Executive Summary
This report presents a marketing proposal for Target Corporation’s new line of clothing product – Ava & Viv dedicated to plus-size women and teens. Target is a successful retailer and made a wise financial investment decision by being among the first larger retailers to focus on an emerging niche of plus-size women and teen apparel segment. The company will use this marketing proposal to salvage the relationship, create a strong brand image, and advance product development to appeal to the neglected, misrepresented, and even insulted target consumers while generating massive revenues and profits from large sales volumes.
The Company
Target Corporation is one of the most successful retailers in the US. Today, its global operations reflect a massive force in the discount retail industry. The company is innovative and growth-driven based on its multiple product sales for lower than average value. Target Corporation is known for multiple types of goods, from foods and beverages, clothing, shoes, and jewelry, products for home and office, furniture, electronics, toys, and products for children, pharmacy and outdoor equipment, and gifts among others just like its industry peers.
In this marketing proposal for Target Corporation, clothing and apparel division, plus-size clothing, Ava & Viv will be presented.
Target Corporation is a global brand with most assets and operations in the US. The giant retailer boasts of about 347,000 employees. The company registered a revenue of 74,520 million dollars in the last fiscal year. These figures reflect the firm position of the company in the retail industry.
However, there was a significant change in the structure of the company in terms of its place in the global marketplace. The company used to run business in the United States, Australia, Canada, and other smaller markets. However, because of the introduction of e-commerce projects of various nature, the company decided to make changes to its regional structure.
Over recent years, the company had to restructure its international branches due to the demands of the market and growing competition. In particular, one of the notable changes that the company underwent in recent years is that the company’s new CEO Brian Cornell made some critical decisions, including permanent closure of Canada operations to focus on the discount retailer’s failing U.S. business.
These changes have obviously affected various divisions.
Financial Overview
A Five-Year Financial Overview
According to the Target (TGT) Income Statement, published at Yahoo Finance, the company’s financial performance changed in a considerable way over the last five years. The following table is to represent the changes of the company’s performance in terms of revenues, profit, stock prices, percentage of profit margin and net revenue, growth rate related to year 2 value’s correspondence to year 1 value, the current ratio (correlation between assets and liabilities), and assets turnover (based on revenue and total assets).
Figure 1. Overview of the changes of Target Corporation’s financial performance during the years 2011-2015 (Source: Target (TGT) Income Statement 2016. Web.
Although there were some tendencies of the company’s financial slowdown in 2014 (current ratio lowered to 0.91), the overall financial performance appears to be consistent with a reasonable percentage of annual growth throughout the given period.
Besides, most significant financial ratios indicate that Target Corporation has maintained positive performance for the last five fiscal years.
Current Market Situation
Generally, the current retail industry has been disrupted by e-commerce and other online trading platforms. Besides, notable fragmentation is observed in the industry, but this generally depends on the specific sub-areas. However, retail outlets are greatly concentrated.
Market Description
Clothing sales or apparel retail is a big sector in the US and globally. In the year 2009, it was estimated that the sector generated about $304,906 million in revenues (Weber, 2016). The compound annual growth for the industry is approximately 3.2 percent.
Today, however, new figures have emerged to describe the untapped fortune of the industry. Specifically, the plus-size women’s clothing sales are valued between $17.5 billion and $20 billion, and teens have played a significant role in driving the niche (Halkias, 2016; Adams, 2015). According to the NPD Group, the total apparel sales for women exceeded $116.4 billion while men’s apparel sales topped $60.8 billion.
It is observed that women’s apparel sale is the most attractive and profitable in the apparel line, responsible for more than 52% of the total revenue generated. The apparel line is fairly concentrated, and larger outlets, such as Target Corporation, enjoy the advantage of bargaining power from their suppliers. However, the individualized approach for competition has allowed smaller retail outlets to compete on pricing, apparel styles, and types, and still realize profits. Additionally, the nature of the apparel sector has driven price and style for specific demographics. The trend is also a factor for success for retail stores. That is, retail storeowners must understand new fashion fads, reputation, and unsold inventories (Weber, 2016).
