Change In Retail Stores: Target’s Business Operations And Use Of Internet Technologies

Discuss about the Change in Retail Stores for Academy of Management Journal.

In recent times, Information Technology has transformed business. The future of retail industry is definitely more than brick and mortar stores. With Information Technology, organizations have been able to optimize their business operations (Li, Da, & Zhao, 2015). In recent times the focus of organizations is on innovation through Information Technology. The process of innovation in terms of business and business services have enabled the retail organizations to improve their supply chain. In this case, 10 % of business operators of retail sector focused on customer service to implement innovation accounting in business. On the other hand, 29 % and 15% respectively have implemented by creative and digital sector and manufacturing sector. Only 2 % of total industry use innovation (Kim & Davis, 2016). Most of the business operators have focused on accountancy while implementing the process of innovation accounting, as 39 % of total business operators of the country use this for accountancy. Therefore, it would be correct to say that innovation in accounting on the basis of Information Technology has been a key use of IT for retail stores (Loffi, Wallace & Harris, 2015). The objective of this paper is to discuss the business operations of Target retail store. The Target retail store in Australia is the part of Wesfarmers group. The paper would discuss the current operations of Target and would discuss the use of internet technologies for Target. A brief organizational background and the current operations of Target can be discussed as:

Target is one of the largest retail store in Australia. The company has close to 300 stores in the country. Target was established in the year 1926 and since then it has expanded across the country. It employees more than 16,000 employees. The current business operations of Target include to take products from suppliers and provide to consumers. The company does use Information Technology to maintain inventory across its supply chain. One of the concern for Target is increasing cost of supply chain operations. Inflation is another big concern. High inflation signifies decrease in buying power of consumer, their income remains fixed, but the prices of goods and services increases (Kim & Davis, 2016). It impacts the demand of goods which is in inversely proportion to price. This will lead to challenging situation for retail stores. There is need to understand retail facilities which constitute procurement and inventory management. When money is in circulation it dictates the demand of consumer. The retail facility defines the borrowing capacity of individuals and businesses. It determines the interest rate along with price of assets and investment. Inflation and other economic activities are determined by monetary policies of the government (Martin, 2013).

Analysis

There are various use cases for the use of information technology for retail stores. In the article, ‘The Internet of Things (IoT): Applications, investments, and challenges for enterprises’, Lee & Lee argued that one of the advantage of internet technologies for retail stores is supply chain optimization. With the use of internet technologies, organizations can actually focus on real time optimization of supply chain. One of the biggest and the recurring costs for retailers is the cost incurred in supply chain management (Martin, 2013). Therefore, it would make sense for retailers to use internet technologies to optimize the supply chain management cost. Authors discussed the use of JIT (Just in Time) method based on internet technologies. With the use of JIT, large retailers like Target would be able to save their procurement cost. One of the key concern for Target and other retailers is to obtain a balance between ordering cost and inventory holding cost. The retails want to keep the order cost minimum, however with minimal ordering cost, they have to bear heavy inventory holding cost. Just in Time system provides a platform where the holding cost can be minimized as the retailers are not required to keep any stock. With the use of internet technologies, organizations can use the technologies like RFID to manage their inventory. With the use of RFID tags, retailers can actually manage the stock in an automated manner (O’leary, 2011). It is true that organizations would need to make initial investment to develop the necessary infrastructure for internet technologies. Radio-frequency identification (RFID) is already widely in use in inventory and warehouse management systems. And in the near future it is likely to be extended with more connected services like smart shelves that send out signals when they are going empty (O’leary, 2011). These signals will then automatically trigger replacements at the store level by communicating it all the way back into the supply chain.

Another article is, ‘Fashion shopping in multichannel retail: The role of technology in enhancing the customer experience’. In this article, Blázquez (2014) argued that use of internet technologies can help retail stores to focus on targeted ads to users. This would enable the retail stores to increase their penetration in the market. Authors referred to this phenomenon as location-based targeting. With the use of location-based targeting, retail stores can push the advertisement to users who are near the retail store. These location-based advertisements can be pushed to the mobile phones of users on the platforms like Facebook, mobile applications, Google etc. The use of mobile advertisements for retail stores would definitely help them to increase their business. The large retailers can also drive lot of business intelligence with the use of internet technologies. The business intelligence can be derived based on the data collected from the historical purchases of consumers. With this technique, retailers can maintain a database of consumers (Carter & Liane Easton, 2011). This database can be used to store information about customer demographics, purchase history, purchase transaction value etc. With this information, retailers can actually provide customized mobile Ads to users. In the current time, Information Technology is no more a support function for organizations. Today, Internet is the lifeline of businesses and it is critical that organizations should be able to use Internet to its full extent. The retailers would also need a team of talented employees who can actually bring the change in the organization. The largest retailers like Target and Walmart should ensure that the communication between the business team and IT teams is high. It would ensure that there is not gap in the business objectives and the IT objectives.

