Retail Industry In Australia And Target: Market Analysis And Strategies

Market Segmentation and Size of Retail Industry in Australia

Retail industry in Australia is mainly segmented by the product such as food retail/grocery, apparel, footwear, beauty products, durable goods, furniture & furnishings. Further, it is segmented by the retail stores which mainly include the hypermarkets & supermarkets, convenience stores, etc. It must be noted that, complete size of the retail market of Australia is $122 USD in the year 2013 (Mordor Intelligence, 2017.

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Target is the departmental store which is mainly supported by the strong brand heritage, and characterized by fashion, basics, and quality at the best prices. It mainly operates in the clothing home ware and general apparels in the retail industry of Australia. The main aim of this departmental store is to provide both quality and fashion at the reasonable prices (Wesfarmers, 2018.

Following are the industry statistics and market size for the Target in context of retail industry of Australia-

Growth

Revenue

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Businesses

Employment

Annual

Figures

$557.8bn

182145

1933977

Current Growth

2012-2017

1.1%

-2.1%

-0.1%

Forecast Growth

2017-2022

1.1%

-0.4%

0.5% (IBIS World, 2018

The industry of the clothing retailing faced number of challenges from last five years, and these challenges mainly incudes the spending related to the cautious customers, intense competition, and rising cost of rent. It is expected that revenue of this industry shows the growth at an annualized 2.0% over the five years through 2018-19 that is total $16.7 billion. This mainly happens because of the bricks and mortar retailer’s expansion in terms of the online sales channels. It is anticipated that industry revenue will grow by 0.1% in 2018-19 because of the weak income disposable growth. Difficult trading environment is created for the Target from last five years, and this mainly happened because of the negative customer sentiments and online only retailers (IBIS World, 2018. Following is the industry statistics of the clothing retailing market-

Revenue

Annual growth from 2014-2019

Employment

Business

$ 17 billion

2.0%

109957

11380

From last few years, target reflects the losses for the Wesfarmers and this is the reason number of stores of the Target lead to closure. In this context, steps are taken by the organization for fixing the buds. Guy Russo, executive of the Wesfarmers who drove margin of Kmart’s from 3% in 2009 to 10% in 2015, take the charge of the Target. In America, these stores adopt the strategy of the fewer promotions, direct sourcing, and the low price. Russo is confident that with this strategy, target definitely shows the improvement from the loss in 2016 to more than $300 million in the operating income of the organization over the time (Carlises, 2017.

In this context, target mainly focus on delivering the quality fashion at the best price to the customers on daily basis, and giving the best services to the customers. All these activities are supported by the higher level of direct sourcing, improvement in the discipline of merchandise and planning systems, and also the simplification in the operation process. Market targeting is the larger process of marketing in terms of the target customers, as it includes both the research market and the practice of the brand positioning. Positioning mainly involves the brand positioning, and it further includes the different strategies and projects that are initiated by the organization in context of communicating the brand to the target market.

Target in the Clothing Retailing Market: Challenges and Opportunities

Target mainly reported the net profit after the tax (NPAT) of $ 306 million for the full year which is ended on the 30th June 2018. NPAT in terms of operations excluding $300 million non-cash impairment in Target increased 5.2% to $2,904 million. Managing Director Rob Scott of the Wesfarmers stated that, this financial year was considered as important change for the Wesfarmers. Decisive actions are taken in terms of repositioning the group portfolio for ensuring the sustainable growth in earning and also for improving the returns of shareholders (Wesfarmers, 2018.

Following are the profit index of the Target which is extracted from Assignment 1-

Year

Revenue

Growth

EBIT

Growth

2012-13

3.66

N/C

136.0

N/C

2013-14

3.50

-4.4

86.0

-36.8

2014-15

3.44

-1.7

90.0

4.7

2015-16

3.46

0.6

-195.0

N/C

2016-17

2.95

-14.7

-10.0

-94.9

2017-18*

2.80

-5.1

N/A

N/C

As stated in assignment 1, Target can develop the competitive advantage by making changes in the production process of the organization. As stated supply chain of the organization purchased number of things directly and number of things from the distributors, and this process can be changed by the Wesfarmers in terms of getting the competitive advantage. In this context, Target can remove the middle-man from their supply chain and this ensures the raw material at low cost. This low cost resulted in the low prices of the products, and this ultimately leads to the competitive advantage for the organizations (Wesfarmers, 2017. Another factor on the basis of which, competitive advantage can be taken by the organization and these factors are large stores and customer experience. Target mainly focuses on giving the best experience to the customers.

In this context, energy efficiency target is set by the Target that is 25% reduction of energy per square metre by 2019 December in comparison of the 2015. Target focus on the overarching strategy in terms of the low cost abatement first, and this is combined with the collation of the improved data analytics, systems, and processes. This action of the target leads the department stores towards the drive efficiency projects (Elmas, 2017

However, there is one negative factor also which can result in lack of customer’s satisfaction that is in terms of cutting the cost, organization opts the self-service mode. This mode is not suitable for Australian consumers to adopt, because it is not easy to change the culture of consumers in Australia (Wesfarmers, 2018.

