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[14 comments]

Will a small store help Target get its mojo back?

July 24, 2014

Target has been much less bold than larger rival Walmart in going after the small box opportunity. But with the opening of the first TargetExpress beta store, the world will finally get to see if the reeling retailer (data breach, Canada, etc.) has come up with a concept that can help it get its mojo back.

The 20,000-square-foot beta store opened in the Dinkytown area of Minneapolis near the University of Minnesota campus. The store is tailored to the school's students and nearby city dwellers. It features fresh produce, grab-and-go foods, snacks and beverages. Also included is a beauty department with concierge as well as areas for electronics, home and seasonal items. Customers (AKA guests, in Target-speak) will also be able to fill their prescriptions in the store's pharmacy.

[Image: TargetExpress]

In a video that features Karl Anderson, the store's team leader, Target demonstrates its commitment to digitally-connected consumers with a display that uses the chain's Cartwheel mobile app for discounts as well as its new In a Snap app, which allows consumers to scan a poster near the store entrance to shop specific items.

Target plans to open four additional Express stores next year including three in the San Francisco Bay Areas and one closer to home in St. Paul.

Faye Landes, an analyst with Cowen and Co., told the Star Tribune that Target is playing catch-up with Walmart when it comes to small stores.

"They are leading the way," she told the paper. "Given Wal-Mart's actions, everybody has to react more quickly. "

FINANCIALS:     [NYSE:TGT] [ ]

Discussion Questions:

How important will TargetExpress be to Target's future? Will the company be hurt by moving as cautiously as it has into small stores?

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 Target to succeed with its TargetExpress concept?

Comments:

With Walmart's strengths in food and commodities, its move into small format stores (Express, Neighborhood Market and so forth) makes a lot of sense. It's a growth opportunity, especially as a way to find real estate in urban areas and other spaces that can't handle a Supercenter. On paper, it's not surprising to see other retailers pursuing the same game plan.

Target, on the other hand, has spent so much time and effort over the last few years trying to build a grocery and "consumables" business that it lost sight of what made the company great in the first place. The new CEO needs to focus on fixing apparel and home decor, continuing to roll out CityTarget, and getting Canada squared away, before pursuing a "me-too" real estate strategy that doesn't play into the company's core brand positioning.

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Dick Seesel, Principal, Retailing In Focus LLC

Target, Walmart and others who see "small" as the new big thing should remember that a large number of these units will have a small impact on sales and profits. True, it will be a way to extend the brand to locations that perhaps were not viable for the larger formats, and that has a value. Maybe the real value is in distracting shareholders from the issues they face in their core businesses.

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Steve Montgomery, President, b2b Solutions, LLC

Very important due to the growth of e-commerce, as most retailers will be looking to reduce the size of their store footprint. As an example, Staples is just starting the process of trying to cut its real estate footprint by 40 percent-plus in its brick-and-mortar stores.

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Bill Davis, Director, MB&G Consulting

Well, I don't think I agree with Landes that "everybody has to react more quickly" to keep up with Walmart. Walmart has been trying to come up with a workable small store format for forever, and I wouldn't say the verdict is in yet on their latest attempt. Even Tesco, who arguably SHOULD be the one to watch when it comes to perfecting small format, hasn't really found the right mix when it comes to the U.S. So I think Target has some room to move. I suspect the retailer who can perfect a localization strategy is going to be the one that wins. Small format, especially given the potential range that could go into a store, is just not going to succeed when executed in a mass-market way.

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Nikki Baird, Managing Partner, RSR Research

What makes Target so sure they can pull this off when Walmart has not exactly set the world on fire with their foray into this arena? I can't see enough of a jump in profit to make the investment in time, management and start-up costs worth while.

The one thing I do see Target doing right is the location being near a college campus. Those areas can make this more successful than some others. But it can also skew the numbers, making it look more successful than it really would become, in other locations with few young singles who have little time.

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

Location, location, location; then, item mix, item mix, item mix.

'OscarSmith'

Most interesting to me: This pilot store assumes that guests are digitally enabled. That is ground-breaking because it is an acknowledgement that most Target shoppers are empowered by their mobile devices. Digital empowerment means shoppers are more deeply embedded in the shopping process, their relationship with the brand and, ultimately, their commitment to returning.

Just as retail today has accessibility ramps and braille signs for customers with disabilities, the store of tomorrow will need to accommodate the lack of digital access and fluency with sales associates.

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Liz Crawford, VP, Strategy & Insights, Match Drive

Target's smaller footprint will be useful where rent or shopper traffic can't support a full-size store. If they merchandise the store wisely there is a good chance that it would generate more sales and margin per-square-foot.

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Robert DiPietro, GVP Product Strategy & Business Development, Affinion Group

Count me unenthused (Notcom-speak for "yawn"). Target created much of its marketing edge—to the extent that it has an edge anymore—with "cheap chic," which has to have "chic-able" items to work with (towels, furniture, clothing, etc.).

This sounds like a (not much smaller than normal) Target with all the fun stuff removed. Isn't that what the CVS/Rite-Aid/Walgreens clones are for?

As for Walmart; if Target's business plan is to do nothing more than "catch-up" and "react more quickly," then they've already lost.

'notcom'

While this format may not be a barnburner from a sales perspective, it is located on a college campus that doesn't have many options. So, while skewed, the numbers here might end up good (caution, of course, needed in applying it to other areas).

But a smaller footprint allows real estate and expansion opportunities not available with a larger box. And retailers, whether playing catch up or not, should always be experimenting.

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Brian Numainville, Principal, The Retail Feedback Group

TargetExpress can be an important part of target's future—if location is strategically chosen for target consumers. A college town is a good choice. Young people are looking for many types of items. Well curated assortment is key, it must fit local shoppers' needs. I believe it's far more important to find right model here and execute well.

Anne Bieler, Sr. Associate, Packaging and Technology Integrated Solutions

Target is late to the digitally-enabled, small format party. Then again, Macy's was tardy to digital as well then went on to play a mean game of catch-up. Hopefully Target will leverage its initial Express location as a learning lab prior to any roll out (yes, just as Walmart has done with each of its launches) while resisting its tendency to tweak incessantly before moving forward. As ex-CEO Gregg Steinhafel noted, one of Target's greatest opportunities is to strike a balance between perfection and speed.

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Carol Spieckerman, President, newmarketbuilders

Target is struggling with fundamentals which is clearly demonstrated in Canada and with the information technology issues. The companies efforts to distract public attention away from the problems and mistakes is reminiscent of what the previous leadership at Microsoft did. Whenever a company insists on informing the consumer that their direction is what matters they lose sight of where the market is going. Sometimes, like with Microsoft, that can be a very bad business practice.

'gjarnoldjr'

As referenced by other contributors, this store appears to be missing the trendy, cheap-chic element that separates it from the Walgreens crowd. The larger opportunity from a merch perspective could be within apparel, shoes, kitchenware, home office, trendy hard goods ... and NOT in basic consumables found everywhere else.

Is it just me, or does the "perfectness" of the layout and design hierarchy scream B-O-R-I-N-G ?

Jeff Skoke, Principal, Seven On The Line

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