Rapid technological advancement, market demands, competition and consumer demographics require companies to review their distribution strategies regularly (Zemanek et al., 2019). Rates of change necessitate the need for a strategic perspective from managers in assessing the array of alternatives that exist for market coverage and creating a competitive advantage (Zemanek et al., 2019). Prior to the current channel design, Target encountered losses due to replenishing stock by sending cases of items to stores. Since most of the items would not fit on the shelves, stores had to pack the remaining packs in backrooms (Smith, 2018). The new strategy aims at reducing the inventory found at stores. The company’s new supply chain strategy includes new distribution centers, revamped backrooms and revised delivery fees. Target sources its products through thousands of suppliers. These products are stored in a few import distribution centers with large capacities. The first flow center in New Jersey consists of a warehouse where products can be delivered directly to stores (Smith, 2018). By bringing the warehouse closer to the stores, Target reduces delivery time and costs. Stores order a variety of products, which are packed together for delivery, reducing piling up inventory at stores (Smith, 2018). Store back rooms are repurposed for holding merchandise for online orders. Bringing the merchandise closer to the consumer reduces shipping time making target’s service more reliable.
Distribution channels become more complicated when a company covers widely dispersed regions. Target operated through and Omni-channel distribution system aimed at delivering products to physical stores, online platforms, social media, and call centers while still providing seamless customer service (Hubner et al., 2016). Retail organizations, such as Target, are facing increased need of managing both traditional demand and online demand (Hubner et al., 2016). Target can optimize the distribution channel by adding more “flow centers” around the country. For a more streamlined flow of products, Target must increase the mass distribution sites that service the flow centers. Having one mass distribution facility to serve at least three states ensures that products are delivered to flow centers on time. Facilities should be located within large metropolitans and population hubs (Hubner et al., 2016). Creating a competitive advantage for Amazon and Walmart requires Target to be proactive in developing a vast distribution network that can service customers at a lower cost. Customers purchasing goods through online stores and social media should have the option to choose between various delivery options. Customers with urgent need for a product can opt for premium delivery, which will cost more for the consumer while increasing profits for Target because products are already located close to the consumer. By optimizing the distribution channel, Target not only reaches more consumers but also ensures retention of the customer base.
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Target has revamped its distribution system with minimal success, requiring new distribution strategies every few years. The main recommendation is increasing focus on online tracking systems, allowing the company to focus on orders in prior stages of the delivery channel. The company can identify products with the highest delivery urgency and utilize multiple transportation options to transport a wide variety of goods that are in demand from individual stores (Hubner et al., 2016). By placing stores as the center of product delivery, Target has the potential to provide unmatched service to consumers. The new strategy prioritizes on having smaller format stores around the country that allow users to reach more consumers in a limited span of time. Products are located closer to consumers, fulfilling the promise of “Pay Less” (Smith, 2018). Target can utilize social media to debut new products introduced to existing line-ups. Social media exposes people to the product, and assures customers that the product is accessible at a store nearby. Prioritizing on online platforms and social media ensures that consumers confirm the availability of a product before accessing the physical store (Zemanek et al., 2019). It reduces situations in which shoppers rush to stores only to find the product is not available. Following these recommendations ensures Target delivers high-level service and productivity.
References
Hubner, A., Holzapfel, A., & Kuhn, H. (2016). Distribution Systems in Omni-Channel Retailing. Business Research , 255–296. https://doi.org/10.1007/s40685-016-0034-7
Smith, J. (2018, March 14). Target Tests Retail ‘Flow Center’ for Faster, Nimbler Distribution. The Wall Street Journal . Retrieved May 12, 2020, from https://www.wsj.com/articles/target-tests-retail-flow-center-for-faster-nimbler-distribution-1526299200
Zemanek, J., Taylor, E. C., Tran, T. P., & Loomis, D. C. (2019). Two decades of the Journal of Marketing Channels: Impacting the Present and Directing the Future of Marketing Channel Research. Journal of Marketing Channels , 1-13. https://doi.org/10.1080/1046669X.2019.1647914
