TGT Stock: Target Beacons Are a Move in the Right Direction

Target (TGT) is joining the league of retailers that are integrating beacon technology into its stores, incorporating the intelligence and feel of online shopping to improve the in-store experience.

target earnings, tgt, target stock, tgt stockThis initiative is still in the testing phase — starting with 50 stores — and it’s only available to iPhone users. However, TGT plans to increase the availability of the technology once it has enough user feedback that shows that it’s well tailored for Target shoppers.

However, TechCrunch reported that TGT could roll out the Target beacon nationwide as early as Christmas.

A Peep into Beacon Technology

Introduced by Apple (AAPL) — and originally called iBeacon, the beacon technology sends personalized content to Bluetooth-enabled mobile devices. Perhaps the most important word when defining beacon technology in relation business is “personalized.” It gives customers the feeling that a company wants to serve them individually, not collectively.

So in this case, Target wants to send hyper-relevant product information and timely deals to customers in-store. TGT is taking it a step further by including a feature that lets customers call for the help of an in-store team member.

For investors, the question is whether the beacon technology will improve business outcomes for Target stock. The short answer is yes — here’s how.

Somewhere between customer interest and the actual purchase, mobile devices are increasingly finding a place. According to a BI Intelligence report, 28% and 27% of shoppers used a phone to look up product reviews and product pricing respectively in 2013.

What does this tell us? The average shopper wants information. Customers want the best product at the best price. So anything that helps simplify this process will be popular among shoppers and increase shoppers’ trust in the provider. In essence, the first business outcome that TGT can expect from the adoption of beacon technology is increased trust, which should result in more sales.

An Upgrade on the Product Availability Notification Service

Last year, TGT included a feature in its app that notifies shoppers about the availability of the items on their shopping list. The app tells shoppers what’s in stock and the exact place to find it in the stores. But the digital map generated by the app couldn’t tell shoppers where the products are in relation to their position. In essence, this feature just worked best for finding out if items on a shopping list are in stock.

However, with the beacon technology, TGT shoppers can get exact route to the aisles that hold the product.

With beacons now in the picture, it could be possible that once TGT shoppers will be notified when they step into aisles that hold items on their shopping list. Or Target beacons could transmit available deals relating to items on one’s shopping list. It’s hard to imagine shopping being made more personal than that.

In the end, this will drive both traffic and sales, substantially helping Target stock.

Potential for Improved Operating Efficiency

It’s not been discussed much, but TGT is bound to see improved operating efficiency once the beacon technology is rolled out across all of its locations.

How? With beacons transmitting information directly to shoppers, the need for in-store marketers/team members would reduce, in the process, helping TGT save costs. In essence, no matter how small, the adoption of beacons will tilt Target’s bottom line in the positive direction.

Many might think this benefit too small to be worth mentioning. But I think it’s one of many little tweaks that could have a material impact on Target stock.

Bottom Line for TGT

It would be unwise to buy Target stock (or any stock) solely for the adoption of new technology. The tech needs to have a measurable impact on the company’s operations.

However, Target stock already enjoys solid fundamentals, and the new technology seems to poised to improve margins, sales and earnings. Plus, TGT trades for just 15.6 times forward earnings right now, making Target stock a good opportunity going forward.

As of this writing, Craig Adeyanju did not hold a position in any of the aforementioned securities.

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