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Posts about Target

Target's complicated relationship with PFresh

Posted by: Updated: December 10, 2013 - 12:41 PM

It’s no secret that Target Corp. has high hopes for its PFresh grocery format.  Food and grocery products are driving most of Target’s slow comp sales growth—0.5 percent over nine months. PFresh also attracts a lot of repeat business since people will eventually run out milk and bread.

Grocery items are not the easiest things to carry, even for people just wanting to make a quick run for a few items. So why does Target located PFresh so far away from store entrances?

Precisely because Target does not want consumers to make a quick run for a few food items.

“Target wants PFresh customers but they don’t want just PFresh customers ,” said Amy Koo, an analyst with Kantar Retail consulting firm in Boston.

Target’s strategy has always been to get people to buy as much as they can in a store. You may have intended go to a Target only to buy milk and bread but you wind up leaving with a cart full of higher margin clothes, accessories, and home goods. Think about the REDcard ‘s 5 percent discount of total purchases. The more you buy, the bigger the discount.

That strategy is embedded in the store design: to get to PFresh, you must generally pass through a gauntlet of clothes, shoes, jewelry, and sporting goods, a pathway that will inevitably tempt you to buy more.

“It’s like Target is saying ‘we are going to call you on your bluff,’” Koo said. “You may have intended to buy food but you really want to buy clothes.”

Excluding SuperTargets, regular Target stores usually have only one entrance, lest you sneak in through a side door closer to PFresh.

Target’s strategy is clever but does not come without sacrifices. The first is convenience.

Consider CityTarget.  The retailer touted CityTarget as the ideal smaller format for the hurried urban shopper who are not likely to drive cars and buy large quantities of goods, possibly because they are single and rent apartments. A perfect place where you can rush in during your lunch break or just after work, grab some stuff, and then hurry off to the subway or commuter trains.

But visit the CityTarget in Chicago and you’ll discover PFresh is located on the second floor near the back of the store, arguably the least convenient place to buy groceries.

“Convenience can mean different things,” said spokesman Eric Hausman. “CityTargets are convenient because of their locations” in the city core.

The second issue with Target’s approach is the type of customer it normally attracts. Target has always excelled at making its most loyal shoppers even more loyal. These are the type of customers that will gladly buy a lot of stuff at Target.

And let’s face it: if you’re going to navigate the maze of Target departments just to buy some bread and milk, you must really love Target or you must really love bread and milk.

But here’s the rub: Target actually needs to attract a broader group of shoppers beyond its diehard “Best Guests,” Kantar says.

Given Target’s sales challenges since the Great Recession, Kantar argues the retailer needs to focus on the casual, less affluent customer who are more likely to buy fewer items than load up on the Missoni and Nate Berkus collections.

Indeed, about a third of Target’s sales come from customers who make less than $50,000 a year.

One way Target can reach those customers is to make their shopping experience more convenient. To that effect, Target has established Dollar Store like selections near the checkout areas at the front of the store as well as “grab and go solutions “ throughout its departments.

CEO Gregg Steinhafel has also told analysts that Target is looking for further ways to shrink the size of CityTargets. Perhaps that path to PFresh will get a little shorter.

Target finishes Buy Online, Pick Up in Store roll out early

Posted by: Updated: December 4, 2013 - 3:28 PM

Target Corp. has certainly come a long way with its e-commerce efforts.  Two years ago, the company’s website couldn’t even properly process orders following the roll out of its Missoni collection.

Fast forward to 2013. As of the first week of November, all 1,800 of Target’s stores in the United State offer consumers the ability pick up merchandise in the store that they had ordered online.

Buy Online, Pick Up in Store is not exactly new: Best Buy and Macy’s have long offered the service. But given its ambitious timetable—CEO Gregg Steinhafel told analysts during the summer the retailer planned to complete the roll out by Black Friday—Target not only finished the job but finished it a good three weeks early.

Amy Koo, a retail analyst at Kantar Retail, expressed skepticism that Target could complete the project in such tight timeframe. But the company seems to have adopted a more cautious approach to the rollout, she said.

