Chain Targets Food for Growth

Discussion
Feb 20, 2006
George Anderson

By George Anderson


Target plans to expand the amount of space it devotes to food in its discount stores to drive traffic.


According to a report in the Minneapolis Star Tribune, Target plans to expand the food sections by as much as 50 percent in existing stores. All new standard store locations will be rolled out with the company’s P2004 concept that incorporates a higher profile for food.


Morningstar analyst Joseph Beaulieu said, “Food is a major traffic driver. People who go to Target for groceries will also pick up laundry detergent and paper towels.”


Stan Pohmer, a former executive with Target, said the company is moving in the right direction although he cautioned that, if consumers begin shopping the store just for groceries, it could negatively effect profit margins.


Target has been much slower to move into the food business than its bigger rival Wal-Mart. The Star Tribune points out that there are nearly 2000 Wal-Mart Supercenters in operation today while there are only 158 SuperTargets.


The chain also intends to make changes to its SuperTarget locations. The company has announced it will offer more ready-to-eat items into its product mix.


Moderator’s Comment: How do you rate Target’s food business performance to date? What will the chain need to do in its discount stores and SuperTargets
if it is going to be even more successful in the future?

George Anderson – Moderator

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11 Comments on "Chain Targets Food for Growth"


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Lee Johnson
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Lee Johnson
15 years 10 days ago
Target has tried to copy Wal-Mart on the food side, but so far has missed the boat. Their presentation is lackluster, at best. While all of the pieces seem to be in place, they have not figured out how to put them together so that the consumer has something to identify with. They definitely have a way to go before becoming a formidable competitor in the food arena. In fact, in my opinion, if Kmart was still growing their Super Kmarts, I’d rank them ahead of Target. SuperTargets are not merchandised well at all. There is no “WOW factor”, nothing to differentiate their food offering from any other run of the mill grocer. When you enter the grocery department, you get some real mixed messages. The pricing may be “OK” butm for the life of mem I have a hard time figuring out if the stores are upscale, discount or high low–lots of mixed signals coming through; whether it be from display techniques, signage, decor, lighting, item selection or variety. It looks as though they… Read more »
Mark Lilien
Guest
15 years 10 days ago

When I spoke to Chris Serres, the author of the newspaper article, he told me that Target did not say what categories would be reduced to allow for the grocery expansion. Since standard groceries (excluding prepared foods) have lousy markups, Target’s change may depress its outstandingly high overall margins. And prepared foods may have nice markups, but they often have high labor and waste expenses. If Target can make grocery expansion a winner (after the opportunity cost is factored in), then its management will deserve a gold medal.

Warren Thayer
Guest
15 years 10 days ago

Just finished researching a cover story on this very topic. The consensus of observers close to the situation was that things are improving, although there seems to be a disconnect between the gm shopper and the food shopper at SuperTargets. Another consensus: Target’s food effort is influenced too much by Wal-Mart, and not enough by Costco and Whole Foods. This latter point could, in fact, help explain the first. Seems to me that Target is trying to be the upscale, trendy fashion and gm merchandiser on one side of the store, but when it comes to food, they are still trying to be Wal-Mart. Of late, there have been more upscale food skus in SuperTargets, and this new effort at food to go is likely targeted higher also. So this could be corrective action being taken already, if in fact the first two points are correct.

Gene Hoffman
Guest
Gene Hoffman
15 years 10 days ago
Target’s food performance to date has hardly been spectacular, but it has been slowly and steadily moving forward. Target plans well, is willing to pace itself conservatively and grow food sales slowly in order not to make major mistakes. It relies heavily on its private label assortments, perhaps a little too much. To grow its future food business, Target should draw upon its uniqueness as a fashion-conscious merchant. That’s where its strength lies. Wal-Mart has the price-sector dominated so don’t bother with it. Target’s strategy should be to become a Byerly’s-type discount retailer. (That seems to be their current bent anyway.) It should expand its offerings with uniquely fresh, organic and prepared food products; apply its innovative advertising to its expanded food area to build a “fashion aura” into its assortments and services; increase its focus on being “cutting edge” in new foods and new ideas; and build a “High Sense of Theater” in its grocery area. More people will then come to Target and they will pay the price of admission.
Art Williams
Guest
Art Williams
15 years 10 days ago

Target’s food offerings that I have seen are unimpressive in both presentation and department size. They gave the feeling that we are here because we have to be not because we want to be. It looked like they were going through the motions but were totally uninspired. So unless you are a Target “die hard” or it was the closest place for fill-in shopping, why bother?

