Target Looks to Hit Bull’s-Eye with Food
By George Anderson
Target plans to more than double the amount of refrigerated, frozen and shelf-stable foods it carries in its discount stores, reports The Chicago Tribune.
In a conference call with analysts last week, Target’s President Gregg Steinhafel said, “In selected discount stores, where a full remodeling isn’t currently scheduled, we’re adding refrigerated coolers. By the end of this year, we expect nearly half of our stores to reflect these updates.”
The reason for the added food focus is straightforward. Target is looking to fuel its growth by using grocery items to bring in more consumers and expose them to the cheap chic that the chain is known for.
The chain is also looking to add alcoholic beverages in stores where laws allow.
Moderator’s Comment: Is Target making the right move in doubling the size of its grocery sections in its discount stores? What has the chain’s track
record been in grocery sales to date? –
George Anderson – Moderator
I have heard that Target will be creating a number of frozen and refrigerated products under their Archer Farms brand as part of this merchandising endeavor into introducing frozen and refrig products into their stores. Additionally, that they will be doing the same in terms of their expanded grocery offerings—more Archer Farms (and perhaps a new prop. brand or two) grocery items in the dry goods sku expansion.
If what I hear is true, then I think it could be a good idea to expand into frozens and such: more brand identity for Archer Farms; unique products (the goal at least) under the Archer Farms brand that excite Target customers; potential increased margins on their own brand. In other words, building on their unique identity, which is key to their success.
However, if the situation is just an increase of national brand groceries and adding frozens and refrig goods, then I question the efficacy of the move. No doubt they will move volume—Target fills its stores with shoppers—but to what end? I doubt the “Target Shopper” will shop the store more often just for more selection of what they can buy at the supermarket. Rather, the Target customer loves the stores because of their unique offerings on goods at a decent price—the furniture, clothes, etc. that you can’t get elsewhere for any kind of similar price. Now, do that with food, and it could be a big success.
I think Target’s goal is to be taken seriously as a grocery destination by shoppers.
I disagree with the notion that they will flock to Target because they can pick up frozen tacos and tee shirts on the same trip. The hope is that they will come to Target to buy groceries because they like the items, the prices and the presentation. They will also come again to Target to buy non-foods and general merchandise items because they like the items, the prices and the presentation. And sometimes, they will come to conveniently get some of both.
Target is, first of all, a very good marketer of not discount priced products, as mentioned, but more upscale and quality items. Target leaves the EDLP sector to Wal-Mart, and Kmart.
Target is known for its image building with shoppers, and what it stands for, day in and day out….better quality and more updated non-foods products than any mass merchandiser.
With this in mind, Target is hopefully going to leverage its image and advertising campaign, that is so effective, and be less grocery price-oriented to build its food business.
In some stores, it already has Starbucks and one or more of the Yum restaurants. Now, it will probably center its supermarket efforts on superior quality, fresh perishables, meals, and other foodservice type offerings.
Smart business move to attempt and continue to build its non-foods business simultaneously! Marketing its brand has aided Target in separating itself from the low end mass merchandisers. Hmmmmmm
I think Target has had mixed success with grocery and refrigerated. But the issue is not what they carry but the statement that the stores make. The newly remodeled units — and I’ve seen some of them — will show consumers that the chain is really in the grocery business to stay and not just dabbling. What hasn’t been said is that much of the additional space will be used to market the chains Target and Archer Farms private labels. That’s where the money is.
First, the Poll should include the question: Does a good job at shelf stable. And they do, do a good job at shelf stable. Moving into refrigerated and frozen is tougher. With all the channel blurring coming and time compression getting to be a bigger trend, this added convenience should spur on good grocery growth and pick up outside isle growth as well. Seems like a an obvious move. However, I think they need to think about store design as they double the offering and don’t just stick it in the corner. My question would be: Have they really thought about store isle strategy? We have been doing a number of National retail surveys this summer and there are some pretty exciting and new things starting to emerge.
I seriously question the science behind this strategy. I’ve been looking for, and have not found, market basket data which indicates that when refrigerated or frozen food is a primary purpose of the shopping trip, significant expenditures are also made in non-traditional grocery categories.
In other words, does Mom buy towels or tee shirts on the same trip she buys milk and frozen peas?
Intuitively, this makes very little sense to me…on a large scale. Supermarkets have for a very long time understood that small scale general merchandise is a viable addition to the grocery market basket. However, attempts to expand those offerings into higher price points and more destination purchase categories have yet to succeed outside of niche players (Lunds in Minnesota).
In Europe, supermarkets function as mass merchants. The market basket data there is very different from here. But they also drive on different sides of the street. Seriously….what is Target looking at that most of us don’t have access to?
Think about it….what happens to perishables or frozen goods after sitting in your shopping cart for an hour while you try on clothes or shop for small electronics?
Am I missing something?
I think Target should go for it. These guys get it in terms of creating a pleasant, not to crowded or crushed place to shop.
I always take a walk through the dry grocery section looking for deals. I always come out with some soft drinks, tuna, soup, or breakfast bars that I had no intention of buying. Also, it gives me something to do while my 10 year old is shopping and doesn’t want daddy peering over her shoulder.
My daughter and I look forward to going to Target and believe we can get anything there…..so, therefore, it becomes a first stop. Whereas, when we go to Wal-Mart, it is like a chore that we have to gear up for…..
Also, we like Target for its dependable hours (especially Sunday)……in Los Angeles we drive out of the way to go to two-story Target in the Valley.
