1. Flexible Fulfillment and Omnichannel Development Strategies
Joe Malcolm, Jonathon Seton, and Casey Yi

2. 2
Abstract
The retail industry’s competitive environment is changing rapidly. The proliferation of mobile
technology and expanding consumer expectations is fueling intense competition in the retail
space. This competition is further driven by the growing divide between traditional brick-and-
mortar retail stores and online only models such as Amazon. In fact, some market analysts have
indicated that the traditional brick-and-mortar retail store business model could be entering a
period of steep decline, becoming progressively less relevant over the course of the next few
decades.1
In order to compete with both traditional and online models, Target must effectively
implement and integrate an omnichannel program that combines the best of both digital and
physical worlds at each step of the guest experience.
Introduction
There are two buzzwords found throughout retail industry analysis and literature;
“Omnichannel” and “Flexible Fulfillment.” While they are often misrepresented as synonymous,
the phrases represent two nuanced ideas. Flexible Fulfillment is about expanding the options
consumers have to buy and receive products. This includes store pickup, ship from store, and
ship to store.2
Omnichannel, on the other hand, is about seamless, complementary, and
indistinguishable interaction between the consumer and the business regardless of purchasing
channel, (store, online, app) or the device (checkout POS, computer, mobile).3
Taken together,
these two ideas represent key investment areas and growth opportunities.
Target has made significant improvements in its omnichannel presence and flexible fulfillment
capabilities over the last few years. Target is well connected to its guests through online and
mobile platforms. Importantly, these mediums have been incentivized through cost savings
options like Cartwheel and online coupons. Furthermore, Target has a well-developed flexible
fulfillment system in place allowing guests to buy in store, online, and in app with ship to store
and ship to home capabilities for all three of those purchasing options.
Despite these capabilities, Target’s omnichannel and flexible fulfillment strategies still need
improvement. Target’s app suite is discontinuous, sales associates are in need of modern mobile
technology, distribution systems require optimization, and omnichannel capabilities need to be
better marketed to consumers.
1
Rigby, Darrell. "E-Commerce Is Not Eating Retail." Harvard Business Review. Harvard University, 14 Aug. 2014.
Web. 07 Mar. 2016.
2
"Making Room for Flexible Fulfillment." Target Corp. 7 Mar. 2016.
3
Newman, Daniel. "The Omni-Channel Experience: Marketing Meets Ubiquity." Forbes. Forbes Magazine, 22 July
2014. Web. 07 Mar. 2016.

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Our proposals seek to build cohesion among digital and physical realms, flexible fulfillment, and
the omnichannel experience. The following solutions will attempt to bridge the gap between
online and in store shopping, account for evolving fulfillment needs, all while promoting one,
seamless, omnichannel experience.
To meet these goals, we submit four proposals:
1. App Consolidation
2. Mobile Point of Sale (mPOS) Technology
3. Omnichannel Marketing Campaign
4. Supply Chain Management
App Consolidation
Mobile apps are an integral part of the modern retail experience. They are invaluable in their
ability to better connect businesses to customers as part of a well-developed omnichannel
strategy. Further, they facilitate flexible fulfillment by providing customers an array of purchase
and pickup options. Although Target has excelled at producing a variety of apps, they are, with
the exception of Cartwheel, poorly reviewed by guests and represent a disjointed assortment of
otherwise valuable capabilities. To address this issue, we propose that Target’s existing apps be
merged and consolidated into two apps; Target and Cartwheel.
The Target app would acquire Target Registry, Target Healthful, and Wish List. We estimate the
total cost of merging these applications to be about $234,400.4
To combine savings and customer
loyalty programs, Cartwheel would acquire Redperk’s capabilities. We estimate the total cost of
merging these two applications to be $194,600.5
Attempting to manage six separate apps with varying levels of co-integration is fundamentally
opposed to an omnichannel framework. Target’s guests expect a singular, seamless, and
indistinguishable brand experience throughout the entire purchasing process. Six apps diminish
this singular brand experience by apportioning capabilities across multiple platforms.
A recent Forrester study draws similar conclusions. Broadly, it found that consumers spend a
relatively small amount of time using retail apps. While consumers spend about 85% of time on
their phones using apps, only 5% of that time is spent using retail apps. More importantly, the
study found that 60% of retail app consumers have two or fewer retail apps.6
These statistics
speak to the importance of a consolidated app suite. Consumers spend a relatively small amount
4
“Figuring the costs of custom mobile business app development,” Formotus, October 25, 2015,
accessed March 2, 2016.
5
Ibid.
6
Milnes, Hilary. "The State of Retail Mobile Apps in 5 Charts." Digiday. 18 Aug. 2015. Web. 8 Mar. 2016.

