Target to Tackle the Big City

Target already has it right. I toured their downtown Minneapolis store. They do more grocery volume in a Pfresh than what they do in a Super Target. Nice multi-level concept. The competition seems to be Walgreens which is pretty much the only other downtown urban retailer in most of these areas.

David Livingston, Principal, DJL Research

Not having seen the actual store, it is difficult to predict with any level of confidence. However, Target appears to have done its homework in terms of concept and consumer testing to appeal to an urban market. Its positioning of "cheap chic" may resonate well with city shoppers. It would appear that its food offerings and partnership with Apple may provide the needed differential advantage. However, the food section of the store needs to be more front and central than in traditional Targets. Obviously, Chicago is a test, whose results will be incorporated in future rollouts.

As for the competition, learn from the Target test.

Richard J. George, Ph.D., Professor of Food Marketing, Haub School of Business, Saint Joseph's University

The key to success is, as it appears they do, understanding the key differences between the urban and suburban customers, both in assortment and, equally important, services. These customers for instance typically do not have cars to load their purchases into, so delivery service is key. Also, the assortment needs to reflect the lack of availability of products easily found in the burbs, e.g. light bulbs. A brilliant example of how to make these adjustments is Bed, Bath, and Beyond and their tremendous success in Manhattan. Brilliant.

Will they "get it right"? This is a company that has flourished with Walmart as their direct competition. Odds are good they will figure it out.

Bill Emerson, President, Emerson Advisors

I do expect Target to get the CityTarget concept right over time, although even 80,000 square feet may not always be easy to find. It will take some well-focused assortment planning to make this work; not just fewer items like lawn furniture, but more product geared toward the urban lifestyle. Apparel is a particular opportunity to "get it right," although that looks like a challenge for the entire chain right now.

Dick Seesel, Principal, Retailing In Focus LLC

As a young "bright-eyed and bushy tailed" professional, I remember walking to Marshall Field's on State Street in Chicago and Wanamaker's in Philadelphia and being in awe of the beauty and dynamics occurring therein. That stately era ended long ago when those stores, along with CityTarget's Chicago location, the old Carson Pirie Scott space, faded into disappointing wilderness.

CityTargets will be an opportunity and a challenge for Target. They will be reaching for "sales in the city" but they will have to tailor their business plan to revised conditions and clientele. Target people are astute students of the marketplace and I expect Target will "get it right," but only after they accept the attitude adjustments that will be required.

If Target successfully penetrates with its CityTarget stores, other competitors will follows Target's wake into urban areas. But this isn't a slam dunk entry, it's a gamble. Otherwise such areas would already be fully served.

Gene Hoffman, President/CEO, Corporate Strategies International

Target's approach to using existing buildings will allow them to enter the more densely populated areas of cities that ground-ups will find very difficult to duplicate. This should provide them with a location advantage that should outweigh the disadvantages of having layouts that the customers are unfamiliar with.

As several have noted, Target will need to adjust its assortment. They do a great job in this area every day in their current locations, and I have no doubt that they will get it right for these city locations.

Steve Montgomery, President, b2b Solutions, LLC

Full disclosure, I am not a big fan of Target, albeit from the perspective of a 50 something male shopper. I believe they merchandise much more to a younger and female demographic, which admittedly is likely to be the key to much of their success.

Personal preferences aside, I also find the majority of their non-apparel categories being under SKUed and over inventory managed. While their stores are well organized, pleasant and well maintained, it often appears to me that they merchandise their stores to stretch into more selling space then they actually need, given the amount of inventory they carry.

While Target is getting better in the food side of the business, I still find they struggle with basic operational and merchandising issues that other food retailers have long since mastered. Out-of-stocks and poor end-cap planning are among the common Target grocery-side faux pas.

But with all of this negativity as a backdrop, Target may be a perfect fit for smaller, more compact presentations of food and hard lines for an urban customer. The inherent expense of downtown locations will necessitate driving significant dollars per square foot to be profitable. They will likely have to "dense up" to make that happen. Also to their advantage, on the food side of things, urban shoppers tend not to be voracious stock up shoppers as they are either on a mission trip of "whats for lunch or dinner?" or they are young upwardly mobile city dwellers who consume fewer groceries than their suburban counterparts. This means CityTargets can focus on merchandising fewer items and be successful with a smaller number of categories.

