E-business has become a necessity for today’s business. Generally, e-business can be understood as a wider concept that embodies all aspects of information technology use in a business. With the increasing adoption of technology in today’s society, businesses are realizing that information technology use is a source of competitive advantage. Target uses a plethora of strategies to maintain a competitive advantage over its competitors including its information system. An effective information system infrastructure has helped Target attract and retain customers, eventually improving its profitability.
Company Information
Target Corporation was formed in 1902 as Goodfellow Dry Goods. The company was officially named Target in 1962. It offers a wide variety of household commodities, and its success is based on its ability to offer quality and variety products. It has grown to be one of the largest retailers in the U.S., coming in second place after Walmart. Target employs 314,000 employees as of 2016, and it had a revenue of $75.785 billion in 2015 (Target Corporation, 2016). With 1793 stores in the U.S., Target is facing rigorous competition from Walmart, Kmart and other small scale retailers.
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Target has adopted a different marketing strategy from Walmart and its other competitors. Target prides itself by offering more upscale and trendy merchandise, instead of offering low-priced and low quality goods. Hence, Target attracts younger customers with relatively higher income. Target is utilizing information technology to increase its sales volume. Target’s information system enables the business to predict their customer spending habits, and come up with an effective e-business strategy.
Information Resources
Target has extensive information resources used to secure useful information that can be used to market its products to its customers and target customers. Information resources entail: people, hardware, software, information and network. According to Jiang et al. (2008), Target has advanced information technology technologies that enable it to collect a lot of information on their customers and customer profiles.
Piotrowics & Cuthberts (2014) describe the multichannel retailing approach to information technology use at Target. Target has moved from traditional hardware to online resources that allow customers to conduct their transactions easily without necessarily being at the point of sale. Target has a robust computer hardware such as computers and point of sale devices used to carry out transactions with millions of its customers.
Target introduced a robust customer relationship management (CRM) system as early as 2000, which became the primary software responsible for storing customer information. However, Target is currently driven by new technologies and software changes such as smartphone apps, different avenues of mobile payment, and cloud computing and big data due to increased customers (Piotrowics & Cuthberts, 2014).
Target has skilled personnel who are capable of using hardware, software and data at their disposal. Target has customer care and technical support personnel, it has a data center and a shared service center. According to Duhigg (2012), these information centers have data scientists who analyze data collected from customers. Target uses each opportunity it gets to interact and get to know more about customers, for instance, each shopper is assigned a unique code. When shoppers use credit cards, fill in a survey or a coupon, or even visits Target’s website, Target records everything about the customer. Duhigg (2012) examines how Target gets its insights on consumer habits by hiring statisticians, economists and behavioral experts to interpret data, and figure out how to exploit them. Such individuals are responsible for identifying unique moments in a customer’s life when their shopping habits become flexible, so that they can push the right advertisement their way causing them to spend more.
Alternatively, Target has an impressive information system network, such that each Target store can access the amount of stock in other stores across the nation. Target’s network uses LAN and internet to connect each computer to the server. The servers are also connected to store servers such that the stores can monitor what is in their stores. Thus, each target store has an “in-house” clients and servers, whereby the point of sale systems act the clients. Another important aspect of Target’s network is cloud computing, each store is connected to the company’s cloud server such that they can access the stores within the locality in case it runs out of stock.
Target’s information system plays an important role, it secures and stores information which has enabled the company to expand its sales by identifying shopping habits and weakness, which are used to tailor marketing efforts according to specific customer needs. Hence, the information system has enabled Target to retain customers, gain new customers and to remain competitive in the retail industry as seen in Porter’s 5 forces model. Regarding the bargaining power of consumers due to their several choices, Target has to keep prices competitive in order to attract more sales. While it is easy to enter the retail market, it is hard to establish a large business like Target, hence the threat of entrance is minimal. The threat of substitution is quite high for products such as groceries, household products, and electronics. Target customers can easily go to Walmart, Costco or any other retailer. Suppliers have the power to affect Target’s business, hence Target has to treat its suppliers well. Lastly, Target is in a very competitive industry, each competitor has a model that works and customers can easily switch to other suppliers. Porter’s model shows that Target is in a volatile market, and if it fails to plan its move effectively, it runs the risk of failing.
System Specification
Target’s information system has the right requirements which enable the retailer’s activities to run seamlessly. Target is armed with the right organizational and technical requirements that make up its information system (Jiang et al., 2008). For instance, each Target store has its own two servers which are capable of running about 30 registers. Individual stores can also access other servers because they system is created to support any emergencies in different Target stores. The servers are supported by a third party IT service provider, with trained technicians in Target stores. Target collaborates with Microsoft, IBM, Verizon and Hypercom in purchasing various hardware and software resources.
Target runs its point of sale software on Microsoft in tandem with the Inventory Management software, such that Target has a clear picture of the demand of every product it sells. To speed up the purchasing process, Target adopted the electronic signature pads. In 2011, Target made a deal with Microsoft to store its point of sale information in a virtual cloud storage. Cloud storage is more cost effective, and it means that Target will no longer rely solely on expensive servers (Target Corporation, 2016).
