Management at Target has consistently shown resolve that demand is highly flexible and as consumers are price sensitive, any reduction in product cost would naturally put product quality under intense scrutiny. This is particularly true because Target purchases its product offerings in bulk, so that reduced prices can be achieved without necessarily sacrificing product quality. Besides, there is always the threat of competition which could bring the price further down.
Product suppliers at Target are always requested to manufacture products at the lowest production cost possible and to set very minimal margins of profit as well since products are ordered by bulk . Target personnel in return could only add enough to maintain a healthy ROI. Likewise, management is always on the lookout for available alternative products to form part of its pricing strategy. A good come on to consumers are the deep quantity discounts provided to those who order products by bulk.
Regular patrons are given cumulative discounts in appreciation of customer loyalty and the long years of patronizing Target products. Target Corporation also offers seasonal discounts depending on the time the purchase was made, promotional discount plus a short-term discount option to probably stir up sales. Target management has always adopted the strategy of penetration pricing to maximize production output and at a relevant low price. A fast product turnover will do a lot to sales and margin of profit than products with a higher markup though not appealing to price conscious consumers.
So in effect Target retails its product lines to consumers at lower profit margins. At the end of the day in you can entice thousands to buy a particular product and even with a minimal markup it could add up to something substantial. Like many retailer stores, Target Corporation is dependent on the products manufactured by an extensive network of vendor companies to operate their stores and distribution centers nationwide (Gole, Fitzpatrick & Srock, 2005). They actually work with partner vendor companies to ensure timely deliveries of products.
At present Target Corporation is served by 23 distribution centers nationwide that is responsible for the conveyance of products to over 1,500 retail stores (Wikipedia contributors, 2007). This is a very complex system of product procurement as well as product distribution, not counting the time element involved in product placement, particularly on the actual stalls. Target Corporation puts premium on its distribution channels. Proof of this commitment is the construction of 60 new additional stores and the upkeep and renovation of existing facilities.
This would entail cost, since every facility will be fitted with proper equipment and utilities in order for it to be competitive in a volatile market. Equipment would include computers, inventory databases and handheld digital scanners for the retail stores. The new distribution centers in turn must be provided with forklifts, an inventory tracking system, a giant conveyor system and the labor force to man the facility. Given these facilities, Target Corporation must hire and train new employees while providing continuing education to existing employees, notwithstanding an attractive wage and benefit package.
The process involved in the distribution center is really cumbersome. As products are delivered by vendor companies, these go through the digital scanner for inspection and labeling where data enters the giant inventory system automatically (Gole, Fitzpatrick & Srock, 2005). Following the process, products are handled by the warehousing department who shall be responsible for its delivery to specific retail outlets. Once received by retail outlets, products are displayed in well-organized, high quality and stylishly designed stalls in a clean and welcoming environment.
Target management is very particular over the design of its store interiors to conceive wider shopping aisles, aesthetically planned drop ceiling and a well-lighted display area for the convenience of shopping guests (“About Target,” 2007). This last innovation is what probably separates Target Stores from all other retail stores because of the extra attention and service provided to shopping consumers. Naturally with a more architecturally inviting retail outlet, consumers would come time and again to savor the extra convenience only Target retail outlets can provide.