Want to know how a giant retailer succeeds? This article will show you!
It’ll explain the money-making methods Target uses. Plus, you can learn from their success. Dive in and find out!
Introduction
Target is one of the top retailers in the U.S. In 2020, it has 1,850 stores nationwide, providing great service to its customers. It is dedicated to delivering high-quality products and building strong customer relationships. Plus, Target offers convenient e-commerce shopping.
So, what is Target’s income? Basically, it sells products and offers delivery services. It also earns competitive prices from exclusive deals with suppliers. Moreover, Target Brand products have higher margins than national brands. And lastly, GiftCards sales are an extra source of income.
Overview of Target
Target Corporation was founded in 1902 and is based in Minneapolis, Minnesota. It offers a range of products including clothing, furniture, electronics, beauty products, toys and sports equipment. To maximize profits, Target balances its product mix with higher-value items and higher turnover items.
Sales come from two main sources: stores and online. To make sure shoppers are never too far from a store, Target strategically locates them across the US. It also advertises online and in print media.
Besides these two revenue sources, Target earns money from Redcard (its private label credit card program), Cartwheel (loyalty program), Target Subscriptions (monthly subscriptions) and other promotions.
Target’s Business Model
Target Corporation is a publicly traded retail and tech conglomerate with operations in the US, Canada, and Australia. It operates in two segments: Retail Stores and Digital Sales. Recently, Target has seen an increase in its online sales due to the pandemic. Revenue sources include digital sales, retail stores, credit cards, etc.
Target’s digital segment includes their website, app, and Redcard Rewards program. Plus, they offer ship-from-store services which increases convenience and helps them cut shipping costs. This gives them more opportunities to cross sell products that complement those bought online.
Their stores offer a variety of products. These include apparel & accessories, hardlines & electronics, home décor, food & pets, sporting goods & toys, beauty & health care products, babies & kids, and seasonal items like patio furniture or holiday decorations. They also specialize in last minute purchase items such as beer and wine.
Target doesn’t offer banking services, but they partner with Bank at Third Party Institution. This allows customers to earn points with their credit cards, which can be used for discounts at Target stores. This helps increase customer loyalty and drives additional sales.
Target’s Revenue Streams
Target Corporation is one of the largest retail corporations in the U.S. It generates revenue in three main ways: stores, digital, and credit.
Stores: Target operates 1,900 stores in all 50 states. In 2019, store sales totaled $68 billion and made up two-thirds of the company’s total revenue. Target receives income from products and services like order pick up and pharmacy services.
Digital: Target has made investments to boost its online presence. In 2019, digital sales accounted for 8% of total sales, or around $6 billion.
Credit Revenue Streams: Credit Revenue streams generate income through fees associated with credit card purchases on REDcard. These include interchange fees, late fees, transaction fees, etc. In 2019, Credit Revenues made up 6% of total sales, or nearly $5 billion.
Target’s Online Business
Target’s online business is a money-maker. They make income from services like digital advertising, e-commerce, and digital payment. Their e-commerce platform gives customers access to millions of products and in-app buys. They host regular deals and discounts to get more customers. Through digital payments, customers can get gift cards or store credit cards to use on future purchases.
Target has an international presence offering products for different markets. Besides online sales, they make money from shipping fees and transaction fees from credit cards or other electronic payments when customers buy online or in stores. This combination of channels lets Target reach new customers and serve existing ones with ease and efficiency.
Target’s Cost Structure
Target’s cost structure is divided into two types of costs: variable and fixed. Variable costs, such as inventory and labor, can be adjusted to the quantity demanded. Fixed costs, like rent and corporate advertising models, are largely constant. To see how Target makes money, let’s look at these cost elements in more depth.
Variable Costs – Variable costs involve materials and labor used to produce and deliver products. These also include advertising expenses and shipping fees. If Target increases its inventory, they will have to pay more for the goods. When they need more hours to meet customer needs, they pay workers hourly rates.
Fixed Costs – Fixed costs remain stable but may fluctuate over time due to inflation or changing economic markets. Fixed costs for Target include rent, taxes, insurance, corporate overhead, legal fees, advertising, staffing salaries, administrative staff, maintenance repairs, bonuses, etc.
By analyzing both fixed and variable costs, Target can make informed decisions about pricing strategies while staying competitive with other retailers.
Target’s Profitability
Gross Profitability: Target earns gross profit from selling goods and services in-store, from websites and mobile apps. Target aims to provide good products at competitive prices to attract customers. In 2018, 97.6% of total revenue was from net sales and 17% of operating profit came from store operating income before taxes.
Operating Profitability: Target works to increase profitability by improving the customer experience and providing services that make customers satisfied. This includes quick delivery, a pleasant atmosphere in stores, and special product offerings. Target also uses technology to offer value-added experiences such as mobile checkout and loyalty rewards and recognition programs. In 2018, operating expenses accounted for 73% of total revenues before taxes and 73% of Target’s pretax profits were due to markdowns and other promotional costs.
Income Taxes: Income taxes have a major impact on the company’s profits. In 2018, 34% of earnings went towards income taxes before equity adjustments. Also, corporate income taxes must be paid when profits are above certain thresholds set by the IRS.
Conclusion
Target Corporation has spread out its money sources to balance the potential unsteadiness of its retail business. It sells products from food, apparel, home and office supplies, electronics and entertainment. They also obtain revenue from digital delivery services and third-party seller services, to reduce risk.
Their credit card operations are another source of income. To stay ahead of competition, Target widened its online presence by offering two-day delivery for many items. Due to these strategies, the company remains profitable, which is visible in its stock price.
Frequently Asked Questions
Q1: What is Target’s primary source of income?
A1: Target’s primary source of income is its retail stores, which sell clothing, furniture, electronics, and other products. The company also earns income from its website, Target.com, as well as its credit card and other financial services.
Q2: Does Target offer any services or products outside of retail?
A2: Yes, Target also offers a variety of services, such as grocery delivery, in-store pickup, and pharmacy services. The company also owns Shipt, a same-day delivery service.
Q3: How does Target generate profits?
A3: Target generates profits from the sale of products and services, as well as from its credit card and other financial services. The company also earns income from its investments, such as its stake in Shipt.