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of time on retail apps and, more often than not, have only two apps. Given these trends, it makes
sense for Target to reduce its number of apps to better align with consumer preferences.
Target can look to other retailers when creating a consolidated app suite. Using reviews from the
Apple and Android app stores, we find an inverse relationship between the number of apps
offered and the quality of their reviews. Walmart only offers a single app. Its average rating on
both stores is over 4 stars. Walgreens has only one app as well. Kmart has two apps, and Home
Depot, CVS have three apps, all with four and five star ratings. While the inverse relationship
between ratings and number of apps is not absolute, there is clearly a strong pattern in the data.
To juxtapose, Target has six apps – more than twice as many as most other retailers. In the Apple
app store, the Target app, Redperks, Wishlist, and Healthful each have about 2.5 stars. Registry
has 1.5 stars. These ratings tend to be somewhat better on the Android app store however the
average rating there is only about 3.2 stars. These ratings are unacceptable for a leading U.S.
retailer. The capabilities must be merged and more effort to ensure guest satisfaction must be
made.
Mobile Point of Sale
For the consumer, mobile technology has become nearly ubiquitous. A recent Forrester report
finds the following; by 2017, 4.8 billion individuals will use a mobile phone. In the U.S., mobile
and tablet commerce will reach $142 billion, representing about 38% of online transactions.
More than 30% of sales will have a mobile cross-channel component.7
Each year, mobile devices
become more integral to retail sales. Target has already thoroughly connected its guests to its
business through websites and apps, but there is a critical missing link in the omnichannel
experience – the sales associate. For a more omnichannel guest experience, sales associates must
be able to connect to guests via mobile devices.
Mobile POS technology (mPOS) is a growing phenomenon in the retail industry. It has already
been proven to have a number of benefits, most notably with Nordstrom’s implementation in
2011. Since then, Nordstrom’s has seen an overall increase in both checkout price and basket
size. They even saw a 15% increase in first quarter revenues the following year.8
A recent think
tank survey found that 32% of U.S. merchants with more than 500 employees have already
7
Honaman, Justin. "Top 5 Retail Trends to Watch in 2016." Retail Info Systems News. Integrated Retail Intelligence,
4 Jan. 2016. Web. 7 Mar. 2016.
8
"Nordstrom: A Case Study In Mobile Point of Sale." Odyssey Blog. Odyssey Computing, 24 Sept. 2013. Web. 08
Mar. 2016.

5. 5
deployed mPOS systems and 29% plan to do so within the next 12 months.9
Prominent retailers
employing mPOS systems include Apple, Home Depot, JC Penny, REI, and Urban Outfitters.
Traditional checkout POS systems restrict the guest’s omnichannel experience. Despite a number
of recent innovations in retail shopping, the traditional check out process has remained largely
unchanged. The way in which guests actually purchase goods is a hugely important step in the
shopping process. It is, barring returns, the last opportunity for Target to directly interact with its
guests. Given that retail customers expect an omnichannel experience, Target should use the
checkout procedure to increase its omnichannel presence by including a mobile POS system.
Crew members are already equipped with modified iPod Touches. These devices have RFID
scanners that are primarily used for inventory management. While inventory management will
remain a basic feature, this technology is capable of much more. We propose that these devices
are upgraded with the following two functionalities.
1) Mobile Point of Sale (mPOS) Technology
2) Crew Member – Guest Mobile Device Connection
An important feature of this technology would be the digital connection between the sales
associate and the guest. Before any mPOS sale is made, guests with existing Target/Cartwheel
accounts would be encouraged to connect with the sales associate. The guest would use the
Target app to allow the associate to scan a barcode on his/her mobile screen. The sales associate
would then have access to purchase history and product recommendations – similar to the
personalized homepages on the Target website and app. This would allow the sales associate to
provide a tailored customer service experience to each guest. This enhanced service would
increase sales efficacy and drive revenue growth throughout Target stores.
Mobile POS technology also enables sales associates to shorten long lines at peak hours. An
associate could walk down the line, asking customers if they plan to pay with credit/debit cards,
and process the sale on the spot.10
This would move guests through checkout lines quickly and
reduce wait times.
There are, however, potential drawbacks. For example, guests with large amounts of items may
often wish to skip the checkout line and seek out sales employees to circumvent it. In an extreme
case, this could overburden sales associates and render them unable to complete core
responsibilities. To account for this possibility, we can impose restrictions such as a “10 item or
less policy” on mPOS systems. More broadly, we can train sales associates to use mPOS as a
9
Arnfield, Robin. "Mobile POS Gaining Foothold with Large US Retailers." Networld Media Group, 01 Aug. 2013.
Web. 09 Mar. 2016.
10
Soltes, Fiona. "Beyond Line Busting." NRF. National Retail Federation, 31 Oct. 2012. Web. 11 Mar. 2016.