Unlike the launch of the redesigned in 2011, the retailer has not heavily publicized the debut of Buy Online, Pick Up in Store. Back then, critics argued that Target did not adequately test its website to see if it could handle all of the heavy traffic the Missoni collection was bound to attract.

This time though, Target opted for a “soft launch” to first the test the service on employees and some customers.

“Target did not make a big splash, which makes it easier for them to first get the hang of it ,” Koo said. “It’s a real good thing to ease into it rather than make a big blowout statement.”

Even now, the service remains rather low key. Koo said a store she recently visited was only filling 10 to 15 orders a day.

Target is apparently still working out the bugs. A good friend in San Francisco recently complained to this blogger that the item she ordered on the website was not set aside for her when she visited the store.

“Target made up for it though by helping me find the items and helping me wheel them to my car,” she said.

Despite spin, Black Friday numbers don't bode well for retailers

Posted by: Updated: December 4, 2013 - 3:25 PM

The National Retail Federation had some interesting numbers from Thanksgiving/Black Friday weekend.

Low prices helped keep Americans’ budgets in check this weekend: on average, shoppers spent $407.02 from Thursday through Sunday, down from $423.55 last year.

That’s one way to look at it. Here’s another interpretation: consumers on average spent less than they did than the same period a year ago.

More than 141 million unique shoppers have already or will have shopped by the end of the big Thanksgiving weekend, up from 139 million.

More shoppers are always a good thing. But when you factor in how much money they spent, you get this: the number of shoppers over the weekend grew just 1.4 percent while average spending fell 4 percent.

Yikes. A 1.4 percent gain in shoppers hardly equals out a 4 percent decline in spending. Retailers are essentially brawling over a barely growing pool of Black Friday shoppers who are actually spending less on average than did a year ago.

In addition, there is one less shopping week this year because Thanksgiving fell on the last week of November. Suddenly, a season with an already low margin of (profit) error just got a little more perilous.

Target ponders smaller CityTargets

Posted by: Updated: August 30, 2013 - 10:51 AM



Target Corp. thinks its smaller format CityTargets can get even smaller.

During a recent conference call with analysts to discuss second quarter earnings, CEO Gregg Steinhafel said the company was looking at ways to reduce the size of the urban centric store.

“We are building the capability to operate stores in smaller spaces, particularly in urban markets,” Steinhafel said. “We are analyzing results in our [existing CityTargets] to understand where in the stores we have the ability to reduce space even more allowing us to further shrink the size of this store format.”

Launched last year in cities like Chicago, San Francisco, and Seattle, CityTargets are typically 80,000 to 100,000 square feet compared to the regular big boxes, which typically 150,000 square feet or larger.

For Target, the obvious advantage of the format is that you can find more places to stick one in a dense urban core.

Target was pretty lucky to find the urban real estate to accommodate the seven CityTargets it currently operates, said Amy Koo, an analyst with Kantar Retail consulting firm in Boston.

“It’s really hard to find these spaces,” she said.

Going smaller will presumably give Target more options as it scouts future locations for the format.

Thinking even further ahead, Target’s experimentation might allow it to figure out ways to shrink the size of its regular big box stores to make them more productive, Koo said.

With U.S. sales weak, big boxes like Best Buy and Sears have adopted strategies to make the most of its space. Best Buy has partnered with vendors like Microsoft and Samsung to create store-within-a-store concepts while Sears has leased excess space to outside companies.

Big boxes over the next decade will realize that they don’t need nearly all of the space they currently own or lease, Koo said.

“People just don’t go to the general box to stock up anymore,” she said.

Target's Canadian (and American) price perception problem

Posted by: Updated: August 23, 2013 - 3:42 PM



Target Corp. CEO Gregg Steinhafel acknowledges that the retailer suffers from a “price perception” problem in Canada. Consumers readily buy Target’s “discretionary” merchandise like clothes and home.

But when it comes to “non discretionary” items – such as food and healthcare – shoppers assume Target’s prices are much higher than that of Wal-Mart or Loblaws.

