurant cannot maintain its own desired level of profitability, and ends up terminating a lease agreement. Strengths/Weaknesses: One of the biggest strengths of opening in-store restaurants is that some percentage of shoppers will remain inside the doors of Target stores for longer periods of time.While that does not necessarily mean they will purchase more bigger ticket items, they may in fact purchase more products that are classified under “impulse buying. ” Possible weaknesses/disadvantages include the “give-up” of space that could be used to put more products on the shelves, as well as potential liability issues related to the restaurant business (e. g. customer spilling a drink and someone slipping on the wet floor before it gets cleaned.
) Analysis of Strategy: Target stores tend to attract younger and more educated and affluent customers than other competitors, including Walmart.The median Target shopper is 46 years old, the youngest of all major discount retailers against whom Target directly competes. The median household income of Target’s customer base is roughly $55,000. Over 80% of Target customers are female, and more than 38% have children at home.
About 80% have attended college and 43% have completed college (http://sites. target. com). Because its customer base is generally more affluent than those of its competitors, Target is considering the strategy of placing upscale food service vendors in its stores.Indeed, if the strategy is implemented, Target will allow gourmet restaurants only. Of course, the main consideration for market segmentation is geographical.
Will customers in Chicago be more willing to sit down and eat inside a Target store at a locally well-known gourmet pizza restaurant like Garibaldi’s than they would at a national seafood chain like Red Lobster? Conversely, would customers in San Antonio rather eat at an El Chico than at JR’s Steakhouse? These are questions Target must answer in consideration of its market segments and target markets.International Issues: Until and unless Target decides to place restaurants in its stores outside of the US, there are no international issues to consider. Competitive Environment: food service is extremely competitive, and while Target is not necessarily engaging in food service itself (it is only allowing certain franchises to operate in its stores), it hopes to offer customers a reason to stay longer, and if the restaurants are profitable, Target will create additional revenue streams through its lease agreements. Summary of Lessons LearnedTarget has concluded through its market analysis that the decision to open restaurants in its stores is dependent upon two rather obvious, but significant factors: the type of restaurant (in this case, upscale), and the market demand.
First of all, Target recognizes that a high percentage of its customers do not necessarily have a craving for fast food chains, such as McDonald’s or KFC. As such, Target removes those types of restaurants from consideration immediately. So the market for upscale restaurants must then be considered.Research indicates that while customers may be intrigued at the idea, the lifestyle for many of them does not include spending an hour at a restaurant either before or after shopping. Target realizes that its busiest time of the day is late afternoon when customers stop by to do their shopping on the way home from work, and do not necessarily have the time to sit down at a restaurant.
Target acknowledges that Wal-mart’s model works well for a couple of reasons: its offerings are fast-food, so customers can take their food with them, and Wal-mart’s clientele is more inclined to eat fast-food.Further research shows that eating at nice restaurants is typically a “family” outing, and the percentage of customers whose entire families go shopping together is quite small. Finally, Target’s research has shown that more affluent customers are inclined to dine at home: this is simply a cultural dynamic in which the market for in-store restaurants appears small. Conclusions and Recommendations Target has determined that, after careful consideration and market research, it is not a good time to open in-store restaurants.Their market survey found the following: * Less than 25 percent of Target customers surveyed responded favorably to dining at an in-store restaurant more than once a month.
* Over 65 percent gave an unfavorable response when asked if these restaurants would make Target a more desirable place to shop. * 58 percent responded that the restaurants would not enhance the Target brand Target could consider following the Wal-mart model of leasing space to fast-food chains.However, this alternative is likely to hurt Target’s image as a more upscale discount store, and it would not create the revenue stream that Target forecast if leasing space to the higher-end restaurants. So this alternative does not warrant much attention. The other alternative is to do nothing.
Since the market survey indicates a small percentage of customers reacting favorably, and the lack of certainty for long-term financial returns gives the company little reason to incur such a risk to its brand and image, I believe doing nothing is Target’s best alternative at this time.References 1. Dow Jones. (2010). McDonald’s plans upgrades to Wal-mart based restaurants. Dow Jones News.
Retrieved September 20, 2011 from http://www. imagesfood. com 2. Wall Street Journal. (2007).
Wal-Mart makeover favors Subway over McDonald’s. MSN News. Retrieved September 23, 201 from http://articles. moneycentral. msn.
com 3. Target Corporation Website. (http://sites. target. com)