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[12 comments]

Target to test really small store

January 17, 2014

When Target first opened its CityTarget stores in July 2012, it was billed as the company's first foray into smaller box concepts that have become the rage among big box operators in recent years. But with footprints starting at 80,000 square feet, these stores could hardly be considered small boxes. Well, that is about to change as the retailer gets set to build and test its smallest store to date, a 20,000 square foot TargetExpress in Minneapolis.

According to the New York Times, the first TargetExpress will be located on the ground floor of an apartment building being built near the University of Minnesota campus in Minneapolis. It is set to open in July and will include a mix of groceries, health and beauty items, apparel basics, home d├ęcor and consumer electronics.

Going really small has proven successful for Target's chief rival Walmart so far. The retailer continues to roll out its own Express concept, with unit footprints topping out at 15,000 square feet, and Walmart U.S. CEO Bill Simon has said in the past that the stores have achieved profitability "inside of 12 months."

FINANCIALS:     [NYSE:TGT] [ ]

Discussion Questions:

Do you expect Target to be successful with the TargetExpress concept? What unique challenges will Target face operating a small store format?

While we value unfettered opinion, we urge you to show respect and courtesy for people or companies about whom you comment. Keep in mind that this is a public, professional business discussion. RetailWire reserves the right to edit or refuse the publication of remarks that we deem unsuitable. We may also correct for unintended spelling and grammatical errors.

Instant Poll:

How likely is it that the TargetExpress concept will succeed?

Comments:

I think this will work, especially in and around a college campus. They just seem to go together very well and students will enjoy the convenience of being able to get many categories in one stop.

The issue will be how will Target decide which categories to leave out, or which brands to leave out. These hard decisions will need to be made and adjusted accordingly. When you go to Target, you do expect to be able to get everything you need and even though the footprint will be so much smaller, the expectation will remain a big one.

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Zel Bianco, President, founder and CEO, Interactive Edge

An idea right for the marketplace. The TargetExpress concept will work in select settings, especially urban areas where CVS and Walgreens have been biting into Target's (and Walmart's) HBC, GM and grocery business. These stores can also act as depots for delivered and return items. Merchandising will be the key - Target needs to avoid the cookie-cutter approach and understand the individual markets served to be successful.

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Ron Margulis, Managing Director, RAM Communications

I do expect Target to be successful in this venture, particularly in their hometown where they already have had urban success. The two challenges in my mind will be in finding enough good locations in other cities to make this concept viable on a larger scale, and developing a flexible enough marketing plan tailored to the different areas if they roll it out.

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J. Peter Deeb, Managing Partner, Deeb MacDonald & Associates, L.L.C.

Dollar stores have proven that small-format venues with the right assortment can thrive and drive big growth. I've long said that the larger discount chains were missing out on a huge opportunity here. It will be interesting to see whether they use some of the space in the store for pickup after online orders....

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Cathy Hotka, Principal, Cathy Hotka & Associates

Yes, it's a great idea! I think small footprint formats are the new big boxes.

Deciding what to put in the physical space and how to seamlessly connect to a full range of inventory will be Target's biggest challenge. However, catering in-store inventory to what's important to the neighborhood of shoppers should create unique shopping experiences for each location that Target elects to open TargetExpress concepts.

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Dave Wendland, Vice President, Hamacher Resource Group

This tiny Target is most likely a backyard lab that the company can monitor closely then leverage learnings in other locations (or not). Walmart is set to open its first convenience store concept this year, so Target is smart to move forward with new format forays. It's good to see Target stepping out a bit rather that relying on tried-and-true formulas.

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Carol Spieckerman, President, newmarketbuilders

A great concept to test. It may take a while to learn their way to the right assortment, pricing, promotions, etc., and their data should help. They will also need to learn the best approach for replenishing and operating this new format.

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Matthew Keylock, Senior Vice President, New Business Development and Partnerships, dunnhumbyUSA

I think we have a semantics problem when we use terms like "really small" and (even)"tiny" to describe 20K gsf: just a few years ago this would have been a fairly large footprint for any kind of retail short of a (full-line) department store.

But anyway, back to the question at hand - "will it be successful?" This too is pretty much a semantics issue: since they're free to define "success" any way they want, and claim it was simply an experiment even if it bombs (the results will never be public, regardless) then, yes, it WILL be successful...I guarantee it. Will it be successful in the sense that it will allow them to vault over Walmart, solve their current security issues or their longer-term identity issues selling food, then no, it will not be successful.

'notcom'

Sure they can be successful, especially in a campus or metro environment where footprint matters, as well as accessibility. It could also work in smaller areas where the 80K+ square foot concept doesn't make sense.

The challenge will be internal focus and creating separation in thinking from large and small. They are two completely different things that require completely different thinking.

'Scanner'

Wow, sounds like a sure bet to me. I'd presume that Target is a savvy enough retailer to know what product assortment to maximize the limited space and also to tweak it as necessary based on actual performance. Wish these had been around before I got old, had kids and moved to the suburbs!

'karenk'

When is a Target not a Target? Sure it can work, but it's a different market, different format, and by the way not a completely green field opportunity. Smaller footprint convenience oriented stores (so it's really a big box convenience store?) already exist out there, so Target will have to hope that their brand and ability to create localized assortments provides a superior experience to others already filling this need in some fashion.

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Peter J. Charness, SVP America, Global CMO, TXT Group

I always wondered why Target hadn't moved into this concept previously. The brand is a natural for quick adoption in high density locations. With access to their full assortments, they can quickly move in and out of items/categories to get the most productive assortments for a particular area. Should be a very profitable venture.

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Mike Osorio, Senior VP Organizational Change Management, DFS Group

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