Target Corporation: Discount Retailers in the United States - Research Paper Example

?Target Background Target Corporation is among the large discount retailers in the United s. The company has more than 700 stores predominantly in the US though it has made inroads internationally into countries such as Australia, India and Canada. However, the company’s over reliance on the US market implies that Target’s performance is highly dependent on consumer confidence and the state of macroeconomic conditions in the United States (Target 10–K Part 1). As of 2010, Target had a turnover excess of $65 billion, approximately 355,000 employees and was ranked 138 in Forbes Global 2000. Target’s annual report categorises the company’s operations under two broad market segments: retail and credit card. The retail segment offers a wide assortment of general merchandise available either online or at its physical stores. Other than food items and household essentials, all merchandise categories found in physical stores are available for sale on the online shopping site. The credit card segment offers credit and debit cards under the “REDcards” brand to qualified customers. Currently there are three “REDcard” options: Target Visa and Target Card credit cards and Target Debit card (Target 10–K Part 1). Therefore, the company’s revenue model is on sales markups from retail sales and credit card fees and interest. In the retail segment, Target’s biggest competition is Wal-Mart and Costco. However, due to the broad category of merchandise that the company offers, all other forms of retail commerce are potentially competitors. Nevertheless, Target has been able to compete successfully by differentiating itself through a combination of price, merchandise assortment, convenience, customer service and marketing efforts. An example is how Target has deployed different store formats – CityTarget, SuperTarget, Target Greatland and Target stores – to capture different customer segments. In the credit card segment, Target competes with other financial providers. To support the current business environment Target relies extensively on its computer systems for inventory management, customer transactions processing and summarizing company results (Target 10–K Part 1). Some of the main infrastructure components are: networks, Point of Sale systems (POSS), customer relationship management (CRM), and so on. Networking ensures that all Target stores are interlinked such that supply chain management is effectively managed to match consumer demand. This way the company can maximise on its mark-ups while it keeps its inventory costs at a minimum. On the other hand, CRM is vital for Target’s online business as it enables the company to perform customer analytics to improve targeting and customer segmentation. Order Fulfillment Process Analysis As an online shopping site, order fulfillment is a major process at target.com. In this study we selected the most straightforward way for making an online purchase at target.com as a new customer. Order fulfillment starts immediately after online shopper has selected the item he/she wants to buy. This item is added onto a virtual shopping cart. The first input in order processing is the item to be procured. Once an item is selected Target’s system checks if the item is available within its inventory. The output is immediately delivered with the publishing of either “in stock” or “not available”. When you add an item on the shopping cart, target.com opens a mini-window with three options: checkout, continue shopping and view and edit cart. The next input, strictly speaking, is the selection of any of these three options by the customer. The site always provides customer with the option of returning items to cart and continue shopping as one proceeds to checkout. The next set of inputs is customer shipping address, selecting form of payment and billing address. Repeat customers may opt to create an account with target.com, in which case they would not have to keep entering any of these three sets of data each time they want to make a purchase. Customers who have set up accounts at target.com simply sign in and the system picks up their details and waits for them to either change their shipping address or use one-click to process payment. This stage provides the most important information to Target in terms of verifying payment details and generating a customer profile. There are three main processes done at the customer shipping address stage. Customer inputs his address and contacts information and selects shipping option. Process one is verification. Shipping details are recorded temporarily in a database and then they are re-displayed to the customer on a separate pop-up window for her to confirm if the details were accurately captured. The second process calculates the approximate time of delivery for the product depending on the shipping method selected. Process three calculates the total cost of product and shipping and displays that amount in the payment stage. At the payment stage, customer selects the payment option she prefers and inputs her billing address and any promotional card that she may have received from Target. There are three options for payment available at target.com: credit card (Visa, MasterCard, American Express, Discover or any of the Target cards), PayPal or paying with a Target gift card. Three processes occur here. First, Target verifies the validity of whichever payment system that has been selected. Secondly, Target calculates the total billing amount based on items selected plus shipping costs and less any promotional code offers. Thirdly, target.com records the billing address information temporarily in its database. Customer then proceeds to the final stage which for review and placing order. At the final stage there are two inputs: customer can place order or she can go back to shopping. When customer