The proposal for Target to begin using a delivery service for its customer's grocery needs requires a more thorough examination of the area of opportunity surrounding it. A service like this requires a deep knowledge of the client base because it will allow Target to better stock items that are more likely to be used by their clientele. Furthermore, it is necessary to identify certain areas of opportunity regarding this strategy so that Target may improve upon it in the future.
To start with, Target must understand some of the areas of opportunity regarding this home delivery concept proposed for Target. For starters, the process of ordering groceries and the like can be a time consuming process and, for many of the less technology-savvy users, the process can take even longer than simply going to the store and getting the items themselves. In order to combat this, Target must make a concerted effort to make the interface for ordering goods as simple as possible, since, as the demographic studies will reveal, much of their target demographic will be the elderly.
Another issue is that delivering goods to the home is tricky to do efficiently. One solution proposed in an article is the use of a "reception box," which is a container that a delivery person can simply drop the groceries into without having to knock at the door and risk the client not being home (Kämäräinen, Saranen, & Holmstrom, 2001). This will help to alleviate some of the time and effort it takes to go to each house individually and knock on the door, with repeat trips sometimes necessary. In addition, it will make things simpler for the consumer, especially if they or their pets have an aversion to strangers.
Finally, finding the right price for these services is crucial. Many times companies will simply charge too much for delivery service, which turns off a large number of customers. If Target can manage to efficiently deliver these goods, possibly by using the reception box, these costs can be partially alleviated, and profit increased.
Next, it is necessary to examine the demographic and life style aspects of the customer segment that this will be appealing to. The most obvious and prevalent demographic here will be the elderly. To this end, it will be necessary to tailor much of the goods provided toward the elderly since, at least initially, it will not be possible to have every piece on Target's catalogue available for home delivery. This means stocking items like common medications.
Another big demographic are those who lack transportation, such as college students. This presents an opportunity to show them exceptional service, which will, possibly lead to them continuing to support Target's at-home delivery service even once they graduate college (or otherwise have reliable transportation) simply because it is so convenient.
One demographic that must not be ignored is the Hispanic population. Hispanics make up a quarter of the U.S. population today, and, in terms of foodstuffs, were an $8 billion market last year. By 2017, that number could hit $11 billion (Associated Press, 2013). Since the vast majority of what will be ordered on a regular basis is food, this demographic must not be ignored. Food items are becoming increasingly more Hispanic as time passes, and offering specials or discounts for "ethnic" foods such as Mexican food would help to pull in what could at first be an unwilling demographic.
One lifestyle aspect of the target demographics is that they will probably not have reliable transportation. The key, thus, is to keep them as customers without losing them to other home delivery services. To this end, Target must do what it has always done: provide great customer service while also keeping prices as low as possible for the consumer.
Customer interviews revealed that a surprising number of them were not only willing but eager to at least try a goods-delivery service model. The concept seems to be one that many people are at least willing to try, and this is where Target must be proactive: in making an extremely positive first impression to the consumer. To this end, it may be necessary to provide all customers with a sort of beginner's discount in order to further encourage first-time users as well as to retain those who are initially excited about the prospect of home-delivery services. The customer surveys also showed that, quite often, even those who live at home and have reliable transportation (thus allowing them to buy groceries in person regularly) will, at least occasionally, rely on a family member or significant other to find a particular item or items for them. These sort of one-off requests could be worked into Target's at-home delivery business model by offering them as a bonus to loyal customers. For example, a customer who has subscribed to the at-home delivery for three months will have a few deliveries for either themselves or a family member for free. This would, for example, enable Target to reach out to one customer in a home, and, after a time, further their reach into other family members to get them involved and at least try the service.
