Target missing the mark

Target bullseye sign
Target is missing out on a key market sector that would help it better compete against Amazon.

Consumer electronics (CE) is proving to be one of the healthiest retail sectors in 2017. But other areas of retail are struggling to compete with online sales, especially divisions such as apparel and books. With the latest developments, Matt Sargent, senior vice president of retail at Frank N. Magid Associates, is questioning why a big-box chain such as Target is not pushing to drive more sales in its CE division.

According to Sargent, Target is missing out on a key market sector that would help it better compete against Amazon, as evidenced by the Best Buy earnings report. 

MattSargent
Matt Sargent

“Best Buy's successful Q1 financial results demonstrate that the consumer electronics industry is far from dead and point to an underutilized opportunity for Target. Addressing consumer electronics more aggressively affords not only the ability to dramatically increase consumer electronics revenue at Target, but more importantly, allows Target to compete more effectively with Amazon,” Sargent told FierceRetail.

Consumer electronics have not been granted priority status within Target like categories such as apparel, toys, baby and wellness. Target has chosen to prioritize these categories in order to align with the needs of Target's core customer, or guest. While these prioritized categories are indeed tightly aligned with the core Target customer, consumer electronics has grown disproportionately to the point where Target's lack of expertise in this category is negatively impacting the retailer overall.

Looking at the Target guest through the Magid Associates’ Retail Pulse consumer survey, four key points have shaped Sargent’s point of view:

1. Target guests are more tech-forward

Percentage-wise, Target’s core consumers more regularly use smartphones, laptops and tablets than shoppers at competing retailers. At 50%, Target consumers beat out Amazon’s core customer base, 46%, and Walmart, 40%, when it comes to using these devices. 

2. Target guests spend more on CE

Target’s core customer base spends more money on CE purchases than Amazon or Walmart’s customers, 33% versus 29% and 26%, respectively. 

3. Target guests are leaving Target to shop CE products

Only 54% of Target guests indicate that they shop for CE at Target. This means that nearly half of Target’s regular customers aren’t even considering Target for CE. Instead, these customers are going to Best Buy (46%), Walmart (46%) and Amazon (43%). These leakage rates are much higher than other categories at Target.

4. Target’s weakness in CE hurts the brand overall

The fact that the Target guest is so technically advanced and is likely to spend so much more on CE creates an opportunity for Amazon to pry customers away from Target. Amazon can utilize its strength in CE to pivot Target guests to areas where Amazon is not as strong (kids, style, baby, wellness).

“Developing a more aggressive CE plan, with an intense focus on the mobile needs of the core Target guest, would keep the highly valued Target guests more strongly engaged with Target across the entire Target ecosystem,” Sargent said. “Simply put, CE has become a central category need to the Target guest… more so than any other retailer next to Best Buy. Not addressing CE as a priority category is a misalignment with the Target guests’ needs.”

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