Target building an urban footprint

  • Article by: THOMAS LEE , Star Tribune
  • Updated: July 21, 2012 - 2:27 PM

With suburbs awash with big boxes, the discount retailer is chasing growth in the centers of cities like Chicago.

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Mark Schindele, Target's senior vice president of merchandising and city stores, gives a tour of the not yet open downtown Chicago store, Tuesday, July 17, 2012. The store is set to open July 29. Photo by Chris Ocken

Photo: Chris Ocken, Dml - Ocken Photography

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CHICAGO - Under a blistering mid-July sun, the masses seem to collide at the intersection of State and Madison Streets.

A sweating panhandler struggled to make his voice heard above the roaring din of idled bus engines, car horns and the rumble of Chicago's famed elevated trains navigating down Wabash Avenue.

Inside 1 State Street, the scene was much more serene. Small groups of Target employees scattered throughout the building, putting the final touches on one of the Minneapolis-based retailer's boldest ventures in recent years: a smaller store that caters specifically to the urban shopper.

Come next Sunday, CityTarget will debut in Chicago, where the chaos of everyday city life will spill into the two-level structure. The store will feature more checkout lanes, two-shelf shopping carts and smaller sizes of goods like toilet paper so that consumers can more easily carry as they walk home, grab a cab, or hop on the "L" train.

"Our goal is to bring the great Target experience to urban guests -- quick and easy, one-stop shopping," said Mark Schindele, Target's senior vice president of merchandise operations, who is overseeing the CityTarget rollout. "In the city, you have to take multiple trips to multiple [stores] because there is not a true general merchandise retailer in dense urban locations."

For Target, which is also opening CityTargets in Los Angeles and Seattle, the moment will be somewhat ironic: The retailer that perfected the art of building big box stores in tidy suburbs is now seeking growth in congested urban cores where outside parking and quiet are nearly nonexistent.

Target, along with other large retailers like Wal-Mart and Best Buy, really have no choice, experts say. Decades of rapid expansion have saturated the outer suburbs with big box stores fighting for a dwindling pool of customers. High gas prices and a weak housing market have pushed people back toward the cities, said Ronn Thomas, vice president of Cushman & Wakefield/NorthMarq, a real estate developer that specializes in retail.

"The days of the supersized stores are done," Thomas said.

Big box stores typically run 150,000 square feet or larger. CityTargets will occupy 80,000 to 100,000 square feet. At 124,000 square feet, the Chicago store will be the largest CityTarget.

While Wal-Mart is also trying to penetrate city cores, Target ultimately holds the advantage because of its more sophisticated, urbane image, said Carol Spieckerman, president of Newmarketbuilders, a retail consulting firm.

Target says its customers are young, well-educated, moderate-to-better income families who live active lifestyles. The median age for Target customers is 42, the youngest of major discount retailers. They generate an annual median income of $60,000, according to the company.

"Target's brand is much more urban friendly," Spieckerman said. "They are getting closer to where their core and loyal customers mostly live."

Target, of course, already operates stores within city limits, including Nicollet Mall in downtown Minneapolis and Harlem in New York City. But the dense urban core, where real estate is expensive and hard to find, has mostly eluded the retailer -- until now.

In Chicago, the retailer secured a lease to the iconic Sullivan Center, an ideal location to develop a CityTarget, industry observers say. 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 and later the Carson Pirie Scott department stores.

Schindele said Target sought to keep the building's original charm while adding its own design flourishes. Target restored the intricate white columns that dot the entire space. Passengers on passing "L" trains can peer into the second-floor windows of the store, anchored by a glowing CityTarget sign at night.

"Target has an opportunity to leverage the physical locations themselves as a manifestation of its commitment to design," said Amy Koo, an analyst with Kantar Retail consulting firm outside of Boston. "So while other retailers are exploring design partnerships for merchandise, Target can evolve to provide a unique landmark experience, which inherently can't be copied."

In addition, "the explicit use of windows facing the 'L' shows that Target appreciates the differences in commuting styles in the city," Koo said.

Some challenges

But an iconic city building presents its own challenges. Unlike building a big box to its specifications, Target had to work with the space it was given. The building had an assortment of odd corners and crooked spaces, which Target filled with special product displays.

Most daunting was the limited space to unload and store goods. Target used 28-foot trailers instead of the usual 53-foot-long vehicles. To save backroom storage space, Target designed a merchandising strategy to fit more products on the shelves and sell hem faster.

"When it comes off the truck, it goes straight to the shelf," Schindele said. "That way, we're always in stock."

Target also edited its product mix to exclude items that aren't ideal for city living such as large patio sets and baby furniture. Urban customers won't purchase as much in one individual trip versus regular Target stores but they will come back more often, Schindele said.

In some ways, CityTargets present an ideal format for the retailer's signature programs. Target's exclusive, limited design partnerships with Missoni and Neiman Marcus would play very well to the young professionals who work in the city, Spieckerman of Newmarketbuilders said.

Target's RedCard program, which gives customers an automatic 5 percent discount of total purchases whenever they use Target credit/debit cards, will also give the retailer a strong weapon against competitors in the immediate area, she said.

The 5 percent initiative is "fairly unique in urban location," Spieckerman said. "It could really make the difference between someone going to Target and a speciality store."

Thomas Lee • 612-673-4113

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