Following are the SWOT analysis in terms of the corporate performance of the Target, as this analysis is extracted from assignment 1-

Strength

Weakness

· Product: volume, quality, fashion and basics

· Value: low costs and its consistently

· Promotion, brand love with mass reach

· Partnerships: Well-known designers

· Global presence

· Streamlined distribution process

· Strong relationships with suppliers and vendors

· Business reset and change

· Competitor activity

· Conversion scale instability

· Penetration in emerging countries

· Limited visibility in international markets

· Ineffective online presence

· High cost structure

Opportunity

Threats

· Increase direct sourcing

· Enhance center around space productivity

· Increment commitment of better and best ranges through reset of value and form

· Expansion in international markets and emerging countries

· Diversity in grocery department

· employee fascination and maintenance

· Vulnerable economies

· High fashion consciousness

· High cost structure

· Increased competition in retail segment

Corporate strategy is defined as the highest strategic plan of the organization, as this plan defines the objectives of the organization and also the ways through which these objectives can be achieved in terms of the strategic management. Corporate strategy is the hierarchy of high level, and vision and mission of the organizations is the most important elements of the organization. While developing this strategy numbers of techniques are used to evaluate all the SWOT, VRIO, PESTEL (CFI, no date. Following are the important strategies in terms of the strategic management of the organization and these strategies can be used by the Target-

Industry Statistics of Clothing Retailing Market

Growth strategy- This strategy mainly focuses on considering the methods to get more revenues from the sales of products or goods. This strategy is mainly considered by the leaders of the industry, as they usually talk about the vertical and horizontal strategies while referring to the growth strategies. Vertical strategy in this context seeks growth by taking over the different components of the operations path. On the other hand, horizontal strategy states those methods through which business extends its reach in terms of the existing products and services to the new geographic areas or the new target markets (Brussesls, no date.

Diversification Strategy- This strategy mainly refers to the products and services of the organization, and this develops the strategy for successful marketing and sales. The two most important diversification strategies in this context are single-business strategy and the dominant business diversification strategy. This single-business strategy mainly put limitation on the number of products and services to the few people, but not to the single individual. An organization which is using this strategy mainly wants to be the leader in the niche market. This can be understood through the example, single business strategy is the carpet cleaner that exclusively markets the services for the carpet cleaning to the homeowners and restoration services. This single-business strategy could transit the dominant business diversification strategy by also offering the restoration services. The transition might involve the other cleaning and contracting services, and this is accompanied with the primary carpet cleaning services.

Stability Strategy- It is possible for the organization to achieve its optimal market share goals, instead of scaling up. In this context, leaders of the organization can chose stability strategy that considers the existing success under the existing platforms in terms of maintaining its market share. These methods mainly includes the making the process of the organization more efficient in terms of cost with the help of automation, and this is done by cutting the cost in all those areas where possible and also negotiating better costs on materials or distribution margins. This strategy also requires the leaders to focus on the retention of customers, and this is mainly used at the times when there are adverse economic periods. However, generally this strategy is useful for the business organizations which are small size and medium size, in terms of the external business environment (Leonard, 2018.

In terms of the Target the most recommended strategy is the Growth Strategy, as this strategy can be used by the management because they are the leaders of the market by capturing big share in the market. There are types of growth strategy, and in terms of the Target it is recommended to the management to use the market penetration, market development, and product development. Management can use this strategy for getting the number of advantages, and some of these advantages are stated below-

  • This strategy gives the greatest competitive advantage in terms of the production process of the organization, as any efficiency in the production output will bring down the cost per unit and help in achieving the savings.
  • This strategy is mainly used by the leaders of the organization, because they already achieve the stage of stability in the market, and after that there is requirement of growth. This strategy helps the organization in achieving the required position in the market.

Strategies Used by Target

Growth strategy also facilitates number of things for the Target-

  • It helps the organization in increasing their resources and stock.
  • It helps the organization in achieving more sales target and enhance profitability in the organization.
  • It also helps the organization in reaching the new customers or markets.
  • It also helps in making the more investments.  
  • This strategy holds the power to influence the market price of any product.
  • It further decrease the risk related to the external factors such as competitors, market or updates in technology (NI business, no date.

Target can implement the growth strategy by considering following sections of this strategy-

Market penetration- The main aim of this strategy is to enhance the sales of the existing products or services in the existing markets. This element of the growth strategy helps the department stores in increasing their market share. Through this strategy, Target attract more customers and also take the capability to put away the customers of their competitors (Ilhan, & Durmaz, 2015.

Market Development- In this, Target can focus on increasing the sales of their existing products or services in those markets which are not explored at previous stage. It mainly involves the analysis of the way in which existing offers of the organization can be sold in the new markets.

