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. 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 hence Target’s ability to convert the video game browsers into buyers is vital. However, at present Target converted only about 85 percent of the video game browsers converted by Wal-Mart and Best Buy, and a mere 66 percent of the number converted by specialty retailer GameStop.
Target has to develop ways and means to face this challenge. Providing more emphasis on customer service and point of sales promotions and appealing displays that provide visual stimuli while facilitating tactile stimuli may be useful. Perhaps the store may arrange special in-store events and in store free trials for its regular customers. Target doesn’t beat Wal-Mart on price or Amazon on assortment but differentiates on customer experience and its success is built on serving families and women, especially mothers.
When selecting alternatives and developing plans to play online and offline in the video games business, Target should not contradict its corporate strategy that gives priority to this valued customer segment. Strategic Alternatives Traditional brick-and-mortar, contemporary digital, and next-generation hybrid are the three options available for the company. The first option is to ignore the changes in the environment due to evolving technology and to do almost nothing except improving the in-store experience.
This is not suitable as the company will lose its competitive advantage and will not be able to face the changes in its business environment and hence eventually will have to be defeated. The second option avoids the possible opportunity to capitalize on the already existing customer base, the retail store chain as 4 well as the customer inclination to buying in store2. The third option is fundamentally a new response to consumers’ growing interest in combining online and offline shopping relationships in new experiential ways.
That may include mobile formats, hardware formats, stores formats, Internet formats, and it should be flexible enough to incorporate the upcoming changes as well. This is more viable in today’s world as it gives the company a competitive edge while allowing it to reap the benefits of the existing resources. Target’s success is built on serving families and women, especially moms. Target doesn’t beat Wal-Mart on price or Amazon on assortment but differentiates on customer experience.
When selecting alternatives and developing plans to play online and offline in the video games business, Target should not contradict its core brand equity with its valued guests; the moms with children. The in-store as well as online games business fronts should continue to focus on Mothers with children, because that is in accordance with the corporate strategy and they are a niche market that any other competitor has not properly focused on whereas competition is minimum and brand authentication is high with its existing brand image to beat any consequent entrant.
If the hard-core and sophisticated gamers segments are selected, Target will have to compete vigorously with the giants well established with sound brand equity as well as expertise in the online gaming business domain and establishing in this segment is hence less practical and inappropriate for the company and it ignores its precious customer segment thus violating the corporate strategy as well.
Furthermore, in contrary to those who love family and kid friendly games and social games the hard-core and sophisticated gamers have higher expectations and may be difficult for the Target to fulfil at the beginning. 2 Over 90% of sales are still occur in store while only 6%-7% is made online. 5 The sales can be enhanced through improved in store gaming experience for them coupled with variety of segment specific gaming products offered with loyalty programs, store wide promotions, store fliers and promotions at the point of sales as well as mommy bloggers and member clubs in social media etc.
Recent data suggested that the women specifically shopping for video games at Target tended to be slightly younger with higher incomes, and were even more likely to be shopping with their kids. Therefore, Target should focus more in providing a premium service to this sub category as well. This could be done by providing them with better service at a premium price and providing more variety in their preferred game collections. An in-store survey to get clear idea about their gaming preferences may be helpful.
However, while specifically focusing on moms with children, online business front may gradually expand beyond that segment as a secondary step including other customer segments such as hard core and sophisticated gamers. A Woman with children probably embraces the opportunity to purchase games, gift cards, games subscriptions or a membership for her partner or older child who no longer shops with her. Hence expanding into other segments may be initiated with a gift idea with the blessings of the core customer segment.
