Target: GLIMMER

Sunny Mui | Rachel BrinkenhoffEsther Berg | Pany Chen

Agenda

Market DescriptionCompetitionSWOT AnalysisObjectivesStrategyAction PlanBudget

Market Description

• Typical guest– Young – Well-educated– Medium income – Active lifestyle

• Who is the average customer?

Competitors

• Wal-Mart• Ulta• Sephora• MAC• Walgreens

SWOT Analysis

Strengths• One-stop shopping with low prices• Store image• Inventory management• Socially responsible company• Convenience

Weaknesses• Some goods seen as cheap/low quality• Non-exclusivity of many brands• Prices not as low as competitors• No service• Boring shopping experience• Employees not very knowledgeable

Opportunities• Better customer experiences• Inventory management improvements• Localized product assortments to

appeal to local markets• Exclusive and higher quality product

lines• More guest services

Threats• Competitive pricing pressure from Wal-Mart• Image as a large corporation• Higher service of specialized cosmetics stores•Higher costs

Objectives• Reduce theft/shrinkage– Remodel– Bottom line: decrease costs

• Create a cosmetics shopping experience that increases customer involvement– Differentiation– Customer satisfaction– Bottom line: increase sales

Product Strategy

• Remain fashion forward and quality oriented, yet value conscious

• Leverage exclusive products’ premium cachet– Boots

• Compare certain products to boutique brands• Source products from local cosmetics makers– “Lead products”

Pricing

• Maintain current overall pricing strategy consistent with Target image

• Mid-range pricing sets Target apart from other discount retailers and attracts the well educated, middle-class market

Layout• A store within a store– Glass, lighting, mirrors– Replace middle shelves with 4.5 foot high shelving– Extend outer shelves to back wall to enclose an

area specifically for cosmetics– Entrance will consist of 3 foot high counters with

shelving• Three basic areas within the department– Savvy, wise, and chic– Color coded areas

Layout

• Expensive products will only have one display product– Cosmetics specialist will retrieve the product

for the customer• More product testers– Easily accessible, very obvious, and

highlighted• Three touch screens • Security patrols

Promotions

• Enhanced experience through interactive touch screens– Reviews, recommendations, videos

• Target employee trained in Target’s cosmetics brands

• Problem-Solution marketing approach• Conduct recycling specials

Promotions

• Conduct targeted marketing promotions for special events

• Utilize customer/employee reviews of products

• Highlight Target Glimmer opening• Signage of the weekly “model”– “Real people. Celebrity looks.”

Action PlanJune 2010 - Review of market situation

July 2010 - Review of marketing objectives and strategy

August 2010 - Remodel of cosmetics section

October 2010 - Soft opening of the cosmetics section

November 2010- Grand opening of “Glimmer” cosmetics section at Target

Budget

• The remodel:

• Wages– 6 hrs x $9 x 7 days x 52 weeks = $19,710

Glass Shelving $20,000.00

Touch screens $1,200.00

Signage and Printing $1,000.00

Merchandise displays $1,000.00

Paint $1,000.00

Labor $10,000

Total $34,200.00

Budget

• Promotions= minimal set-up costs– $600 new signage printing allowance

• In total, the first year implementation costs would be $54, 510.

BudgetSensitivity Analysis of Potential Revenues

Sales Increase Total Revenues Increase in Dollars

0% $ 1,386,666.67 0

5% $ 1,456,000.00 $ 69,333.33

10% $ 1,525,333.33 $ 138,666.67

15% $ 1,594,666.67 $ 208,000.00

20% $ 1,664,000.00 $ 277,333.33

30% $ 1,802,666.67 $ 416,000.00

40% $ 1,941,333.33 $ 554,666.67

50% $ 2,080,000.00 $ 693,333.33

60% $ 2,218,666.67 $ 832,000.00

70% $ 2,357,333.33 $ 970,666.67

80% $ 2,496,000.00 $ 1,109,333.33

Budget

Shrinkage Decrease (Percent) Shrinkage Decrease (Dollars)5% 1,099.28$

10% 2,198.56$ 15% 3,297.84$ 20% 4,397.12$ 30% 6,595.68$ 40% 8,794.24$ 50% 10,992.80$

• Assumption: Shrinkage=1.51% of sales– Base shrinkage: $20,938

• Conservative revenue growth of 5%– New shrinkage: $21,985

Budget

• Sales increase of 5%: $69,333• Shrinkage decrease of 5%: $1,099

• Conservative total increase in revenues: $69,333 + $1,099 - $54,510 in implementation costs = $15,922 net revenue gain within the first year.

Sales Increase$69,333

Shrinkage Savings

$1,099

Costs$54,510

Net Revenu

e Gain

$15,922

Budget

WACC 8%Gross Margin 30.50%

Cash Flows Increase in Sales 69,333.00$ Remodel Cost (34,200.00)$ Recurring Costs

Year 1 16,051.30$ Wages (19,710.00)$ Year 2 16,051.30$ Promotions (600.00)$ Year 2 16,051.30$ Total Recurring Costs (20,310.00)$ Year 4 16,051.30$ Net Positive Sales 49,023.00$ Year 5 16,051.30$ Cost of Goods Sold (34,070.99)$

NPV 29,888.17$ Shrinkage Reduction 1,099.28$

MIRR 22% Net Positive Cash Flow 16,051.30$

NPV And MIRR Analysis

SWOT Analysis (Post)Strengths

• One-stop shopping with low prices• Innovative, trendy, and young• Local products• Interactivity and customer engagement• Socially responsible company• Convenience, easy shopping • Personalized service• True shopping experience• Discourages shrinkage• Increased loyalty

Weaknesses• Some goods seen as cheap/low

quality • Non-exclusivity of mass market

brands • Prices not as low as competitors • Increased costs • Still not as good shopping

experience as specialty cosmetics stores

• Less service than specialty stores

Opportunities• Even better customer experiences • Inventory management improvements• Virtual mirror, try on cosmetics virtually

through new technology• Exclusive and higher quality product

lines• More guest services• More concentrated marketing• Greater product depth

Threats• Competitive pricing pressure from

competitors• Image as a large corporation • Higher service of specialized

cosmetics stores• Higher costs could threaten profits• Too dramatic a change can alienate

customers

Conclusion

Current situationProduct strategyLayout changesNew promotionsCost and benefits

This concludes our presentation.Thank you for your time.