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guest service opportunity first, a sales opportunity second, and a transaction opportunity last.
This will promote the full effective use of the technology instead of making it just an easy way to
skip waiting in line. Furthermore, the use of mPOS to break up long lines should make their
avoidance a non-issue.
Mobile POS technology is most effective with big box, higher priced items. The immediate
opportunity to make the purchase drives consumers to close sales and reduces the rate of
abandonment.11
This, in turn, drives sales growth. For this reason, mobile POS devices would be
strategically deployed in departments that sell higher priced items such as jewelry, electronics,
and furniture.
The most effective way to implement a mPOS system would be to upgrade Target’s existing
mobile devices to accept credit card payments. This could be achieved with technology similar to
the Square. The Square is a small device that plugs into the audio jack on mobile devices. It
accepts both magnetic and chip cards and is a widely popular POS system for small businesses.
The implementation of a mobile POS system would consist of three segments.
1) Development and Purchase of mPOS “Square” Hardware
2) Software Update on iPod Touch’s to Connect with Guests via Scanner
3) Software Integration of mPOS into Existing Checkout/Accounting System.
Target should launch a trial program to test the efficacy of the mPOS plan. Currently, Target has
about 1,800 stores in the U.S. A trial program should consist, initially, of at least 15% of these
stores. This equates to 270 stores. These stores should encompass a representative sampling of
Target’s guest demographics and regions. We anticipate each store requiring 25 devices priced at
$50 each.12
This price is approximated to include software development expenses. In total, these
figures calculate to an initial trial program investment of $337,500. To be conservative, we
suggest management allocates at least $400,000 to the project to prepare for other general,
administrative, and incidental expenses.
ROI can be analyzed quantitatively and qualitatively. The devices will automatically track
payment volumes and spending patterns. Such metadata can be analyzed to determine if the
mPOS systems are driving revenue growth. Qualitatively, Target can utilize surveys and focus
groups to determine if guests are responding positively to the new payment option. After a trial
period of about 8 – 12 months, management will decide whether or not to launch mPOS at
successive Target locations.
11
Clay, Kelly. "Nordstrom Sees Sales Boost From Mobile POS Devices."Forbes. Forbes Magazine, 6 Apr. 2012.
Web. 11 Mar. 2016.
12
"POS Accessories For Businesses Square Shop." Square. Square, Inc, Web. 11 Mar. 2016.

