Some of Target's suppliers are on edge.
Since Brian Cornell became its chief executive last year, the Minneapolis-based retailer made headlines by closing its Canadian stores and laying off nearly 2,000 corporate employees. He's also leading a re-evaluation of every product Target sells, prioritizing some categories while de-emphasizing others.
For vendors, it's an unsettling time as they wonder where their products will rank on Target's reconfigured priority list. Will they get as much shelf space as in the past? Or will they be shrunk down to make room for up-and-coming products or one of Target's private-label brands?
That air of uncertainty hung over a workshop held by Kantar Retail, a consulting firm, in Minneapolis this week to brief Target vendors on the state of the company.
"Everything seems to be on the table there," Leon Nicholas, a Kantar senior vice president, told the suppliers. "The last thing you should do is do nothing. … Things are going to change."
In conversations outside the meeting, several suppliers privately said they were closely watching the company's reorganization. One food vendor whose products do not appear to be on Target's priority list said he was worried about losing premium space, in the check-out lane and on the end of aisles, to brands viewed as "healthier."
Another vendor, whose products appear to be a high priority, said her worry wasn't about shelf space but just getting basic work done amid the upheaval at Target's headquarters.
The retooling at Target is an example of a broader shift in retailing toward more local, natural and craft products, a change that's put large makers of consumer packaged goods on alert, said Jason Long, a St. Louis-based retail consultant with Shift Marketing Group.
"The big brands are going to survive," he said. "You're not going to take Oreos off the shelf. But you may reduce its space."
At the same time, smaller and midsize brands may find an opening at Target.
"It used to be much more difficult for smaller, unknown brands to get a party to listen to them," Long said. "Now there's more of an ear and more of a willingness to listen."
Last fall, Cornell first began talking about the need to double down in a handful of areas that have been a core part of Target's DNA and that shoppers say are the reasons they go to Target. Those "signature" categories are baby, kids, wellness and style.
At a financial meeting in March, Cornell and other Target executives laid out more details about that re-prioritization, classifying products as falling into one of four boxes. After the signature categories, the next level is "outperform," which includes items like laundry detergent and pet care that help drive trips to the store. That grouping will receive some investment, but not as much as the first.
The next tier is "perform." Those are the things that shoppers pick up while they're in the store because it's convenient, such as baking needs and automotive. This group will receive fewer resources.
The final category is "reposition," which is a temporary classification for areas Target wants to reinvent. The most prominent example is grocery, with Target in the early stages of an overhaul of that department to offer more natural, organic and premium items.
Retailers have always made choices about what products or departments to highlight in their stores. But Target executives have acknowledged the company hasn't been as disciplined in doing this in recent years as they should have been.
Katie Boylan, a Target spokeswoman, said the company has been "open and transparent" with its road map and is working closely with suppliers.
"We want to make sure we're delivering what our guests are looking for and understanding where things are at from a consumer trends perspective and that we're keeping pace with those changes," she said. "We're going where the guest wants us to go, and we're doing that in partnership with our major vendors and suppliers."
For some vendors, Target's reorganization can be a big opportunity, especially if they fall into one of the top two categories. But even so, that doesn't mean those suppliers should rest on their laurels, said Kantar's Nicholas. Rather, that means Target is going to expect more from its vendors in terms of investment and collaboration.
"It's like winning a video game," he said. "Then you have to go on to the next level."
Those in the "perform" category are probably most in danger of being replaced by one of Target's private-label brands, said Amy Koo, another Kantar analyst.
"And if you are in the reposition category, you need to figure out a way to get out of that box," she said. "That is a frightening place to be."
So what should suppliers do to make sure they are still top of mind at Target? The Kantar consultants suggested they highlight their work in areas that Target values: the environment, education and volunteerism, and worker well-being. Another tip was to think of ways they can collaborate with Target on charitable partnerships, such as buy-one-give-one models that Target dabbled with during the back-to-school season last year.
Target is going to be moving faster than it has in the past, the Kantar consultants added.
"You're going to see small, incremental changes every week," Nicholas said.