If CityTargets can take advantage of the smaller footprint and create an interesting and changing sales environment within these retro-fitted stores to address the needs of the urban shopper, I may have to re-evaluate Target both as a retail consultant, and as a potential shopper!

Mark Heckman, Principal, Mark Heckman Consulting

I think grocery will be a big draw and will help Target to bring in a lot of urban folks. I think they also will appeal to a broad audience and demographics. The "Expect More, Pay Less" core value proposition should play out well in these new markets for them.

Matt Schmitt, President & Chief Experience Officer, Reflect

When Target set sales afloat on a barge in New York City, I knew they had the right idea about marketing to urban shoppers. Absolutely -- they will get it right. Even going into an historic building gives the retailer a leg up in terms of cache and appeal. Further, they would have to adhere to certain hip design principles in order to stay in line with their equity. Yep -- it's a winner.

Liz Crawford, VP, Strategy & Insights, Match Drive

I expect Target will get it right. Walmart has not had luck moving into urban areas, but Target should be able to do this through some adaptation of their store model. Target currently has locations in New York City (upper Manhattan, Brooklyn and Queens) that are adapted to the smaller retail space and seem to be thriving. Target stores should satisfy urban shoppers with the variety of products offered at competitive prices. Perhaps Walmart will take a clue from the CityTarget concept and attempt to move in the urban market again.

Zel Bianco, President, founder and CEO, Interactive Edge

Target has already done a good job penetrating more urban areas. As Rich said, their concept of "cheap chic" plays well with urbanites, especially the younger set. However, there may be a big difference between Urban and City.

The urban store simply brings the big box experience to a ready, and often under-served market. For the most part, these follow a tried and true format execution.

However, the true City store has to adapt to existing constraints of real estate and location. In the case of Chicago, they are really pushing uphill with a downtown State Street location.

In order to be successful, CityTarget will have to create a true destination worthy of drawing traffic to a downtown location. Given their heritage with Dayton-Hudson stores, you would think Target would recognize the challenges they face.

Raymond D. Jones, Managing Director, Dechert-Hampe & Co.

It is still about location ,location, location. If Target has the right location for the demographics they need, they will be successful.

Ed Rosenbaum, CEO, The Customer Service Rainmaker, Rainmaker Solutions

I think they absolutely will get it right, but it will take time to find the real estate that meets their needs. The emphasis on groceries and a underserved consumer will result in a much higher visits per year among their customers. Over time it will be a winning strategy for them.

Unfortunately it is going to have a direct impact on the smaller independent retailer that has served the urban consumer's needs until now.

Doug Fleener, President and Managing Partner, Dynamic Experiences Group

Location, location, location. Target already has the rest of the model set-up. Now, they just need to increase their locations. The CityTarget concept will certainly give target the opportunity to do this, however the real question will be if Target can get the product market segmentation correct. Only time will tell.

Kai Clarke, President, Miraclebeam Products, Inc.

"It's clear that Target's approach to urban locations is different than that of its chief rival, Walmart."

This is where an English teacher would write "An interesting point ... but you didn't develop it! C+."

Anyway, back on topic; while I wish them well -- of course -- and don't see a reason not to do this, I think we should recognize this is never going to be a game changer for them. There simply aren't enough viable "big city" downtowns for this concept ever to amount to more than, say, a hundred stores ... a mere thimble in the ocean that is Target.

As for whether or not they'll get it right, as I pointed out several weeks ago -- and David reiterated today -- they've had plenty of practice in their Minneapolis HQ store that's been operating for years (though to be fair, IIRC its more of a "normal" store than these will be).

'notcom'

As a city dweller, I think this concept is right on the money. There is a huge, untapped market in cities, including many people who don't have cars. I'll be surprised if this isn't a stunning success.

Cathy Hotka, Principal, Cathy Hotka & Associates

City Targets seem a lot like Kohl's Jrs. A smaller footprint brings in more traffic. More accessible to the masses.

Is Target dragging its feet or will it open on the ground floors of the soon to be demolished Saks Fifth Ave. site on Pittsburgh's Mellon Square?

'weo'

Without having visited one of these new concept stores, I would say Target is on the right track in terms of appealing to modern, urban, environmentally-conscious shoppers. CityTarget profits will determine whether or not the company has "gotten it right." If so, then competitors will have to keep up and answer/match its differentiating factors.

Christopher Krywulak, President and CEO, iQmetrix