Retail outlets, such as Target Corporation, understand that personal incomes, disposable incomes, consumer preferences, and other macroeconomic factors, such as interest rates tend to influence sales significantly.
Large retail stores and chains have the benefit of superior quality products, advanced marketing practices, and effective management of the supply chain. These factors create a competitive advantage for Target Corporation, Abercrombie & Fitch, and Levi Strauss & Co. among others.
Weber (2016) estimates that the margin for the retail industry is about 30 percent to 40 percent, but this figure depends on specific niches. For instance, the grocery stores generally have relatively small margins, but they rely depend on large volumes of sales to make profits. Conversely, others may sell a few volumes but make huge profits.
Location is also an essential factor for most retail outlets, especially for Target Corporation that runs brick-and-mortar. A store can thrive or fail simply because of the choice of the location. For many retailers, popular choices include large shopping malls, standalone stores, and/or strip malls. Behind these choices, retailers tend to evaluate demographic characteristics, traffic, lifestyle (high end or low segments), complimentary stores, and competition among others.
For apparel sales, seasonality is a critical factor for consideration. For instance, retail outlets are most likely to realize increased store traffic and sales during winter holiday seasons, back-to-school days, Easter periods, and Mother’s Day, but these sales are punctuated with marginal declines based on the sector. Inventory turnover is also an important issue for the clothing sale.
Target Corporation stands out in the market of clothing and apparel manufactured by discount retailers because it can find specific appeals to the different social groups who are interested in quite diverse types of products. Nevertheless, there is a growing competition in this segment of the discount retail industry as well. One of the newly developed trends for the product line is to introduce special plus-size fashion products that, at the moment, subject to an increasing appeal because more consumers are interested in such clothing (McCall, 2015).
Product Review
The product line of plus-size clothing developed by Target is branded under the name Ava & Viv. Its slogan statement is “Ava & Viv, made just for you: classic looks with a modern twist to flatter every kind of curve” (Target Corporation, 2016). Overall, the product strategy, in the current situation, is an attempt to combine casual clothing that people can wear season after season with the specific details that would create a feeling of customized clothes. It was described as “a mix of professional and casual separates, coordinated sets, denim and jackets with prints and designs” (Kim, 2015, p. 1). Given the fact that at the time, when the product line was designed and developed, there was more of an appeal for casual style, it was initially a successful branding strategy. Main features are:
- causal style.
- affordable price.
- wide range of basic clothes.
- light hints of customized design.
Table A2. 1 (Segment Needs and Corresponding Features/Benefits)
Competitive Review
The plus-size fashion industry is estimated to value between $17 billion and $20 billion a year of business (Halkias, 2016; Lieber, 2015).
Although about 65% of women in America are regarded as plus-size, plus-size apparel is yet to exploit the market. Hence, the market is considered an emerging niche and treated as such by major players. In fact, American Apparel, Neiman Marcus, Zara, Barneys, Intermix, and Urban Outfitters among others do not currently carry fashion line for this market. On the other hand, H&M and Forever 21 and others just offer a small fraction of plus-size clothing. In addition, Department stores have also failed to carry them.
However, it is also important to point out the fact that this segment of the market is growing tremendously fast, and there are many considerably worthy competitors for Target, such as J. C. Penney, Asos’ H&M’s and Mango’s product lines, Ashley Stewart, among others. Although for companies manufacturing solely clothing, Target Corporation could be an indirect competitor, the retailer has designs for a similar market, having last year introduced its own line for plus-size women, Ava & Viv (Wahba, 2016). Target has advantages in terms of price, channels, and logistics, but there are some challenges related to designs, brand name, and product presentation.
Table A2.2 (Sample of Competitive Products).
The plus-size industry is an emerging niche. Therefore, from a financial and investment perspective, Target Corporation made the right choice to allocate some resources for this market segment. Most reports have demonstrated that the plus-size market has a significant potential for growth, especially if all 65% of American women and teens are targeted.
