Behind 'Tarjay:' Target’s Strategy Combines Bargain and ‘Elevated’ Products | WSJ The Economics Of

Summary

Target's success lies in its unique blend of department store aesthetics and discount pricing, creating an elevated shopping experience. The retailer's strategy includes a mix of lavish displays and standard aisles, exclusive private labels, and limited-time designer collaborations. Amid the pandemic, Target expanded its store count and leveraged existing locations for online order fulfillment, boosting sales. Its private labels contribute significantly to its revenue, with some brands crossing the $1 billion mark.

Takeaways

• 🏬 Target focuses on store aesthetics to create an elevated discount store experience.
• 🎨 The store's strategy includes a blend of department store visuals with discount pricing.
• 📈 A study by Hawk Incentives shows that feeling like you're getting a good deal can boost sales.
• 🛒 Retailers aim for a balance between necessary items and impulse buys to maximize profits.
• 📊 Target has grown over 35% in the last two years, reaching over $100 billion in annual revenue.
• 🛍️ Target continues to expand its physical store count, including smaller format stores, alongside e-commerce.
• 📍 75% of the US population lives within 10 miles of a Target store, facilitating convenient online order pickups.
• 🚚 Stores act as fulfillment centers for online orders, with operations starting in the back room.
• 🛍️ Exclusive private labels and limited-time designer collaborations are key to Target's inventory strategy.
• 💰 Private labels offer higher profit margins for Target, with some brands worth over $1 billion.
• 🔄 Target is adaptable, changing strategies quickly in response to evolving consumer behavior.

Q & A

What is Target's strategy to differentiate itself from competitors?

Target focuses on creating an elevated discount store experience by combining department store aesthetics with a discount model, featuring sleek mannequins, elaborate displays, and fancy lighting.

How does Target's store design contribute to its success?

Target's store design combines lavish lighting and displays for certain areas like apparel, home goods, and electronics with standard merchandise aisles, creating a balance between high-end appeal and practicality.

What role does the feeling of getting a good deal play in Target's sales strategy?

According to a study by Hawk Incentives, when customers feel they are getting a good deal, it can make them feel smart and increase sales.

How has Target's growth been in recent years?

Target's business has grown more than 35% in the last two years, crossing $100 billion in annual revenue, largely driven by the pandemic and a decision to invest in its stores.

What is unique about Target's approach to e-commerce?

Target uses its physical stores as fulfillment centers for online orders, rather than building separate e-commerce warehouses, which has saved money and increased efficiency.

What percentage of the US population lives within 10 miles of a Target store?

Around 75% of the US population lives within 10 miles of a Target store.

What is the role of a 'fulfillment expert' at Target?

Fulfillment experts at Target are workers who collect goods off the shelves or pack items into boxes in the back room to fulfill in-store, curbside pickup, and online orders.

How does Target use sortation centers to improve its operations?

Sortation centers allow Target to centralize the packing and shipping process for orders from stores, making the distribution more efficient.

What is the significance of private labels in Target's inventory?

About one third of Target's inventory is exclusive to the retailer through private labels, which can be more profitable and help to differentiate Target from competitors.

How do limited-time capsule collections contribute to Target's brand image?

Capsule collections with designers help Target convey a high-end design image and attract customers interested in both affordability and style.

What is the financial benefit for Target in having private labels?

Private labels can result in 25% to 30% higher gross margins compared to manufacturer brands, with 11 of Target's brands worth at least $1 billion.

How has Target evolved since its start in 1962?

Target has evolved by changing store designs, acquiring businesses, and adapting its strategy to meet the changing needs of consumers while maintaining its image as an elevated brand.