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Business Operations Business Models

How Does Target Make Money (Business and Revenue Model)

The Target business model

How Does Target Make Money?
Here’s what you should know:
  • What is Target, and how does Target work?
  • How does Target make money?
  • Merchandise Sales
  • Other Revenue
  • Credit Card Profit Sharing
  • Target’s Subsidiaries, Acquisitions, and Exits
  • Target’s profit and revenue
  • What is the Target business and revenue model?
  • Target’s funding and market cap

How does Target make money? Here is a full, in depth, breakdown of their three (3) revenue streams and the different products and services they offer, as well as the Target business model, their year over year revenue, and how Target works.

What is Target, and how does Target work?

Target is a big box department store that offers a wide selection of products such as apparel, home décor, electronics, and more.

The store was founded in 1962 by Douglas Dayton and John Geisse, Yahoo began trading on the New York Stock Exchange (NYSE) on October 19, 1967, under the ticker symbol “TGT”.

Since that time, Target has grown to more than 1,931 stores in the U.S making it one of the largest bix box stores in America.

Some of Target’s competitors include Walmart, Costco, Best Buy, and other big box stores.

Target App in Apple App Store | Target Business Model | How Does Target Make Money? | How Does Target Work?
Source: Apple App Store | Target

How does Target make money?

According to Target’s about page, Target, to date, has more than 1,931 stores in the U.S and counting. So how does Target make money from all these stores?

Below is a breakdown of how much money Target makes and its revenue model. Including all revenue streams and how much they charge for their services.

Here are the 3 ways of how Target makes money (in 2022):

Target has a revenue model that makes money in three (3) ways – merchandise sales, credit card profit sharing, and other revenue.

#1. Merchandise Sales

To no surprise, Target makes the majority of its money through retail merchandise sales. In fact, $104.6 billion, or 98.7% of Target’s total revenue came from merchandise sales in 2021.

As noted above, Target has more than 1,931 stores in the U.S. Which makes money from the merchandise it sells through its five (5) product categories; apparel and accessories, beauty and household essentials, food and beverage, hardlines, as well as home furnishings and décor. Which you can see the sales breakdown below.

  • Apparel and accessories: $17.9 billion (17% of store sales)
  • Beauty and household essentials: $27.7 billion (26%)
  • Food and beverage: $20.3 billion (20%)
  • Hardlines: $18.6 billion (18%)
  • Home furnishings and décor: $20.3 billion (19%)
Target Store | Target Business Model | How Does Target Make Money? | How Does Target Work?
Source: Target

Note: 81.1% of sales originated in store, while 18.9% took place through their online store, Target.com.

#2. Other Revenue

Target also makes money from what they call “other revenues”. Which, in 2021, collectively generated an additional $1.39 billion of revenue for the company.

Other revenue, according to page 45 of Target’s 2021 Form 10-K, includes “advertising, Shipt membership and service revenues, commissions earned on third party sales through Target.com, rental income, and other miscellaneous revenues.”

#3. Credit Card Profit Sharing

Although this makes up just a very small portion of Target’s total revenue, Target also makes money through what’s called credit card profit sharing.

How does Target make money through this? Well, Target is under a credit card program agreement with TD Bank, the issuer of the RedCard credit cards. And under this agreement, Target receives a percentage of all the profits generated by their RedCard credit cards (Target Credit Card and Target Mastercard).

Target RedCard Fees | Target Business Model | How Does Target Make Money? | How Does Target Work?
Source: Target

Note: It’s unclear how much Target’s percentage of the profit is.

Target’s Subsidiaries, Acquisitions, and Exits

To date, the Target Corporation has made a total of 11 acquisitions, 8 investments, 2 lead investments, and 2 successful exits.

Mergers and acquisitions business model
Source: Crunchbase | Target

Target’s profit and revenue

In 2021, Target reported $106 billion in revenue.

Note: Because the Target Corporation is a publicly traded company, under the Securities Exchange Act of 1934, they must file continuous financial filings with the U.S. Securities and Exchange Commission (SEC). You can find all of Target’s publicly released financial reports, including annual reports, through Target’s investor section on their website.

What is the Target business and revenue model?

Target makes money through a few revenue models that they combine within their company, they are:

  • Transaction based business model
  • Advertising based business model
  • Fee for service (FFS) business model
  • Revenue sharing business model
  • Commission based business model
  • B2B2C (partnerships) business model
  • Mergers & acquisitions (M&A) business model

Target’s funding and market cap

As of May 2022, Target’s market cap was $101.88 billion.