Target Corporation has competitors in this market segment as previously noted. Although these competitors carry just a small fraction of plus-size fashion in their merchandise, they are not going to abandon the market either.
It is imperative to note that the entry of big retailers – Target Corporation, H&M, and JC Penny among others- into the plus-size market segment clearly shows the validity and relevance of the market.
Channels and Logistics Review
Target has an advantage in distributing such products because basic and casual clothes are an important need of consumers. One of the appeals of such apparel is its affordable price. Thus, locating such clothes at a discount retailer store makes them more accessible. Therefore, the primary channel for distribution in Target stores.
At the Level-two channel and using in-house team for Ava & Viv, Target has been able to cut cost of production.
Strengths, Weaknesses, Opportunities, and Threat Analysis
Table A2.3 (SWOT Table).
Strengths
Target Corporation has competitive edge over other retailers. Ava & Viv line was designed in-house. As such, it has allowed the company to cut costs associated with apparel production. In addition, Target Corporation has a wide distribution network across the US (its main market) after permanently closing Canada operations. The company was able to dedicate significant resources for product development, including hiring external consultants for promotion and feedback. It also enjoys the position of being the first among larger retailer to focus on the plus-size apparel market, and many consumers associate its design with quality at competitive prices.
Weaknesses
Critics have argued that Target Corporation failed, after few weeks, to generate adequate visibility and attention for the Ava & Viv line (Lieber, 2015). This implies that Target Corporation did not conduct sufficient promotion for the brand. Instead, it was only known among the few celebrity plus-size women and, therefore, it was a case of less thoughtful execution strategy of Ava & Viv apparel launch. It also observed that the pricing strategy is low, a fact that could leave the firm with a small profit margin.
Opportunities
It is estimated that about 65% of women in America are plus-size women, and this percentage does not include teens who are responsible for driving the growth of the market. On this note, Target Corporation made the right investment choice to explore the emerging niche market in which it can design new clothing for all seasons and occasions.
Further, plus-size women community has gained major attention online. As such, the company can use online promotional tools to push Ava & Viv apparel to target consumers. At the same time, Target Corporation can collect views from customers for product and design improvements. Partnership with more plus-size women, celebrities and bloggers will give the company an edge over competitors and create visibility for Ava & Viv apparel.
Threats
One major challenge facing plus-size apparel retailers is that they cannot simply generate adequate attention among target customers. In fact, some plus-size women have negative experiences shopping for clothing. Target Corporation will also have to deal with emerging competition from independent retailers, online retailers, designers, and other less known entrants seeking a fraction of the market segment. The company must also face and manage unrealistic expectations from customers on how cloths should look, feel, and cost because of its emerging nature. Further, most plus-size consumers are also sensitive to price. As such, determining the right pricing strategy could present difficulties for Target Corporation.
Objectives and Issues
The plus-size apparel segment is an emerging niche. Therefore, it has not generated the necessary attention required. On this note, Target Corporation marketing objectives should focus on creating product awareness and growing market.
First Year Objectives
Market Share Objectives
To acquire 15% of the market from the current negligible rate for plus-size apparel by June 2017
Promotional Objectives
To increase awareness of Ava & Viv apparel in the US to 85% by June 2017
Objectives for Growth
To increase the size of the US operation (claim at least 20 percent of the current $17 billion revenues of the niche) by June 2017
Objectives for Branding
To make Ava & Viv apparel the most preferred brand in the US by 2017
Profitability Objectives
To attain about 15% return on investment by June 2017
Second Year Objectives
Market Share Objectives
To acquire 35% of the market from the current negligible rate for plus-size apparel by June 2018
Promotional Objectives
To increase awareness of Ava & Viv apparel in the US to 95% by June 2018
Objectives for Growth
To increase the size of the US operation (claim at least 35 percent of the current $17 billion revenues of the niche) by June 2018
Objectives for Branding
To make Ava & Viv apparel the most preferred brand in the US by June 2018
Profitability Objectives
To attain about 18% return on investment by June 2018
Issues
Although Target Corporation must strive to meet the above-mentioned the above objectives, multiple issues have been noted in the plus-size apparel segment. Notably, the company must focus on changing negative perceptions of customers about the plus-size apparel segment. Most customers for long time have felt humiliated, neglected, misrepresented, or even insulted.
