Target is a North American retailing chain with headquarters in Minnesota, US. Target’s brand promise is based on the slogan “Expect more. Pay less”. Target pursues the mission to become a preferred shopping destination, by creating superior value to its customers, by enhancing customer experience and by investing in innovation.
Market structure
U.S. retail industry is highly consolidated, with the main top 5 companies controlling approximately one third of the overall food market, as estimated by Deloitte. The rest of the market is comprised of smaller stores that usually cater for specific consumer needs. Thus, for example, organic and ethnical food are commonly distributed through smaller stores. The largest market players usually emphasize efficiency and scale economies in their operations, thus trying to offer cheaper products to their customers. There is a relatively low loyalty among its customers and the cost of changing a retailer are relatively very small.
Effect of new companies entering the market
The effect of the new companies entering the market depends on the offer they bring to consumers. Due to industry consolidation, price pressure and a large importance of scale economies in the retail industry, it is hardly possible for a new company that offers a standard product to enter the market and to survive there. New competitors that have a differentiated product offering, on the other hand, pose a significant threat to Target. Thus, organic food stores attract increasingly more people, and they deliver a product that traditional discounters do not.
Prices
As the retail industry is rather mature and there is a large number of players in the market, both nationally and internationally, there is a strong tendency among retail companies to engage in price competition, which results in the reduction of margins for all participants. This is also reinforced by the fact that major retailers offer rather similar products and consumers find it very easy to switch from one retailer to another, in case there is a difference in product price. This tendency is likely to continue also in the future, especially in the light of then recent economic recession and consequently a decrease of consumer spending. Price competition is especially important for discount retailers, such as Target, that primarily attract their customer by offering lower prices.
Prices in the niche markets, such as that of organic food, are expected to remain rather high due to the relatively low competition in the industry and the rising interest of consumers to such product types.
Technology
References
Booz&Co. (2013, April 30). New food retail industry outlook is personal, digital and virtual. Retrieved from http://www.booz.com/global/home/press/displays/new-food-retail- industry-outlook?utm_content=AllPressGLOBAL&utm_source=RSS&utm_ medium=TextLink&gko=abec0