However, when the heavy file sizes of the hard-core games are concerned, the company will have to offer online open gaming facilities and it may have to look for cloud computing options to provide uninterrupted experience in the future. Offering subscriptions, pay-per-play and membership options are required for attracting and sustaining the online clientele. Customers should be offered with Cross-platform mobility so that they can play virtually anywhere any time. Nowadays Games have become a lifestyle and is used for securing physical fitness that appeals the busy moms and their appearance conscious partners 6 nd teens alike while new Social gaming category is aiming at a new customer segment that exactly coincides with the Target’s present customer base: That aims at, “everybody but hard-core gamers” (EBHCGs). A mom with kids in school could enjoy turning on the equipment during her free time because they are matching with her desires and skillset. It is important to understand the commercial advantage of spreading consumers’ payments over extended periods in smaller, less noticeable increments such as membership fees.
Target’s online presence in the games business should be aggressively marketed with blitz through in-store events, filers and online advertising, e mails, and social media so that its online presence is effectively announced and established and hence the revenues will follow shortly, paying off the costs involved. Leveraging the video games business in both the online and offline domains is an opportunity for the company and in the long run they may be directed towards entering into untapped US markets as well as global expansion as a consequence of their vigorous online presence.
Target should explore the possibility to establish games related alliances and partnerships with major console manufacturers and game manufacturers so that arranging more attractive in-store events and providing better prices and more attractive product –service bundles with latest features are possible while the partnerships with game manufacturers will provide customers with access to a unique wide variety of new games at affordable cost.
Such bundles may be able to mitigate the ill effects of the slim margins of the consoles as well. Target must harness the power in reaching cross channel consumers, those guests that approach Target through the Internet and through the stores. They may be provided with the options such as ordering online and picking up in-store when it is a physical product such as a gaming console 7 or an accessory thereby reducing the delivery time and costs while making the customer delighted.
Nowadays hardware and software services are starting to integrate vertically to provide a total solution and experience to the customer and this trend is growing. Target can effectively participate in that enhancing the revenues and mitigating the ill effects of the low margins provided by the console manufacturers. The marketing plan mainly seeks to influence women shopping with children for in store shopping and explores how Target can continue to improve their successful retail games business for about 3 to 5 years.
Decision and Implementation I recommend targeting at the mothers with children for the whole hybrid solution as it maximally capitalizes on the company’s strengths such as its brand authenticity as mom friendly high quality retailer, the physical presence across the US with its well established chain of stores etc. while mitigating its weaknesses such as being a novice to the online gaming business, limited resources to beat the highly competitive market segments etc. y entering into a less competitive niche market so that it can gradually but firmly establish and saturate that market segment minimizing the threat of potential new entrants. Furthermore, it keeps the company tuned to the changes in the customer needs through their responses in the social media so that Target can be flexible to possible future changes in their desires as well as the changes brought by the evolution of technology. The pricing of the services should be in accordance with the company’s usual pricing strategy.
It can offer products and services under two categories: Economical competitive pricing for the 8 basic products and services including the used games for the cost conscious customers so that they are attracted while premium prices for the latest and more sophisticated products and services with enhanced variety for the high-spending customers. However, these premium prices should be comparable to the competitor’s prices while exceeding the quality of theirs to be competitive. When providing the services Target should continue to offer the same quality of responsiveness and care to its customers.
The company should first start with making its stores more appealing for the gaming business, organizing in-store events and announcing the customers about its future presence in online game distribution market through these events as well as through in-store fliers and e mails, direct mails, social media and the other appropriate media to address potential customers. Then the It should be aggressively introduced and marketed with blitz through in-store events, filers and online advertising, e mails, and social media so that its online presence is effectively announced and established and hence the revenues ill follow shortly, paying off for the costs involved. This is more cost effective and the online presence is established within short time. 9 Expected Outcomes The expected outcome is to provide the Target with a competitive edge to face the future challenges related to customers’ changing buying habits and the evolution of the technology while increasing its in-store sales as well as the sales through online and different formats in the next 3 to 5 years.
At the first year a 20% growth in sales volumes for the total hybrid solution is expected and during the next years the on line and other format sales are expected to grow at 10% rate while the in-store sales to grow at 5% rate considering the untapped potentials of both options. In addition to the monetary gains, increased brand awareness, reputation, customer satisfaction and loyalty, as well as market share are expected in the video game market.