The in-house team must focus on delivering a line of apparel that does not only looks great, fits well among the target market segment.
Another critical issue noted is about merchandising / marketing / promotion strategy. Target Corporation has failed to develop a consistent display and promotion strategy. For instance, Ava & Viv in some stores are tucked away and labelled ‘women’s Plus’. On the other hand, JC Penney is focusing on developing customer loyalty by dedicating a floor to plus-size apparel.
In terms of design, the in-house design team must strive to delivery strong fashion for plus-size women for every occasion and season. The company must appreciate that the niche market has not developed specific patterns, sets of skills, and designer models for a wide range size in the plus-size market segment.
Further issues may arise from various age demographics. For instance, the industry players face teens who want trendy and fabulous outfits to express themselves by using fashion and do not care much about body size. Conversely, ‘old-school’ women who feel that body size is an issue would prefer more suitable plus-size styles. Consequently, the retailer is stuck between these two distinct shoppers in terms of who to meet their needs immediately.
Marketing Strategy
Product
Ava & Viv line is designed for plus-size women by the company’s in-house design team. The line is meant for fit and different occasions. It reflects the company’s focus on quality. However, some critics have claimed Ava & Viv line is just like any other common apparel in any store.
Price
Prices range from $10 to $80, and the company will add new pieces every month (Lepore, 2015). This low pricing strategy is meant to push and attract many plus-size women and teens to Target retail outlets. In addition, the low pricing strategy will counter pricing strategy adopted by JC Penney (from $12.99) while appealing to price sensitive customers. It is noted that the company will cover costs and realize profits from low prices based on huge volumes intended for sales.
Target Corporation has adopted market-penetration pricing to ensure that it can attract both plus-size women and teens early in the product life cycle.
Place
With over 1,793 stores in the United States, Target Corporation is well placed for wide distribution of Ava & Viv apparel. The company will gain competitive advantage because of these distribution channels (Target Corporation, 2016). Moreover, these retail outlets are strategically placed in locations where they draw huge number of shoppers each year.
Apart from brick-and-mortar stores, Target Corporation has launched Ava & Viv apparel because the plus-size women community has started to thrive on social media and blogs.
It is imperative to note that Ava & Viv line is exclusively distributed in Target outlets only.
Promotion
The plus-size market segment is generally new. As such, it has not received much publicity and promotion. On this note, Target Corporation has focused on the product promotion using different strategies. First, the company engaged some plus-size women to launch and promote the Ava & Viv apparel. Second, Target Corporation, in some stores, dedicated a floor for Ava & Viv apparel. Third, the company is now exploiting online opportunities to promote the Ava & Viv apparel because most plus-size women and teens tend to look for designers and discuss their fashion preferences, feels, and look online.
In addition, Target Corporation has realized positive reactions working with plus-size fashion bloggers. For instance, the company works with three prominent plus-size bloggers, including Gabi Gregg, Chastity Garner Valentine, and Nicolette Mason. These bloggers are the brand ambassadors of the new plus-size clothing line, Ava & Viv (Kumar, 2015).
The plus-size bloggers are meant to create favorable publicity, create good relations with plus-size women and teens, Target Corporation corporate image, and dealing with any negative comments generated online among critics of the apparel line. These are all public relation efforts.
The company also directly appeals to its target market segments through Web marketing.
The company should consider traditional media to reach other plus-size women and teens who have not joined online communities.
Target Corporation occasionally offers sales promotion, for example, Cartwheel offer (40 percent off Ava & Viv Apparel & Swim for plus-size styles).
Position
Target Corporation offers the Ava & Viv Apparel as fashionable, trendy, and affordable plus-size clothing for women and teens who want to express themselves through clothing without experiencing limitations of the body size.