Recommendations for Target Inc.

Both the articles are interesting read and there is a scope of lot of learnings from retailers. It is important that retailers should a vision in place about the use of internet for operations management (Roh, Hong & Min, 2014). The organizations should have both short term and long-term plan for improvements that can happen with the use of Internet. It would also make sense for retailers to analyse various drawbacks and risks along with the benefits (Li, 2013). With the excessive focus on internet technologies, organizations can develop privacy and security risks. It is important that organizations should manage all the privacy and security concerns while storing the information of consumers (Prajogo & Olhager, 2012). The personal details of consumers should be used only for advertisement purpose and not for any other purpose. In the long term, retailers should focus on cloud computing model. With the cloud-based system, organizations would be able to scale their operations easily. Another benefit of cloud-based system for retailers is the cost advantage (Mentzer, et al., 2011). The retailers can save a lot of cost if they use cloud system as compared to on premise system to manage IT assets.

In recent times, Target has improved a lot in terms of the use of Information Technology across its supply chain. However, it is important that the organization must continuously improve. It can happen only when Target has a dedicated annual budget to be spend on Information Technologies (Sarac, Absi & Dauzère-Pérès, 2010). With the use of Internet and modern IT techniques, Target can actually aim for the best retailer in the world. This would also provide an opportunity to Target to improve its online retailing (Butner, 2010). The specific recommendations for Target can be discussed as:

It is recommended that Target must use internet technology to improve its supply chain management through the use of contemporary tools. It can be either of six-sigma, Total quality management, ISO 9000, ISO 10000, Quality function deployment (QFD) or can be combination of these approaches or can be any other (Lee, 2014). Also, WBS (Work breakdown structure) and WBS dictionary must are input for quality preparation process because they are kind catalogue of customer expectations (Prajogo & Olhager, 2012). And fulfilling each of the items of the WBS is directly related to the quality of the project.  Also, Time, scope and costs must be balanced while preparing for the quality. These 3 i.e. time, scope and cost are also known as Iron Triangle of the project management. Cost is important parameter and if the costs are already very aggrieved or just sufficient, quality is likely to suffer. Similarly, if the schedule is quite aggressive that only considers various tasks and activities and ignores the time for building quality, quality is again likely to suffer. Also, scope should be clearly defined in terms of what type of documentation, quality of documentation is needed (Loffi, Wallace & Harris, 2015). For example, customer can provide the various templates in Statement of Work (SOW) around which project team has to provide documentation.

It is recommended that Target should definitely pursue the location-based advertisement. In addition to the location-based advertisement there is a lot that can be done. It is important that Target should increase its spend over mobile advertisement (Razmerita, Kirchner & Nabeth, 2014). In this era of internet technologies, mobile advertisement is the fastest way to reach out to consumers. With mobile advertisements, and location-based targeting, Target can actually create the profile of users. For example, suppose there is a user X who usually come to store on first week of every month. With this data point, Target can push the mobile Ad to user X in the last week of the month. The Ad should tell user X about the various discounts and promotions available on Target. In fact, with the use of Internet Technologies, Target can go one step ahead wherein it can populate the cart of user X based on the history of purchase (Grewal, Roggeveen & Nordfält, 2017). There are number of players in the market that provide the services of customized Ads to consumers. Google and Facebook are two biggest players that provide this service. Therefore, it is suggested that Target must tie up with Google and Facebook for mobile advertisement. There are also various other mobile ad networks that provide this service.

Conclusion

            The above paper discusses the business operations of Target. The paper discusses the improvements that can be made in the retail strategy of Target. With the above discussion, it can be said that the company must invest heavily on supply chain management and optimization. The two key recommendations for Target Inc. is the use of RFID tags across its supply chain and use of customized advertisements for consumers. It is important that organizations should have specific target towards effectiveness and efficiency improvements. With the use of above recommendations, Target can easily have the target of 10% to 20% improvement in efficiency and effectiveness.

References

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