Target is very capable of dramatically changing this if they decide to get serious about selling food. Expanding the size of the department and increasing the offerings is a very good start. If they also develop a strategy and a presentation that consumers can understand and relate to, I believe that they can become a major factor in food sales.

Mark Heckman
Guest
15 years 10 days ago
Target has a real dilemma on its hands when it comes to food. They have successfully postured themselves as an upscale alternative to Wal-Mart on the non-food side of the business, but their venture into food will likely never be attractive to that same core audience. Others have made the point that Wegmans and other superior traditional supermarkets will always win the day with the quality and product driven food consumer. Research that I have conducted and syndicated research that I have read, would indicate that Target’s core shoppers are not price-driven and generally look to traditional supermarkets for their food purchases. So if we can conclude that Target does not currently have the horsepower to become a first class quality-service food retailer, their options are few. Conversely, Wal-Mart food operations have ubiquitous appeal across their core shoppers, both being primarily “price driven”. With that said, they are even expanding their core base into some of the more upscale groups, particularly within the commodity categories of paper, detergent, HBC, and pet. In addition, with the… Read more »
Murtok SIx
Guest
Murtok SIx
15 years 10 days ago

The key to being successful to is follow Wegmans’ example. No matter what Wal-Mart tries, they cannot compete with Wegmans. People go to Wegmans for better food, better service, cleaner stores..you name it, Wegmans has it.

To become successful in food, Target needs to do two things:

1) Be like Wegmans

2) Not build a supercenter next to a Wegmans.

Let Wal-Mart have the low-income consumer who wouldn’t know Creme Brulee. If it’s not basic and bland, Wal-Mart won’t have it. They serve low income, low expectation consumers and are good at it.

David Livingston
Guest
15 years 10 days ago
I would give Target a F grade so far. But certainly, must give them credit for trying. A review of the “food ops” sales by store gives a clear picture of just how bad they are doing. Most of the higher food ops are in the Twin Cities area. Still the very best food ops at Target are less than the average Wal-Mart. When they venture into other parts of the country, Target is running about 30% below average in sales per square foot versus the competitors, and generally well below half of what Wal-Mart Supercenter is achieving. It’s not uncommon to find food ops of less than $200,000 per week in SuperTarget. The good news is that food ops in most stores seem to be showing some very strong percentage increases. It doesn’t look like Target is going to give up on food. Target has known for a long time that customers still do not equate food with Target. They also do not have the rock bottom low price image of Wal-Mart Supercenter. So… Read more »
Rochelle Newman-Carrasco
Guest
Rochelle Newman-Carrasco
15 years 10 days ago

I was in Target last night and, as I looked for doggie poop bags, I passed the food section. I remember being surprised at how many people seemed to be shopping there and recall generalizing who they must be (middle to lower/middle with kids). As I passed the wine section, I realized that I was jumping to conclusions as I took note of the carts of young straight couples and gay couples alike who were taking advantage of what I can only view as a matter of convenience. I suppose if Target were to expand their food offerings and make them more appealing, both in selection and presentation, then perhaps they would get trial and that might lead to repeat visits, if not loyalty. I know they now have Choxie and those wine boxes. A few more design based ideas might be enough to differentiate them from the supermarket and the Smart & Final nearby. Could they be a Trader Joe’s hybrid? Time will tell.

Charlie Moro
Guest
Charlie Moro
15 years 10 days ago

Having spent some time connected with the Target strategy, I would share that they may be a B- food operation, and there are some issues as you try to manage and create from a central Minneapolis location, but if you watch very closely at the incremental changes, improvements and adjustments they make from cycle to cycle, you will be able to see the comfort level they have with going slowly and methodically and you will also see that they are creating a much better mousetrap than they have ever had in the past. It may be hard to differentiate food…but as long as I feel better as a shopper being affiliated with Target than in other venues, then I have won most of the battle…I have the customer coming into my store.

Lyle Larson
Guest
Lyle Larson
15 years 8 days ago

Target has structured it’s food departments to mirror the was they go to business with general merchandise. They do not want any influence from people that are or have been in the grocery business. They believe that the way they have been successful in GM is also the way to go in food. Well, I would suggest that this is a bad decision especially when comparing the success of Wal-Mart to Target. I do however, believe that they should go more upscale in food and attract the same customer that buys their merchandise. The health food business, such as Whole Foods, is having tremendous growth, so why not take some of that market share from Whole Foods and Wild Oats? That concept is having double digit growth, certainly more that the industry as a whole. Target needs to get rid of their arrogance and start listening to people with experience in the food marketing industry.

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