selects the later there is no output. However, when customer places order, Target completes the transaction and sends the customer receipt to her email and on the web page. Here the customer’s details are shared with the relevant departments instantly, so that the item is removed from the warehouse, packaged and shipped to the given address. Customer information is also sent to customer service in case customer later contacts Target with questions, and to the marketing department for possible targeted marketing campaigns in future. We noted X problems from Target’s online order fulfillment process. First of all, the site did not calculate estimated taxes which may be important to some clients or, worse, still may lead to extra charge on the debit card. Secondly, whereas the system identified that our shipping address was invalid it did not prevent us from moving ahead to checkout. Thirdly, when we used the same computer Target’s system picked up the previous incomplete order and added it to our present order. Target’s system seems not to have been programmed to time out. We find this to be risky in the sense that a customer who is not keen may end up doing double or triple purchases of the same product. This also raises concern on security because it may imply that one’s credit or debit card details remain online insecurely. Fourthly, shipping charges are not shown on the payment page but on the review page. We think that showing it earlier can help customer make the decision to terminate the transaction earlier if he/she finds the shipping costs prohibitive. Security features We think a user would be willing to enter personal data and financial data on the Target website largely because Target is a big brand. We cannot ignore the effect of big brands on consumer perception. This means that the mere fact that the consumer is able to identify target.com as the legitimate website for Target Corporation, he/she will believe that the organization will have taken all the necessary steps to make their customer’s online presence secure. This means that the first security feature for this website is the presence of the Bullseye design and Bullseye dog that are renowned trademarks of Target, company contact information, FAQs and “about us” section at the bottom of the webpage. These give assurance to site visitors that they are in a legitimate Target website. The remaining security features that we can identify from target.com are presence of HTTPS and user accounts. Online shoppers are often told to look for lock icon and HTTPS on the browser before they make any payments online. HTTPS stands for HyperText Transfer Protocol with Secure Sockets Layer protocol. HTTPS is a protocol that transmits normal http interactions via an encrypted Secure Sockets Layer (SSL) which implies that it encodes the data records being exchanged. Target.com has HTTPS and lock icon at the address bar when one moves to checkout pages. User accounts are signified by the “sign in” and “my account” tabs on the web page. User accounts are password protected and as such customers can securely put their information therein. The greatest threats at target.com are credit or debit card fraud and identity theft. Identity theft may but is not limited to financial fraud. For example, an organisation may hack into user accounts to gain sensitive information from say, famous users such as CEOs, movie stars or politicians. We would recommend that Target implements timeout and use independent security service providers like Verisign to bolster their site’s security. Timeouts prevent people from obtaining private information such as phone numbers, address, billing address and so on when one leaves his computer for a short break. Anyone who wants to do so will have to provide the user’s password. Having independent security verification provides a second review or line of defense to Target and also assures customers of that the site prioritizes their security. It is best to have multiple lines of defense in online transactions. Recommendations for improvement Clearly Target had been thinking about improving its online processes and in August 2011, it moved its online business from Amazon.com into its own e-commerce system. The immediate benefits of this move for Target are long-term savings of the transaction fees that would have gone to Amazon, and ability to sell a greater assortment of products online. The company has also been able to implement attractive marketing strategies in the form of free shipping for orders above $50 and a “daily deal” feature on its home page. That said, Target will now have to perform all the challenging functions – such as order fulfillment, in-store integration and customer service, which accompany the operations of a leading online shopping portal by itself. In the worst case scenario this may make the company focus less on its core competencies. On the contrary, the company may use this opportunity to build new competencies, especially given its good performance in the brick-and-mortar retail business. Our suggestion is that Target should leverage its new e-commerce platform to increase local customer interaction through a modification of its “daily deals” feature. The modified version should use IP addresses or have a select city tool to highlight different deals for consumers depending in the city they are in. This will create more buzz since consumers will be having something in common and interact more with each other and the retail outlet. This may also provide a platform for Target to increase the revenues of its in-store amenities such as Target Cafe. The downside to this strategy is that it will require a very robust e-commerce system and also greater operations strategy as it may require a decentralised daily deals selection approach. Works Cited Target. “Target Annual Reports?: FORM 10-K.” Target.com. 10 Jan. 2012. Web. 10 Jan. 2012.  Read More