For that reason, Target’s Canadian sales have fallen below the company’s original projections. Still, the company’s price perception woes are not exclusive to Canadians.

Over the past three years, Target has struggled with weak U.S. sales during the crucial holiday shopping period. Part of Target’s problem is that the company has not cut prices as aggressively as its competitors, analysts say. Holiday is largely about discounting, but Target has refused to chase what it calls “temporary market share” at the expense of profit margins.

In any case, Target’s prices are probably not materially more expensive than rivals. The company already offers 5 percent off each individual purchase with a REDcard. And Target recently decided to match online and in-store prices of competitors like Wal-Mart and Best Buy, and offer free shipping.

“There isn’t going to be a meaningful change in our [holiday] strategy, because day-in and day ... our prices are competitive,” Steinhafel told analysts during a recent conference call. “We have a very strong value proposition and our circular pricing is even more aggressive than that and we take market leading positions.”

But perception doesn’t always match reality. Target’s prices may be competitive, but Americans looking for deals will likely assume Wal-Mart and Amazon have lower prices, analysts say.

“For the last three holiday seasons, [Target] has performed poorly,” Daniel Binder, a retail analyst with Jefferies & Co., wrote in a recent research note. “This appears to reflect its less aggressive pricing message even as its everyday low prices competitive.”

“We do remain concerned that its less aggressive promotional posture during the biggest quarter may contribute to a loss of mind share with its core customers,” Binder wrote.

In other words, for all of its marketing prowess, Target doesn’t effectively communicate to consumers its holiday prices are just as good if not better than everyone else’s.

To address soft sales in Canada, Steinhafel promised to take quick action to educate consumers.

“We’re going to make sure that our prices get more notice than they have been up to this point,” Steinhafel said. “Part of that was a conscious plan on our part to make sure that we really won in home and apparel and we feel real good about where we’re in those two businesses today, so we’re proud of that fact.”

“Now we have to just turn on the gas a little bit on the other side of the equation to make sure that we’re getting the Canadian guest to understand what great values we offer,” he said.

Steinhafel could easily apply that same logic to American consumers come November and December.

CityTarget store in Chicago straddles Cubs/White Sox divide

Posted by: Updated: July 22, 2013 - 2:05 PM



In Chicago, where baseball loyalties are divided between the Cubs (North Side) and the White Sox (South Side), Target Corp. has decidedly pledged its allegiance to the Cubs.

Or has it?

Target enjoys a multi-year marketing deal with the Cubs to support its new CityTarget store, which includes a noticeable bull’s eye logo on the famed ivy and brick outfield in Wrigley Field.

Only one problem: the CityTarget store is technically located on the South Side.

Last year, the Minneapolis-based retailer opened the CityTarget store to much fanfare on State and Madison streets. Designed by famed architect Louis Sullivan and built in 1899, the building, which is a U.S. historic landmark, was home to the Schlesinger and Mayer department store and later Carson Pirie Scott.



But a decision by Chicago’s City Council in 1908 declared Madison street as the official dividing line between the north and south sides of the city. The store sits on the south side of Madison. If the store had opened just 100 feet across the street, Target would have safely been in Cubs territory.

Not that it really matters since there are plenty of Cubs and White Sox fans who live and work on each other’s turf. It's not as if Target would pick a building solely on the basis of baseball loyalties. And some people believe the real North/South divide belongs someplace else.

Still, Target has tried hard to position CityTarget as neighborhood stores with strong ties to the community. And a few people did notice the contradiction, said Brian Kelly, a Chicago-based retail consultant.

Right now, the CityTarget sells more Cubs merchandise than White Sox products. In any case, both teams have losing records and are unlikely to make the playoffs.

In recent months, though, the Cubs and White Sox have ceded considerable shelf space to another Chicago team: the Blackhawks of the National Hockey League, which recently won the Stanley Cup Championship.

So it seems in Chicago retail, geographic loyalties don’t matter so much as winning pedigrees.



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