{"id":18679,"date":"2016-11-18T15:25:39","date_gmt":"2016-11-18T20:25:39","guid":{"rendered":"https:\/\/digital.hbs.edu\/platform-rctom\/submission\/not-on-target\/"},"modified":"2016-11-18T15:39:07","modified_gmt":"2016-11-18T20:39:07","slug":"not-on-target-a-retail-giant-struggles-to-remain-relevant","status":"publish","type":"hck-submission","link":"https:\/\/d3.harvard.edu\/platform-rctom\/submission\/not-on-target-a-retail-giant-struggles-to-remain-relevant\/","title":{"rendered":"Not on Target: A Retail Giant Struggles to Remain Relevant"},"content":{"rendered":"

In late 2011, Target quietly launched a retooled and internally-built website. The relaunch was symbolic in the sense that it showed Target\u2019s 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<\/sup><\/p>\n

Target got the message, but perhaps too late, finally hiring a Chief Digital Officer in 2013.2<\/sup> Online sales followed, but only to a degree.\u00a0 In 2015, Target\u2019s digital sales still only constituted roughly 3% of the $74 billion total, a far cry from Amazon but in line with Wal-Mart\u2019s 2015 digital make up of 2.5%. 3,4<\/sup><\/p>\n

Digital is here. Now what?<\/strong><\/p>\n

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 \u201cslots\u201d that limited the number of coupons that could be used in a trip, and then scan the coupons at checkout.\u00a0 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<\/sup> 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.\u00a0 Economics aside, the app has allowed Target to gather massive amounts of guest data.\u00a0 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.\u00a0 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.<\/p>\n

Digitilization has also begun to transform the way Target manages its inventory. In May 2015, Keri Jones, Target\u2019s head of supply chain announced that Target will pilot Radio Frequency Identification (RFID) technology.6<\/sup> The technology will allow a small RFID device or tag to be placed on an item of inventory (likely clothing). \u00a0The tag simply consists of a microchip with an antenna that emits a signal to a receiver.7 <\/sup>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.<\/p>\n

\u00a0Are we there yet? No. <\/strong><\/p>\n

While noble, these steps towards digitization are not enough. To compete with established juggernauts like Amazon and up-and-coming challengers like Wayfair and Jet.com, more needs to be done to ensure that Target remains relevant.\u00a0 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.\u00a0 The decreasing costs of tags will make the economics more and more attractive.\u00a0 Second, Target\u2019s digital strategy team needs to look itself in the mirror and decide what it is.\u00a0 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.\u00a0 Whichever way it goes, it needs to decide fast.\u00a0 Because if you don\u2019t define your strategy, someone else will for you.<\/p>\n

Word count: 646<\/p>\n

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1 \u00a0<\/sup>\u201cWhy Target lost its aim,\u201d The Economist \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0<\/em>http:\/\/www.economist.com\/news\/business\/21645218-discount-store-chain-which-forgot-its-formula-success-why-target-lost-its-aim<\/a> \u00a0, accessed November 2016.<\/p>\n

2 <\/sup>\u201cTargets Chief Digital Officer Leaves Target,\u201d Star Tribune \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0<\/em>http:\/\/www.startribune.com\/jason-goldberger-target-s-chief-digital-officer-leaves-target\/394626801\/<\/a> \u00a0, accessed November 2016.<\/p>\n

3 <\/sup>\u201cTarget Reports Fourth Quarter and Full Year 2015 Earnings,\u201d Target Corporate website \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0http:\/\/www.startribune.com\/jason-goldberger-target-s-chief-digital-officer-leaves-target\/394626801\/<\/a> \u00a0, accessed November 2016.<\/p>\n

4 <\/sup>\u201cWal-Mart 2015 Earnings Release\u201d Wal-Mart Corporate website \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0http:\/\/corporate.walmart.com\/_news_\/news-archive\/investors\/2015\/02\/19\/walmart-announces-q4-underlying-eps-of-161-and-additional-strategic-investments-in-people-e-commerce-walmart-us-comp-sales-increased-15-percent<\/a> , accessed November 2016.<\/p>\n

5 <\/sup>\u201dRFID: New Tag Technology Will Elevate Target\u2019s Guest Experience,\u201d Target Corporate website \u00a0https:\/\/corporate.target.com\/article\/2015\/05\/keri-jones-perspectives-RFID<\/a> \u00a0, accessed November 2016.<\/p>\n

6 <\/sup>IBID<\/p>\n

7 <\/sup>\u201dFrequently Asked Questions\u201d RFID Journal \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0 \u00a0http:\/\/www.rfidjournal.com\/site\/faqs#Anchor-What-363<\/a> , accessed November 2016.<\/p>\n","protected":false},"excerpt":{"rendered":"

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. 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