George Dayton took over a dry goods store in 1902 called Goodfellow Dry Goods company. The next year it was renamed to Dayton Dry Goods Company and by 1910 it became Dayton Company. It has operated many different stores and has participated in an aggressive acquisition strategy. The company had good results for fiscal year ending January 2016. Revenues increased by a small 1.6% over the previous year but the real kicker is the net income. These were positive after coming off a negative previous year, $3.4 Billion compared to a loss of $1.6 Billion.
The first Target store opened in 1962 which was part of the parent, Dayton Company. Dayton held several retail stores along with Target, but Target performed the best (and still does), so the parent was renamed to Target. The company divested from the other retail stores to concentrate on its core.
How the Company Started
George Dayton was a banker/real estate mogul and wanted to find a location where he could use his earnings. After some analysis, he determined that Minneapolis, Minnesota was one of the better places to start a business.
Dry Goods (think Macy*s) was a hot type of business in those days. This inspired him to open Goodfellow Dry Goods to be renamed to Dayton Dry Goods and then Dayton Company.
Dayton used his savings and expertise in banking to self-fund the opening of his store. Proceeds from the store were used to expand. He died in 1938. His sons and grandsons took over the operations after that.
After the 1980’s the Dayton’s were no longer running the company. It merged with upscale company Hudson to become the Dayton-Hudson company but by the year 2000, it changed its name to Target.
The company got involved with several different types of retailers. This had their hand in too many pots, so to speak. After the success of Target, the company eventually concentrated on this as its main company.
Later in its history, the company opened several stores in Canada. This turned out to be disastrous as it did not do any research for the Canadian customers. It tried to use what worked in the United States. It also took on much more competition than anticipated. The company ended up closing many of its stores in Canada.
Most recently, the company has seemed to lose its focus by concentrating on low margin groceries. While it is clearly trying to compete with Walmart, breaking away from the strategy that makes it successful is hurting the company. By expanding its grocery offerings, it had to take away floor space from items that made up its core sales.
In 2013, the company experienced a security breach in its credit processing that left customers who shopped at its stores, vulnerable. The fallout from this encounter is likely to continue for some time even as top officials responsible during this period, have resigned.
The company has made it a priority to solidify this part of the business to ensure it never happens again.
Why it Works
The company has always prided itself on giving back to the community. It has been this way since the early days when George Dayton was running the operations. Even though the Dayton family is no longer at the helm, the company continues its philanthropic activities with a large budget.
The company competes actively with Walmart. It has a huge number of product offerings and tries to keep prices discounted for consumers. The competition keeps the company on its toes and management is not afraid to try out new initiatives.
Dayton Company saw many opportunities to expand the Target line of stores. As an example, in some areas where Ames Department Stores were having trouble, it jumped at the chance to swallow up stores and repurpose them as Target branches.
In the 1990’s and even into the first decade of the 21st century, Target used hip advertising, geared to a younger crowd. They also used a dog as its mascot, which was a bull terrier with a target on its eye.
The company has increased activity in promotional efforts with the use of the REDCard. It gives 5% discounts to customers who purchase merchandise on the card which can be used online as well as in-store.
The company is aggressively beefing up its promotional efforts online and via mobile. It wants to seek out millennials as a key demographic. It must use a multi-channel approach if it is to be successful with this group. It is targeted search marketing as the main means to increase its visibility on these channels. It is also using email targeting to gain favor with its audience.
Target has partnered with big name social media companies such as Facebook and Pinterest (among others). You have likely seen ads on your feeds. If not, expect to soon.
It has in the pipeline, partnerships with retailers to display videos concentrating on the products with ties to possible celebrities for an extra push.
Target has increased its grocery line and due to the low margins will use this as a loss leader strategy. It feels it needs to do this to stay competitive with Walmart. It’s too soon to see if this continues to be viable for the company.
Target does allow ratings on its product and it is similar to Amazon’s structure. Users can leave a 1 to 5-star rating as well as comment on their purchases. Viewers would be well advised to check other websites for validation (Amazon, Walmart, etc.)
Lessons Learned by The Business
- Identify a need to adjust with the times. Although management has faltered on this in the past, especially with its Canadian strategy, they used this as a learning experience. The time when it did payoff was its decision to create a massive discount store in the 1960’s called Target. This deviated significantly from their traditional store model. As you may know, there are several more stores currently than when they started in the 1960’s. In fact, they have abandoned all other types of stores and renamed the company as Target Corporation.
- The company is big on trying to improve what is currently practiced. They do this by making small changes and seeing how those changes stick. By keeping the changes small, customers don’t get anxious, and it is easier to measure. They can also revert to the previous, whenever something doesn’t go as planned.
- The company knows it needs to balance trying out new initiatives while maintaining its core business. It uses data it gathers from its customers to recognize patterns and trends and tries to capitalize on that.
How Other Businesses Can Learn from This
Always keep in mind the two ways of increasing the bottom line: cut costs and increase market share. A company who can do both will come out ahead. It should see significant growth from using this strategy. Of course, how a company goes about doing this is not easy. Target has seemed to figure out just how to do it.
Another key lesson to learn from Target is not to take security procedures for granted. The company has lost customer traffic and is still trying to gain it back to this day.
When looking to expand, do it in a measured, systematic way. The failed Canadian expansion Target experienced can be used as a case study on its own. The company opened up too many stores in a short period and tried to match the same kind of sales techniques it uses for the United States. Companies should perform strong market research before venturing into new areas.