Not on Target: A Retail Giant Struggles to Remain Relevant

Target, a U.S. based retailer, has enjoyed success in the past by marrying the practical with the trendy. However, the prominence of online shopping is threatening its very existence. This article examines several initiatives Target is taking to remain relevant in a digital age. But it may be too little too late.

In late 2011, Target quietly launched a retooled and internally-built website. The relaunch was symbolic in the sense that it showed Target’s commitment to a new age of digitization. It also symbolized the rising influence of a new competitive threat: Amazon. Ironically, for the past 10 years, Target had outsourced nearly all its online operations to Amazon, including the hosting of its website. Now its partner had become one of its most menacing rivals.1

Target got the message, but perhaps too late, finally hiring a Chief Digital Officer in 2013.2 Online sales followed, but only to a degree.  In 2015, Target’s digital sales still only constituted roughly 3% of the $74 billion total, a far cry from Amazon but in line with Wal-Mart’s 2015 digital make up of 2.5%. 3,4

Digital is here. Now what?

The nudge into the digital space forced Target to rethink how to interact with its customers. In May 2013, Target launched the smartphone app Cartwheel, which aimed to marry the function of couponing with a social network. The app allowed a customer to scroll through a variety of temporary coupons, place the coupons into one of several “slots” that limited the number of coupons that could be used in a trip, and then scan the coupons at checkout.  The app linked with Facebook to provide a way to share your savings, creating a network effect. By many measures, the app seems to be a success. As of May 2015, the app had been downloaded more than 14 million times and generated more than $1 billion in promotional sales for Target.5 While the numbers seem impressive, a skeptic would ask if the sales generated were incremental or simply discounts on products people were already going to buy.  Economics aside, the app has allowed Target to gather massive amounts of guest data.  The Cartwheel data have allowed Target to better understand buying patterns of guests, allowing promotional activity to be better targeted (pun intended). For example, a coupon can be sent to a customer who has not visited the store recently to nudge him or her back in.  Based on the length of the lapse, the coupon amount and product can both be adjusted to provide just the right discount to encourage a trip to the store.

Digitilization has also begun to transform the way Target manages its inventory. In May 2015, Keri Jones, Target’s head of supply chain announced that Target will pilot Radio Frequency Identification (RFID) technology.6 The technology will allow a small RFID device or tag to be placed on an item of inventory (likely clothing).  The tag simply consists of a microchip with an antenna that emits a signal to a receiver.7 The technology should allow for better inventory management along the supply chain, giving Target visibility to where inventory sits along the chain, a tricky task in the past. Better inventory management should then lead to lower shortage rates and more ease in locating a product within a store, resulting in lower operating costs and a better customer experience.

 Are we there yet? No.

While noble, these steps towards digitization are not enough. To compete with established juggernauts like Amazon and up-and-coming challengers like Wayfair and, more needs to be done to ensure that Target remains relevant.  To start, Target should accelerate the roll out of RFID to the entire chain and enable their use within other nodes of the supply chain.  The decreasing costs of tags will make the economics more and more attractive.  Second, Target’s digital strategy team needs to look itself in the mirror and decide what it is.  Does it want to compete with Amazon on selection and delivery or Wal-Mart on price or does it want to do something completely different.  Whichever way it goes, it needs to decide fast.  Because if you don’t define your strategy, someone else will for you.

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1  “Why Target lost its aim,” The Economist                                                                                                    , accessed November 2016.

2 “Targets Chief Digital Officer Leaves Target,” Star Tribune                                                                                                , accessed November 2016.

3 “Target Reports Fourth Quarter and Full Year 2015 Earnings,” Target Corporate website                                            , accessed November 2016.

4 “Wal-Mart 2015 Earnings Release” Wal-Mart Corporate website                                                                   , accessed November 2016.

5 ”RFID: New Tag Technology Will Elevate Target’s Guest Experience,” Target Corporate website  , accessed November 2016.


7 ”Frequently Asked Questions” RFID Journal                                                                                                     , accessed November 2016.


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Student comments on Not on Target: A Retail Giant Struggles to Remain Relevant

  1. Interesting take on Target. I think that the business that is most threatened by Amazon is Target’s apparel business. I read online that Target does 19% of its business on apparel vs. 7% for Amazon, but that by 2020, Amazon will increase to 19% as well [1]. If Amazon were to become a major player in apparel, Target would definitely need to change its strategy. For starters, Target would need to re-brand its apparel brand as its own stand-alone brand that consumers seek out instead of a brand that consumers happen upon. In addition, Target is going to have to ramp up its in-store experience for its customers. This will mean creating an experience for the customers from the second they walk through the door. If they’re not able to do this, and if Amazon ever decides to open brick and mortar stores, Target is in real trouble in the future.


  2. Interesting post on Target! I agree that Target still has a long way to go before it can compete effectively against rivals. Jason Goldberger, the Chief Digital Officer, recently left the company amidst lagging online growth relative to peers. The company will either need to grow through significant investment in digital or follow the strategy of Walmart, which recently acquired for $3.3 billion [1]. For now, it looks like the company is increasing its investment in capital projects, which is projected to be $2 billion in 2017 [2]. It will be interesting to see how these changes impact the business.


  3. Thank you for wonderful post. To keep up with today’s harsh reality in competitive low cost retailer, I believe Target has to be active in the journey to disrupt its operation model. Its business model has been to be a chip chick luster which has been fading for the past several years with the rise of many giants such as Amazon who is arguably at the forefront of digital revolution. In my opinion, Target in the future should focus even more on integrate technology into its supply chain operations, specifically logistics and inventory management. You have mentioned RFID in your post and I agree that they should quickly fine-tune this system and roll out to achieve even better cost management throughout supply chain.

  4. Very interesting read and I too worry it may be too little too late from an e-commerce perspective. Elements that are hard to quantify like momentum and buzz are no less important than their measurable counterparts. The fact that they “quietly” launched a new website make me think they don’t yet understand that yet. The app seems to be getting decent traction but I worry, as you mention, they are merely subsidizing purchases that would have happened anyways. To be convinced it was really having an impact on incremental sales, I would like to see evidence that the app is attracting new customers or even pushing existing customers to use target for purchases they wouldn’t have otherwise made or would have made elsewhere. I agree that RFID makes a compelling case but am concerned that it is a response that does not fully address to the changing landscape.

  5. Thank you for the interesting post! One interesting way in which some brick-and-mortar retailers are approaching competition with the large e-commerce giants is through tie-ups. For example, UK retailer Argos has a “click-and-collect” tie up with ebay where customers can pick up their ebay purchases from the closest Argos store for a shorter delivery time. This not only helps Argos leverage its existing store network to get a piece of the ecommerce pie but also provides opportunities for cross-selling and increased traffic. Maybe this is an option that Target could explore? However, as HBS2018 above mentioned – Ultimately Target will just have to focus on providing a superior in-store experience to the customer and it looks like they are on the right track!

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