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Omnichannel Marketing
The first two sections of this paper have offered ways in which Target can improve its
omnichannel and flexible fulfillment strategies. App integration will provide the guest with a
more seamless brand experience while crewmember mPOS technology will drive sales growth
and allow for more personalized guest service. These improvements, along with existing
capabilities, are key components of Target’s evolving corporate strategy.
Although Target has a broad array of omnichannel and flexible fulfillment capabilities, the
company has failed to market them effectively. Browsing through a variety of recent marketing
communications, including television, YouTube, and social media, omnichannel and flexible
fulfillment capabilities are apparently absent. Guests need to be made aware of capabilities like
the Target app suite (Cartwheel, Wishlist, etc.), the Target website, ship to store, and curbside
pickup in order for them to be taken advantage of. Target could improve its omnichannel and
flexible fulfillment tools far beyond the competition, but if guests aren’t made aware of these
tools, then it would all be for naught.
We propose an extensive national marketing campaign focused on communicating Target’s
commitment to providing its guests with a comprehensive omnichannel and flexible fulfillment
oriented brand experience. E-commerce, flexible fulfillment, omnichannel; these concepts are no
longer the future of retail. They are the present. For Target to continue to remain relevant, it must
compete and market itself along these lines.
Social media is an excellent platform for brand advertisement and reaching a national audience.
It has an enormous audience, is relatively inexpensive, and is highly effective. According to the
Pew Research Center, as of January 2014, “74% of online adults use social networking sites,
with 71% of these adults using Facebook and 23% of the adults using Twitter.”13
Target has
large follower base on multiple social media sites, currently boasting 23 million followers on
Facebook and a total of 66 million views on YouTube. Social media is essential as a
communications tool that makes companies accessible to those interested in their products, and
makes them visible to those who have no knowledge of their products. According to a study by
Nielsen, “Approximately 46% of online users count on social media when making a purchase.”14
By advertising Target’s omnichannel programs on these social networking sites through posts
and videos, awareness of these programs will grow. This also leads to more website viewership;
as companies that generate more than 1,000 Facebook likes also receive nearly 1,400 website
13
"Social Networking Fact Sheet." Pew Research Center Internet Science Tech RSS. Pew Research Center, 1 Mar.
2016. Web. 1 Mar. 2016.
14
Bennett, Shea. "The State of Social Media Marketing." SocialTimes. SocialTimes, 27 May 2013. Web. 1 Mar.
2016.

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visits a day, while companies with over 1,000 Twitter followers generate more than 800 new
website visitors a month.15
Radio is another effective means of omnichannel marketing communications. A study by Nielsen
Catalina Solutions found that radio made an average return of 6.21 times the original investment.
However, the study found a direct link between radio advertising and brick-and-mortar retail
sales. In the study, two retailers generated 11 and 23 times, respectively, the returns they were
investing.16
Additionally, radio had a particularly strong effect on African-Americans and
Hispanic consumers.17
With Target’s recent campaign to appeal to the Hispanic market, which
accounts for nearly a third of the guests in ten major markets, running advertisements on national
radio stations is a great way to appeal to Target’s key demographics. Radio marketing has not
only shown to produce high ROI, but also the spending on radio campaigns is “so small that
results barely register in the econometric marketing-mix analyses many marketers use to measure
returns on investments.”18
For example, the price to run advertisements on SiriusXM is about
$10,000 per week.
Another great platform for communicating Target’s omnichannel capabilities is television
advertisements. According to Nielsen, there was $1.22 average return to $1 investment across a
number of brands.19
Compared to the other advertising channels, this number is rather low, as
according to a survey done on companies with at least $250 million in annual revenues and $1
million in advertising spending. However, we believe that television is still an essential and
relevant platform in marketing, as there are over 116 million households in the United States
alone that house a television.20
Also, television advertisements can be connected with social
media to better communicate Target’s omnichannel capabilities. A study by Nielsen found that a
personal care brand that ran an advertising campaign during sports games had 165% more tweets
about their brand from fans that were tweeting about the games than they did in the time period
prior to the campaign. In contrast, the group that did not tweet about any of the games only sent
about 72% more brand tweets on the days of the campaign compared to the time period prior to
the campaign.”21
The price for running advertisements on basic television versus cable television
15
Ibid.
16
"For Advertisers, Radio Is Worth Listening To." Newswire. Nielsen, 29 Apr. 2014. Web. 1 Mar. 2016.
17
"What Medium Scores Highest ROI? It May Be Radio." What Medium Scores Highest ROI? It May Be Radio.
AdvertisingAge, 25 Mar. 2014. Web. 1 Mar. 2016.
18
"What Medium Scores Highest ROI? It May Be Radio." What Medium Scores Highest ROI? It May Be Radio.
AdvertisingAge, 25 Mar. 2014. Web. 1 Mar. 2016.
19
"Maximize the Return on Your Advertising Spend." Newswire. Nielsen, 12 Jan. 2009. Web. 1 Mar. 2016.
20
"Nielsen Estimates 116.4 Million TV Homes in the U.S. for 2015-16 TV Season." Newswire. Nielsen, 28 Aug.
2015. Web. 1 Mar. 2016.
21
"Stirring Up Buzz: How TV Ads Are Driving Earned Media for Brands." Insights. Nielsen, 22 Feb. 2016. Web. 1
Mar. 2016.

