Photo: Target
Will dedicated teams lift Target’s grocery business?
Is Target finally getting the order of the figurative horse and cart straight when it comes to its grocery business? The chain, according a Wall Street Journal report, is creating dedicated teams of employees in its stores whose sole purpose will be to work in grocery and not split time in other departments.
With its new focus, each Target store will include a grocery team of between 10 and 60 associates. The company is also in the process of building a regional leadership structure with grocery directors who will be responsible for overseeing 60 stores.
To date, Target has dedicated grocery teams in place at around 450 stores with another 150 coming on line in the next month, according to the Journal. Target currently operates 1,797 stores. It has hired 10 grocery directors with plans to add one or two per key market going forward.
On Target’s second quarter earnings call last month, CEO Brian Cornell discussed the improvements the chain has made in its grocery business, including “assortments, quality, freshness, presentation and in-stocks.” He also admitted that, despite the positives, Target experienced a “small comp sales decline” in grocery during the period.
He did express optimism, however, that the chain is on the right track when it comes to grocery, pointing to Target’s LA25 test stores where sales are two to three percent higher than in comparative stores and perishables are up five percent.
Among the changes Target has made in the LA25 stores are wood grain signs and updated shelving. The chain has increased sampling and put a greater emphasis on cross-merchandising. In fresh foods. Target has updated lighting, flooring and signage while adding new produce bins to enhance product presentation.
“Guests have told us the new food area now feels more intimate and separate from the rest of the store, providing a distinct grocery shopping experience they prefer. We are very encouraged with these initial observations and we will continue to leverage learning from these stores as we work to improve grocery performance across the chain,” said Mr. Cornell (via Seeking Alpha).
- Target Revamps Staffing for Grocery Business – The Wall Street Journal (sub. required)
- Target’s CEO Brian Cornell on Q2 2016 Results (Earnings Call Transcript) – Seeking Alpha
- Get a First Look at New Enhancements Just Unveiled at Target’s LA25 Stores – Target Corporation
- Is Target getting its grocery act together? – RetailWire
Discussion Questions
DISCUSSION QUESTIONS: Will Target’s changes to regional staffing and merchandising lift its grocery business? In its efforts to upgrade its grocery appeal, what is Target getting right and wrong?
Poll
BrainTrust
Dick Seesel
Principal, Retailing In Focus LLC
Ed Rosenbaum
CEO, The Customer Service Rainmaker, Rainmaker Solutions
Local stores should have two main competitive advantages in groceries and consumables: freshness of stock and assortments curated to local tastes.
While there is a lot of press about shopping online for groceries and consumables, consumers still want to go to stores and pick their own. So Target’s strategy of dedicated grocery teams would seem to be a logical move to shore up local stores’ competitive advantages in groceries which can be a huge traffic driver to stores.
There is one major challenge, however! Target is competing with local grocery stores that live and breathe curated freshness. And the local grocery chains are getting very good at click-and-collect strategies to bring that freshness to your front door.
I agree about the competition from local grocery stores, Chris. Now, if Target were to create a program enabling customers to give back to their communities while they shopped, they’d be well on their way.
Also, Target is a higher-end-than-Walmart department store. If they really want to slay their competition they should tap the organic market. Millennials (I) will buy cheap organic produce anywhere they (I) can.
I think if you look at another innovation at Target, its digital media network, there is positive news ahead for Target and grocery. Ad Age just reported on this network.
What it means for CPG vendors in Target’s grocery section is that they can now use specific data on Target guests and shopping history to target these guests wherever they are in the digital media ecosystem. That means Target guests at CNN.com will see relevant CPG brand advertising for Target to encourage them to plan another trip to Target grocery.
Target has been working for more than 15 years to figure out how a digital media network should apply for them. Their little red barcode reader for price checking has been the tip of the iceberg for work in advancing back office applications, which empower in-store signage and merchandising display. The question has always been, what parts of the playbook developed with PRN by Walmart will they have the capabilities to assess and the confidence to apply? Executive support, as always, is the key determinant.
Anything that helps Target execute the unique demands of the grocery business is a positive, especially if the dedicated teams ensure the freshness of meat, produce and dairy. But this doesn’t address the fundamental challenge: How to make Target a top-of-mind destination for fresh food in the first place.
If saving a business only requires parity then this will help. But, I always believed that success is defined by being both different AND better. This feels very much like catch up and I find it incredulous that it took Target this long to figure this out. Good luck being as good as [insert every supermarket name here].
I’ll be the contrarian here. Target should get out of the grocery business, STAT. Target made its reputation on fresh, innovative merchandise that couldn’t be found anywhere else … Oreos and apples don’t fit that bill and are commodity items that won’t lead the company forward.
Cathy — I’m right with you on this. Target does everything it can to be Walmart, which misses the point because they rarely are.
Cathy, you have hit the red bulls eye on Target’s back.
With the battles for $1.5 trillion in annual food spending (North America) being waged several times daily, Target has everything to gain by competing with grocers and foodservice providers. The business of business is to produce customers and, for retailers, that business also means being a provider of choice through products, quality, convenience and price. Food as a start or the addition to any basket increases revenue and margin per visit. Hats off to those at Target who won the internal battle to provide food. Selling well means they’ll enjoy wallet share in food spending and serve customers with what they need every day.
