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Target's complicated relationship with PFresh

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  • 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.

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