Product development- The main objective in this context is to launch the new products and services in the existing market. In other words, product development can be used in the form of extended offers which can be given to the existing customers (Wheelen & Hunger, 2012).

Following steps are required in terms of implementing the growth strategy-

  • Target need to focus on the creation of the value proposition, which means, in terms of ensuring the long growth of the business organization need to develop the factors which result in high value for the organization. In this context, management need to identify the reasons because of which customers chose their products over the products of their competitors.
  • Another step states that, organization need to identify their potential customers, which means, ideal customers for the existing products and service. In other words, organization needs to identify the customers.
  • It is necessary for the organization to develop the policy through which any changes in the internal and external environment can be measured.  In case organization is not able to measure the change, then there is no way to understand whether such changes are effective in nature or not. In this context, those key indicators must be identified the organization which directly affects the growth of the organization.
  • Target further needs to identify their current streams of revenue, as these streams help the organization in making the business more profitable in nature.
  • Competition and strategy of competitors must be evaluated by market (Biederman, 2015.  

This is considered as important function of the organization, and before taking any decision organization need to evaluate this area. External and internal environment impose number of challenges for the organization, and for dealing which these challenges organization need to make changes in the strategies and processes. Following are the measures through which, management can control and monitor their future performance-

  • Control measures must be developed by the organization in terms of controlling the future performance, and these measures include the control management team, monitoring tools, etc.
  • Another step in which organization needs to focus is the development of the control policy through which these measures can be achieved.

References

Biederman, G. (2015. 7 Key Steps to a Growth Strategy That Works Immediately. Available at https://www.entrepreneur.com/article/240853. Accessed on 10th October 2018.

Brussels. Types of growth strategies. Available at https://www.1819.brussels/en/growing-your-business/growth-strategies/types-growth-strategies. Accessed on 10th October 2018.

carlisle, J. (2017. Wesfarmers Showcases Its Strategy. Available at https://www.sharecafe.com.au/2016/07/08/wesfarmers-showcases-its-strategy/. Accessed on 10th October 2018.

CFI. What is Corporate Strategy?. Available at https://corporatefinanceinstitute.com/resources/knowledge/strategy/corporate-strategy/. Accessed on 10th October 2018.

Chand, S. (.Brand Positioning: Meaning and Positioning Strategies. Available at https://www.yourarticlelibrary.com/brand-management/brand-positioning-meaning-and-positioning-strategies/32314. Accessed on 10th October 2018.

Elmas, M. (2017. Wesfarmers to trim Target portfolio. Available at https://www.insideretail.com.au/news/wesfarmers-to-trim-target-portfolio-201706. Accessed on 10th October 2018.

IBIS World, (2018. Clothing Retailing – Australia Market Research Report. Available at https://www.ibisworld.com.au/industry-trends/market-research-reports/retail-trade/other-store-based-retailing/clothing-retailing.html. Accessed on 10th October 2018.

IBIS World, (2018. Industry Statistics & Market Size. Available at https://www.ibisworld.com.au/industry-trends/market-research-reports/retail-trade. Accessed on 10th October 2018.

Ilhan, A. & Durmaz, Y. (2015. Growth Strategies in Bus?nesses and A Theoretical Approach. International Journal of Business and Management, vol. 10(4. PP- 210-214.

Leonard, K. (2018. Types of Corporate Level Strategy. Available at https://smallbusiness.chron.com/types-corporate-level-strategy-60147.html. Accessed on 10th October 2018.

Mordor Intelligence, (2017. Australia Retail Market. Available at https://www.mordorintelligence.com/industry-reports/retail-industry-in-australia. Accessed on 10th October 2018.

NI Buisness. Should I grow my business?. Available at https://www.nibusinessinfo.co.uk/content/advantages-and-disadvantages-growing-your-business. Accessed on 10th October 2018.

Petryni, M. Differences Between Brand Positioning & Target Marketing. Available at https://smallbusiness.chron.com/differences-between-brand-positioning-target-marketing-24167.html. Accessed on 10th October 2018.

Wesfarmers, (2017. Annual Report 2017. Available at  https://www.wesfarmers.com.au/docs/default-source/default-document-library/2017-annual-report.pdf?sfvrsn=0. Accessed on 10th October 2018.

Wesfarmers, (2018. Target. Available at https://sustainability.wesfarmers.com.au/our-businesses/department-stores/target/. Accessed on 10th October 2018.

Wesfarmers, (2018. Wesfarmers 2018 Full-Year Results. Available at https://www.wesfarmers.com.au/util/news-media/article/2018/08/14/wesfarmers-2018-full-year-results. Accessed on 10th October 2018.

Wesfarmers, (2018. Wesfarmers shareholder review 2018. available at https://www.wesfarmers.com.au/docs/default-source/reports/wes18-048-2018-shareholder-review.pdf?sfvrsn=4. Accessed on 10th October 2018.

Wheelen, T. L. & Hunger, J. D. (2012). Strategic Management and Business Policy (13th ed.). Prentice Hall, USA.