Most of those surveyed said they would use the service about once per week, which is also about how often most of them go grocery shopping. This means that most consumers who end up using the service would do so for most of their grocery shopping needs. In addition, most are willing to spend at least a little extra on it. Most of those surveyed listed the amount they would be willing to spend as somewhere between $10 and $20 per order. This means that most customers will, in all likelihood, choose to order larger amounts in order to reduce the number of trips. The third party that Target elects to use must be aware of this, and be able to ship especially large orders.
In terms of the specific reasons why so many consumers are motivated about the concept of at-home delivery of groceries, there seems to be two prevailing notions. The first is that it will allow the customer to be more independent and not rely on their family or friends to randomly have to buy them groceries. The second is that it will allow for more free time. For those who already have reliable transportation, they said that they would appreciate the extra free time it would allow them, especially if they do not live close to a Target, as many do. This convenience is especially beneficial for college students because oftentimes they are pressed for time, with commitments like classes and work, and simply cannot afford to leave the house when there are other things to be done. This service will allow Target to form an especially mutual relationship with college students, who will greatly appreciate the convenience of at-home grocery delivery.
In order to effectively serve these demographics, it is necessary to understand their motivations. Studies show that consumers who do their grocery shopping online do so for two primary reasons: convenience (which 57% admit is a major reason for grocery shopping online) and lower prices (which 53% said is another major factor) (FMI, 2012). These two factors should be two of Target's largest priorities in order to ensure a rapid positive response to the program. This will ensure that much of the positive experiences toward the service will be spread via word-of-mouth to friends and family of the customers, which is always more effective than mere advertising.
One potential problem lies with the location of many of the customers. Studies show that about 40% of those who do regular grocery shopping live in either a small town or rural area (Wolfson, Kinsey, & Senauer, 2001). This could create a problem for distribution to those areas because the cost of it could outweigh the potential benefits, and leave the door open for Target's competition to swoop in. One way to combat this is to establish a presence in major metropolitan areas and then, once profits have increased enough, construct offices for the third party shipping company to operate out of all over the U.S. so that most major cities are covered. This will ensure that even the most rural areas will only be a few hours away from a shipping center, and will also help for Target to reach the greatest number of consumers.
About half of the customers surveyed also expressed that they would view Target differently and would be more likely to shop there in the future if the at-home grocery shopping experience was positive for them. This lines up with studies that have found that mood is one of the biggest factors that affects repeat shopping experiences (Swinyard, 1993). This means that Target's experience must foster good feelings in customers in order to ensure repeat shopping experiences, especially for the at-home model.
The best way for Target to do this is simple: make each customer feel unique, and cater to their needs. Repeat customers are an absolute must for this type of business model, and ensuring that they are satisfied, such as by administering surveys, is crucial, especially in the early stages of the at-home model of grocery shopping. Target is fortunate in that it already has a relatively large consumer base to work from, so many consumers will be willing to give the at-home service a try just on reputation alone, but Target should not rely on just this. Target has a reputation for quality that keeps it, in the eyes of consumers, as a reputable supplier, and the at-home grocery delivery service will simply be an extension of that, and will deliver the quality that Target is known for.
Associated Press. (2013) As U.S. demographics change, so does the menu. Daily Herald. Retrieved from https://www.dailyherald.com/article/20131017/news/710179801/
Food Market Institute (FMI). (2012). U.S. Grocery Shopper Trends 2012 Executive Summary. Retrieved from https://www.fmi.org/our-research/research-reports/u-s-grocery-shopper-trends
Kämäräinen, V., Saranen, J., & Holmström, J. (2001). The reception box impact on home delivery efficiency in the e-grocery business. International Journal of Physical Distribution & Logistics Management, 31(6), 414-426.
Swinyard, W. R. (1993). The effects of mood, involvement, and quality of store experience on shopping intentions. Journal of Consumer Research, 271-280.
Wolfson, P., Kinsey, J., & Senauer, B. (2001). Data mining: A segmentation analysis of US grocery shoppers (pp. 01-01). St. Paul: Retail Food Industry Center, University of Minnesota.