Information from the point of sale and other forms of interactions with the customers are managed in a customer relationship management system (CRM). Target’s CRM is specifically designed to allow people, processes and technology to work towards increasing profitability and reducing operational costs. Information in the CRM and Target’s cloud are further analyzed using relevant sales, marketing and customer care analytics. Analytics are used to identify sales trends, and the effects of different marketing campaigns. Lastly, based on the information, a demand forecasting will be conducted to show the expected short-term and long-term figures (Duhigg, 2012).
E- Commerce
Having collected customer information through various information technology sources, Target uses the information to facilitate business. Target has come up with different ways to communicate effectively with different customers about its products. According to Duhigg (2012), Target engages in aggressive selling after analyzing a customer’s spending and lifestyle habits. For instance, to appeal to pregnant women, Target mails them a combination of advertisements and coupons on pregnancy products and baby items. Target creates such adverts wisely by mixing it up with other adverts so that they appear random, so that customers will not feel like they are targeted. Once the shopper is inside the Target store, they are bombarded with cues and rewards such that they find themselves spending more.
Another approach to e-commerce is online sales. Target has adopted a business-to-consumer approach whereby it sells its products directly to the consumer. Consumers view the products on the website, before making an order. Target’s online shopping is gaining popularity such that Target dedicated 460 stores to fulfillment of online orders (Target Corporation, 2016). Most customers prefer shopping in the comfort of their homes. To improve its capability to deliver to customers, Target has converted some of its warehouses to online order fulfillment centers where they are use sort and pack online stores before shipping them.
Target recognizes the potential of e-commerce to improve its profitability, hence it is marketing its online store through various channels (Goldmanis et al., 2010). Target uses various channels to advertise its online store, it uses mails, coupons, and social media. Additionally, Target is now expanding stores with fulfillment capacity. Target is also offering flexibility in that it allows online shoppers to come and pick up their products from the store. To support online shopping, Target created a robust online checkout system that does not fail (Brynjolfsson et al., 2009).
Emerging Trends and Technologies
E-commerce is a dynamic concept, with many businesses adopting e-commerce, it is crucial for Target to keep up with emerging trends and technologies. Emerging trends and technologies are more convenient, time saving and have superior functionality. For instance, the introduction of android phones makes it easy for businesses to access their customers through mobile phone application. This is a value adding concept that can revolutionize shopping.
Targets should use its CRM to manage online shoppers the same way it uses it to manage customer information that visit Target stores. Online shoppers leave a trail of information as they go through different social sites and entertainment sites. By paying attention to customer online activities, Target can create effective consumer messaging that will appeal to individual taste.
Target.com is the website used by Target to communicate, advertise and sell products to different customers. Target needs to find ways to improve its website to attract and retain more customers so that they can spend more as they browse the website. Content is an important aspect of e-commerce. Target should research on high-impact content marketing, instead of blindly producing images, videos, blog posts and links that do not engage with the audience. Marketing is not a one-size-fits-all event, effective content will optimize on micro-moments that will appeal to different audience members.
Target should also take advantage of Black Fridays and other major shopping events. Over the years, Black Fridays have proven to be very profitable for online shopping because customers are afraid of the long lines at stores. Small discounts on such events are known to attract a lot of customers, and Target stands to make substantial gains during such occasions.
Lastly, Target needs to create a more flexible shipping and delivery system to support e-commerce. When Amazon launched Prime Now, an instant delivery service, it increased its customers dramatically. Target should create flexible delivery options on its website so that it can fulfill the needs of different customers.
In conclusion, an effectively implemented information system provides a business with abundant data that can be used to understand and engage with different types of consumers. Target has put in place a robust information system made up of point of sale computers, CRM softwares, analytic softwares and demand forecasting softwares. Each aspect of the system serves a purpose, and they are all responsible for the improved sales. Networking is another concept of Target’s information system that has created efficient channels of information between point of sales systems, stores, and warehouses. The processes information is used to create effective online and offline promotional campaigns. However, the most important contribution of information technology is e-commerce. Target made $475.6 million from the last quarter of 2015, hence this avenue is quite promising (Target Corporation, 2016). Target needs to streamline different aspects of its massive information system, and apply new trends in online marketing in order to reap more profits from digital sales. For example, Target can create customized content that will attract and retain more online clients.
References
Brynjolfsson, E., Hu, Y., & Rahman, M. S. (2009). Battle of the retail channels: How product selection and geography drive cross-channel competition. Management Science , 55 (11), 1755-1765.
Duhigg, C. (2012). How Companies Learn Your Secrets. The New York Times . Retrieved from: http://www.nytimes.com/2012/02/19/magazine/shopping- habits.html?pagewanted=all&_r=0
Goldmanis, M., Hortaçsu, A., Syverson, C., & Emre, Ö. (2010). E‐Commerce and the Market Structure of Retail Industries. The Economic Journal , 120 (545), 651-682.
Jiang, Y., & Yu, S. (2008, January). Mining e-commerce data to analyze the target customer behavior. In Knowledge Discovery and Data Mining, 2008. WKDD 2008. First International Workshop on (pp. 406-409). IEEE.
Piotrowicz, W., & Cuthbertson, R. (2014). Introduction to the special issue information technology in retail: toward omnichannel retailing. International Journal of Electronic Commerce , 18 (4), 5-16.
Target Corporation. (2016). About-Top Stories. Retrieved from: https://corporate.target.com/about