In addition, the company creates an impression of a big box store that gives validity to the neglected plus-size clothing line and delivers a vital fashion statement for various customers for every season and occasion.
Marketing Research
Before the launch of the Ava & Viv Apparel, the company conducted research using focus groups. It created a discussion between its in-house design team and plus-size style professionals. Gabi Gregg, Nicolette Mason, and Chastity Garner acted as models, consultants who provided their opinions, and online promoters for the line.
Target Corporation decided to use online platform to push the brand because many plus-size community members are now actively participating online and generating the necessary information such designers and retailers require.
Conversations generated by critics have been incorporated into new line of products released every month.
Going forward, the company can develop surveys to target plus-size women and teens who visit its retail stores. It should provide rewards and discounts for individuals who take part in such surveys.
Given the negative notion that the plus-size market segment has held for a longer period, Target Corporation will have to design questionnaires to explore consumer experiences in its stores and about its collections, fashion, trends, and offerings.
Personal interviews and focus group will be used to create engagement with individual customers and online bloggers who promote the plus-size market segment.
All the valuable insights gathered are extremely useful for the in-house design team for product development and improvements.
Action Programs
- September – Target Corporation started conducting market research to identify what exactly plus-size women and teens wanted in their clothing to incorporate in its new clothing line, Ava & Viv Apparel. The research was performed using personal interviews, blogs, and focus group discussions.
- October – the company used data collected to design and produce prototypes of Ava & Viv Apparel.
- November – Target Corporation brought in influential industry experts for consultation, feedback, product tests, and eventually improvement.
- December – the company relied on online bloggers for campaigns to promote the Ava & Viv Apparel before the launch. This approach was intended to generate positive response and excitement among plus-size women and teens.
- January – Target Corporation launched the new Ava & Viv Apparel, displayed in its store and pushed for online advertisement.
Budgets
Target Corporation offers Ava & Viv Apparel line for a maximum price of $80.
Sales revenues
- 80*50,000,000 = 400,000,000.
Profits
- $400,000,000 – 30,000,000 – 120,000,000.
- $250,000,000.
Break-even volume (BEV)
Variable costs
- (80-30) *y – (120,000,000) = 0.
- 50y = 120,000,000 million Units to be sold.
Controls
Any controls applied should focus on salvaging relationships among plus-size women and teens because for longer periods, they have left mistreated, neglected, and even insulted by retailers.
- Product quality – must appeal to both ‘old school’ women suitable clothing and teens focusing on trendy fashions.
- Brand image – Target Corporation must demonstrate the image of a big box retailer advancing the plus-size apparel.
- Brand awareness – should reach both online community and regular shoppers.
- Operational effectiveness – this should help the company to cut costs and enhance distribution.
- Customer satisfaction – individualized treatment of plus-size women and teens because of their negative experiences.
References
Adams, E. (2015). Target and Other Mass Retailers Are Finally Taking Plus-Size Shoppers Seriously. Racked. Web.
Halkias, M. (2016). J.C. Penney creates its own plus-size women’s fashion brand. Dallas News. Web.
Kim, E. K. (2015). Target unveils plus-size Ava & Viv collection for fall. Today. Web.
Kumar, K. (2015). Target’s plus-size promotion. The Bulletin. Web.
Lepore, M. (2015). We’re Pumped for Target’s New Plus-Size Line, Ava & Viv! InStyle. Web.
Lieber, C. (2015). The Embattled Plus-Size Industry Is Taking Matters Into Its Own Hands. Racked. Web.
McCall, T. (2015). Target Is Overhauling Its Approach to Plus-Size With Ava & Viv. Fashionista. Web.
Target Corporation. (2016). Corporate Fact Sheet. Web.
Wahba, P. (2016). J.C. Penney Has Tapped This ‘Project Runway’ Star to Launch Its Plus-Size Brand. Fortune. Web.
Weber, A. (2016). Retail Industry Analysis 2016 – Cost & Trends. Web.