Despite the growing popularity of digital devices, the Minneapolis retailer has revamped its entertainment section to drive sales of physical books, CDs and DVDs.
When it comes to books, music and movies, no one is likely to mistake Target Corp. for a Borders or Blockbuster.
Which is a good thing for Target since the former is extinct and the latter is a shell of its former self.
As digital technologies wreak havoc on traditional speciality retailers, Target recently completed a makeover of its entertainment section across its 1,700 plus stores, hoping customers will grab more DVDs and exclusive Tony Bennett or Gloria Estefan album releases along with clothes, shoes, lamps, groceries, pet food, etc. Changes include a new kids entertainment hub, colored signs and a gift card station.
Target's entertainment section already plays a key role in attracting customers. Books, movies and music, along with software and electronics, made up roughly 20 percent of Target's sales of $65.8 billion last year. But executives sense an opportunity to deepen Target's grip on a shrinking entertainment market by better emphasizing its store assortments.
"It's one of the only categories that's driving constant freshness and newness on a weekly basis," said John Butcher, Target's vice president for entertainment, noting that the store stocks new releases every Tuesday or Friday.
"We think there's a lot we can do to make sure the existing space is more relevant for the guests, and that's what we're proving with this current transition."
Analysts say the shift is a shrewd move by the Minneapolis-based retailer as it will fill a void left behind by Borders and Blockbuster and squeeze more sales. "We're not going to see people line up at Target for music," said Russ Crupnick, senior entertainment industry analyst for the NPD Group Inc., a marketing research firm. "But it's less about going to the speciality store and more about the destination store, grabbing a bigger share of the shopping basket."
In redesigning the entertainment section, Target wanted to better organize the merchandise by price and category while creating an easier, more attractive shopping environment for shoppers like mothers, Butcher said. For example, the retailer grouped together all of kid-focused books, DVDs and other merchandise whereas the products were previously scattered throughout the store.
"Mom is in a hurry," Butcher said. "She has 10 minutes to spend in the store. She has a list of 10 to 15 things to buy. She needs to find what she is looking for fast. We knew if we can create one singular destination, she would be able to get to the area faster, buy what's she looking for and move onto to the next store."
Judith Russell, editor of the Robin Report, a retail industry newsletter, said kids, in particular, will always gravitate toward physical copies of books and movies. "It's a smart, opportunistic strategy," Russell said. "Consumers are not quite ready to go 100 percent digital. There is still a market out there. Has it gone away? No."
Another big change was adding more color to the section, Butcher said. In the past, the category signs were all gray, which blended into the shelves. Today, the kids section is green, books are purple, movies are blue (to better emphasize fast-growing Blu-ray discs), and music orange.
Customers can now see staff recommendations for books along with future release dates for high-profile works. In movies, Target has organized discounted DVDs by price to better reflect the section's value content, Butcher said. There's also a special section called "Heroes" where the retailer markets action and comic book-oriented films and merchandise.
Within the music section, the retailer has reconfigured its shelving to include more modern releases on the top section and older releases on the bottom section. Target also added a gift card station, which is strategically positioned near the electronics area where it sells iPods.
Butcher would did not disclose specific numbers but says the redesign is showing results.
"We're seeing the best sales results we have seen many years in the entertainment space at Target," he said. "It's the first time we can realistically see all of our major areas showing positive sales growth over a four-week time period."
In some ways, Target's investment in entertainment seems counterintuitive given the growing number of consumers who now prefer to download music and movies directly to their iPhone and iPad and purchase books through new e-readers like Amazon.com's Kindle and Barnes & Noble's Nook.
For example, DVD sales fell 11.3 percent since 2009, totaling $14 billion last year, according to the Digital Entertainment Group. Meanwhile, digital movie sales grew 19 percent to $2.5 billion.
Digital downloading has especially siphoned sales from physical music formats like CDs. In 2010, manufacturers shipped 212.4 million units to retailers, a 22 percent decline from the previous year, according to the Recording Industry Association of America. At the same time, the number of digital units rose 2.3 percent to 1.3 billion.
Still, physical copies of music, movies and books dominate the market, Crupnick of NPD said, which presents opportunities for large discounters like Target that enjoy economies of scale. Books and music, for example, make up only 3 percent of global digital sales, according to PricewaterhouseCoopers.
"We're still very much in the early stages of the digital revolution," Crupnick said.
And retailers like Target and Best Buy Co. Inc., based Richfield, are becoming more adept at selling digital entertainment through their websites and mobile devices, said Jeff Edelman, director of retail and consumer products advisory services for the McGladrey consulting firm.
"There's no question about it, digital has take a big chunk out of the [traditional entertainment content] business," Edelman said. "But bricks-and-mortar retailers have finally figured out how to capitalize on it."
Still, by Target's own admission, the retailer has some work to do. The company does not break out sales of music, books and movies, but comparable store sales in the "hardline" categories have been falling even as Target has been generating strong overall growth in sales at stores open for at least a year.
The weak economy could have something to do with that. Last year, hardlines' share of Target's total sales fell to 20 percent from 22 percent in 2009 while nondiscretionary categories like household essentials and food each gained one percentage point to 24 percent and 17 percent respectively, according to the company's annual report.
Despite the economy and the growing popularity of digital downloading, Butcher said he sees no reason to shrink the entertainment section.
"The guests are voting with their wallets and [are] very happy with the direction we are going, especially if we continue to provide new ways of differentiating our assortment from the rest of the market," Butcher said.
Thomas Lee • 612-673-4113