Target Corporation: Maintaining Relevance in the 21st Century Gaming Market Situation Analysis
Target Corporation is one of the largest US based retailer popular among suburban women shopping with their children including high spending teenagers because it offers one-stop shopping opportunity with a trendy, superior mix of premium high quality merchandise as well as discount merchandise for its customers. Target.com, the online, electronic retail store, Target Financial Services, that operates the Target Red and Target Visa card are its other business ventures. Its ‘high level stewardship’ coupled with ‘Expect More-Pay Less’ slogan differentiates it from the rest of retailors. Video games are among the most productive categories in the Target Corporation’s chain of 1,744 Target Stores and Superstores as evidenced in its Total Sales, Sales Per Foot and Contribution Per Foot indexes which are 1.54, 1.55, and 1.3 respectively (indexed to average for group) and it is one of the two items that provide higher contribution margins and total revenues. Hence this is a significant item in the retail business portfolio. Folding in sales of consoles and accessories, the size of the overall game industry had reached $21 billion. Roughly 55 percent of this came from software, about 30 percent from hardware, and 15 percent from accessories. However, the Video games can be digitally distributed, they could be shopped for, bought, received, and installed all on a home laptop, personal cell phone, or gaming console such as Microsoft’s Xbox 360, Sony’s PS3, or Nintendo’s Wii through online. Therefore, being mainly a brick and mortar store, Target is facing the threat of shrinking or losing this lucrative business due to this growing trend of online shopping and purchasing of games. The seriousness of the threat is clear when considering that faced by the brick and mortar recorded music retailers when the digital distribution and iTunes’s music retailing were introduced to the market. Therefore, the 2
company expects to find an effective solution to face this challenge and to leverage the video games business capitalizing on its strengths. The offline sales of games should be continued as still over 90% of retail sales occur in stores while all online sales account only for 6%-7% and Target can capitalize on its already existing chain of stores without significant investment. Nevertheless, online game market is expanding and the customers are changing their buying habits to switch to convenient and quick online markets and hence enhancing online sales is a must for the future survival. Furthermore, that is cost effective for the retailor as the labour charges and other overheads are minimized while the customer base may be expanded with the untapped regional markets in the US as well as markets outside the US. Brand image as a reputed mom-friendly retailor that offers high quality trendy merchandize, widespread market presence across the US with 1,744 Target Stores and Superstores for over a century, design, and innovative marketing techniques are among its strengths. Though it is mainly a brick and mortar store, it already possesses significant achievements and reputation in the digital business domain such as being the first retailer to offer prepaid iTunes debit cards as well as Target.com being the most downloaded retail app on the Apple by 2009. Not being aggressive in online marketing of gaming products is one of its present weaknesses. Target Corporation has to face the competition in the retail market, competition from the online gaming retailors1 as well as the slim margins offered by the major console manufacturers for their consoles. 1 Here not only the competition from well-established online only retailers but that of the online store fronts of other retailers such as Wal-Mart as well as the new entrants to online game retailors such as OnLive should be considered. 3
The in-store traffic alone will not bring revenue and...