9. 9
differs, with the rates for cable television spots being somewhat less expensive than those on
basic networks. For example, “FOX charged an average of $200,000 for 30 seconds of
primetime air, and CBS charged almost $114,000 on average. Meanwhile, the average rate for a
30-second spot on the top 15 cable networks was $13,100 as of 2011.”22
Target has done little to market its broad array of omnichannel and flexible fulfillment
capabilities. There are few mentions of these programs throughout existing advertising mediums
and the results are apparent. Although Cartwheel surpassed 7 million users in 2014, there are
many others that have gone greatly unrecognized, such as Wishlist and Target’s Flexible
Fulfillment policy.23
Data shows that “mobile traffic spent browsing and shopping at Target rose
251% in March the year the Cartwheel app was released, nearly 100 million more hours
compared to a year earlier.”24
If Target is able to successfully translate this success with
Cartwheel to its other apps, we expect much higher omnichannel shopping traffic – driving sales
growth and increasing profits.
Supply Chain Management
For Target, as with most retailers, e-commerce as percentage
of total sales is increasing every year. To adapt, Target
should optimize its distribution systems, taking advantage of
modern technologies and advancements in the field. To
accomplish this, we propose two solutions; cross docking,
and delivery route optimization.
Cross docking is the transfer of products from an inbound
carrier to an outbound carrier, without those products
entering the warehouse or being put away into storage. If
they must be put into storage, the time they spend at the
warehouse is systematically kept to a minimum. Thus, the products "cross the docks" from the
receiving dock area to the shipping dock area.25
22
Severson, Dana. "The Average Cost of National Advertising Campaigns." The Average Cost of National
Advertising Campaigns. Demand Media. Web. 1 Mar. 2016.
23
Tode, Chantal. "Target's Cartwheel on a Roll with 7M-plus Users, New Features." Mobile Commerce Daily.
Mobile Marketer, 28 May 2014. Web. 1 Mar. 2016.
24
Wahba, Phil. "Target Finds Rare Tech Edge: Its Popular Cartwheel Shopping App." Fortune. 05 June 2014. Web.
1 Mar. 2016.
25
Kulweic, Ray. "Current Thinking on Supply Chain Strategy." Target 20.3 (2011): 28-35. Ame.org. Association for
Manufacturing Excellence, 2004. Web. 11 Mar. 2016.

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Although Target already uses a cross docking system, only about
50% of product volume is processed using cross docking.26
To
improve on supply chain management, this figure should continue to
grow to keep inventory and transportation costs down, reduce
transportation time, and eliminate inefficiencies.
Our second distribution solution optimizes Target’s delivery truck
routes. In 2001, UPS developed a new delivery system that cut costs,
increased efficiency, and reduced delivery times. To do this, they optimized delivery routes by
mapping routes that made right turns over 90% of the time. We propose that Target distribution
trucks adopt a similar program.
UPS engineers found that left-hand turns were a major drag on efficiency. Turning against traffic
resulted in long waits in left-hand turn lanes that wasted time and fuel, and it also led to a
disproportionate number of accidents. By mapping out routes that involved a series of right-hand
loops, UPS improved profits and safety while touting their catchy, environmentally friendly
policy. As of 2012, the right turn rule, combined with other improvements, saved around 10
million gallons of gas and reduced emissions by the equivalent of taking 5,300 cars off the road
for a year.27
While Target does not operate nearly as many trucks as UPS, utilizing a UPS style
system would still result in material cost savings and emission reductions.
Conclusion
Overall, Target has a well-developed omnichannel and flexible fulfillment strategy. There are,
however, areas that require improvement. The app suite needs to be consolidated, sales
associates need to be equipped with improved mobile technology, omnichannel capabilities need
to be better marketed, and distribution can utilize improvements in supply chain management
techniques to optimize delivery routes. These four solutions we offer can be implemented as a
cohesive strategy or individual programs as time and budget allows. We are confident that each
solution we offer will improve Target’s omnichannel and flexible fulfillment strategies while
promoting revenue growth and cutting costs.
26
Langnau, Leslie. "Crossdocking Comes of Age." Material Handling and Logistics. Penton, 1 June 2004. Web. 4
Mar. 2016.
27
Mayyasi, Alex. "Why UPS Trucks Don't Turn Left." Priceonomics. N.p., 4 Apr. 2014. Web. 2 Mar. 2016.