I agree that it’s incredible that it took Target this long to figure this out. It’s pretty basic. They’ve got a lot of catching up to do in an extremely competitive market. If comps don’t respond significantly in the next year or so, I’ll vote with Cathy Contrarian!
No — adding more overhead is unlikely to help their grocery business. Their previously-discussed ideas about assortment management show that this is not a business they are prepared to be in. They may want to pay a little less attention to their guests and find out what those of us who wouldn’t dream of shopping for groceries at Target think (like why we like Walmart better).
Target recognizes it must do something to jumpstart its grocery business. This dedication of staff plus other changes noted is a move in the right direction. Grocery in Target has suffered from the lack of a knowledgeable staff in this space. Will this be enough to create demand and a differential advantage? I see this move more as the ante than a game winner.
I’m with Cathy on this one. Unless Target is going to focus on Tar-chez chic groceries, I don’t see the match with their customer base.
But that’s just my 2 cents.
Target’s decision to enter the grocery business was, in my opinion, questionable. The fact that they’ve now decided to have a completely independent staff validates the concern. It’s a completely different business. This sector is flooded with great options. Traditional grocers — Kroger and Safeway along with Whole Foods and Trader Joe’s continually ramp up their game with fresh, clean, nutritional selection and service (e.g., click-and-collect). Target missed the mark with their introduction to this market and have been frantically trying to catch up ever since. No technology will change the shopper’s (sorry guest’s) perception — she just doesn’t go out of her way to shop for groceries at Target.
The blind leading the blind. Target has too many Walmart-esque employees that IMO have no clue nor interest in the statistics and dynamics of the sales in grocery or other departments. The grocery is handicapped in the Pfresh stores by being 300 feet from the entrance. Then another 250 back to the checkouts. In most stores this is just a food museum. Perishables are limited. They sold off the struggling pharmacies to CVS. Maybe they should sell off the grocery to a major supermarket chain that has a clue about selling grocery. Maybe if Target added a second entrance in front of grocery and hired highly-paid and engaged employees like you see at Costco, they could lift up the grocery department.
In 2015 Target’s revenue was $74 billion. Food + pet = 21 percent or $15 billion. Grocery’s role is frequent traffic. Retail lives or dies on traffic. High traffic reinforces outlet predisposition for other categories. Cornell admits Target has a traffic problem. So grocery is important to Target, even if pet ($3 billion?) is backed out.
Any business that represents 15 percent of total revenues and a greater share of total transactions, must be verticalized to ensure a competitive stance within its categories. The importance requires the focus.
Milligan roughly said that Target was neither fish nor fowl in grocery. That portends, “Death in the Middle.” I think Target has to commit to the category. Its position on the floor is in the back of the store versus Walmart where it is at the store entrance. The assortment feels overly focused on convenience. Not sure if a “Target Trip” strategy is helping the category especially with its focus on being trend-right, which means assortment has to be broad and deep. Adding an aisle to bring in booze wasn’t a step in the right direction.
Here is a great example that “retail ain’t for sissies!”
Groceries and Target have not become synonymous. Cathy said it right when she stated that they should get out of the grocery business. But they can’t because they would be admitting Walmart beat them. I never enjoyed even walking through the grocery section. It is not inviting. Get in. Get out. Go to Tony’s.
Target has shot themselves in the foot in so many ways, it’s hard to know where to start. Rearranging the deck chairs on the Titanic is not going to help unless the course is corrected, and that seems unlikely in the thinking at present.
I don’t think having a dedicated grocery team is the silver bullet to cure Target’s grocery woes. While it may help a little by creating more focus and attention on keeping shelfs stocked and fresh, the bigger issue is changing consumers’ perceptions.
Most consumers prefer to do the bulk of their grocery shopping at a traditional grocery store that has everything on their shopping list. While Target’s CEO Brian Cornell has stated a goal of making “Target a food destination,” I am not sure this is a realistic goal. Target may never be able to compete on assortment and freshness with full-line grocery stores and specialty grocers.
Target may be more successful if they actually scaled back their grocery items to just the staples and convenience items that consumers forgot to pick-up at the “real” grocery store. Grocery has some of the industry’s thinnest margins and Target may be more profitable if it uses some of its existing grocery space for higher margin products. Another option would be to dedicate more space to deli or prepared meals to-go for busy shoppers. That is certainly the trend in traditional grocery today and I believe it is a much safer bet … who wants grocery items to leak onto their newly purchased fashions?
“Among the changes Target has made in the LA25 stores are wood grain signs and updated shelving.” Yeah, that’ll do it.
The problem I have right now with Target — and I think a lot of people do — is that as is often the case when someone comes under close inspection, every “improvement” brings about a revelation that they weren’t doing something so basic that it wasn’t even on the radar. How can you have confidence when you start wondering what else isn’t being done?
Maybe some grocer — hello Tony O — can confirm if this is still true, but every “real” grocery I’ve ever been in has a “produce guy(s)” and a butcher, etc. Having staff that’s just wandering around from department to department isn’t a recipe for success, and makes one wonder just how serious they really were about food, and why they entered into it if they weren’t going to approach it more professionally.