Freddy’s “Meyers,” as it’s called, has been doing it for years! I don’t think the average customer puts fresh or frozen food in their cart and then tries on shoes. The buzz word will get out that Target has good deals on quality seafood and meat items, and they to will be successful.
Target has two problems with regard to food. First, when you think food, you don’t think Target. Nothing about their brand even whispers food. With the options out there, that’s one they need to work on.
Second, in the remodeled stores referenced in the article that I’ve visited in Chicago, the refrigerated and dry goods are placed far from the entrance. They don’t have the product breadth for a stock up trip and the food location isn’t convenient. As mentioned earlier, closer to a Kmart type execution.
The Super Targets avoid this problem with a supermarket style layout near an entrance and a wide product selection.
Based on what David wrote, it seems that Target would be better off if they came up with a proven winning formula, through testing, before a major rollout that might become an embarrassment, financially.
So far Target has had trouble being taken seriously about being a grocer. I’ve studied the sales performance on a store-by-store basis of the “food ops” department at Super Target. They have way too many stores doing less than $250k per week. Basically, when it comes to food, they are not performing any better at this game than what Kmart did. Because of the typical low volumes being done in the “food ops” side, perishables have limited presentation. I will say that the dry grocery has a nice presentation, but low traffic. I really question Target’s expansion into food. They just don’t seem to be very good at it, but they are getting better. When comparing same store sales on the “food ops” side, I’m seeing some nice percentage gains, but with a low basic point, it’s not resulting in a lot of dollars. Perhaps over the long haul, this might pay off if they can continue with their slow improvement.
Target is on the right path. For example, when it offers free trade and organic coffees from a brand manufacturer (Millstone) and its own controlled brand (Archer Farms). Doing more of this will help Target develop the cachet in food that it has elsewhere in the store.
Target’s expansion into food has been slow, steady, consistent and stable. I look for them to have continued success.
Yes, Don, shoppers do mix peas and t-shirts. They have been doing so at Meijer for decades now. So much so that Wal-Mart followed the model. Target has taken a much more selective and measured approach. Thus, allowing them to differentiate (there’s that word again) from other competitors, namely Wal-Mart. While they enter the food market, I am sure that they are working the project slowly in order to capture the right mix that fits their shopper. Their shoppers are distinctly different than Wal-Mart and will have completely different expectations. A different mix of product makes complete sense.
I won’t place myself along with the skeptic nature of some of the previous comments. I believe they’ll have success, albeit not at the speed that we might imagine. That’s not their style. Although, before we realize it, they’ll be a real competitor in food in a way much different than that of the typical superstore.
The strategy should be taking the current Target shopper and allowing them to pick up a few items while they’re already in the store thus saving a potential stop at a grocery store. I doubt seriously if they will get shoppers to come first for the food items and then purchase towels, etc. By encouraging add-on items it’s a great idea and will allow them to expose more people to their Archer Farms label.
I think it’s a risky proposition. How does this fit into the Target short term and long term objectives? What will the assortment and pricing strategy be? I think Target has to carry some food products but they should focus on the impulse and more profitable items – the items that fit their demographic.
They should not become like everyone else and get labeled a me-too.
I applaud Target’s intent, however, there are some hurdles that must be overcome beforehand. First, as others have said, Target is barely known as a food destination. To overcome this, they need to improve their food mix, their merchandising and, in many stores, the location of their food offerings. Next, they need to communicate such changes effectively (inside and outside of the store). Only then can they hope to attract more types of trips beyond those of cherry pickers who wander into their food section after they have completed shopping for their primary need, some non-food item.
I believe Target’s goals are achievable, but simply increasing the size of their food section and adding more (of the right) SKUs will not make it happen.
Expanding a bit on Tom’s point, are Cheerios consistent with Target’s image? Should they want to be a broadline food distributor where they immediately run the risk of unfavorable price positions/poor margins or would they be better off with a line of upscale but still affordable foods? I’m not as blown over as everyone else about their food efforts to date so it’s a bit hard for me to wax too eloquent about any expansion plans.
Yes, Don, European supermarkets/hypermarkets have expanded categories in the opposite direction i.e. food first then clothes, CDs, housewares etc. Store design means that fresh, chilled and frozen food purchases do not sit in the trolley while non-food selections are made.
I’m not taking sides in the Target debate but would like to point out that such one-stop shopping is not necessarily impractical or unpopular. Except that, having grown up in the US, I am innately suspicious of the quality of clothes that are sold by stores that started out selling food. Or maybe it’s because I never buy my clothes from mass market retailers which, by definition, supermarkets must be in order to make a profit from them. If I were to buy the description of Target as cheap chic, then I might be inclined to have a look on their racks and then, depending on the time of day at which I was shopping, I might then glance at their food displays. Soooo, I suppose it could work.
Anyone can sell shelf stable products, so what is the point of difference? Price! Gas stations even sell such items. Target doesn’t and doesn’t have to be dominate in shelf stable items, Cheerios, or whatever.
The money and image is in perishables, and Target, in the stores that I have seen, does well.
Of course, keeping employees with foodservice and culinary backgrounds is key… especially in meals, deli, bakery and other foodservice offerings. Even the meat and produce departments can create ready to cook, heat, or even eat items to complement the carry-out meals business.
Interestingly, staying on top of food trends, and/or new products can be important, as the consumer affairs communication director makes its shoppers aware. SO… why are shelf stable products so important to Target???
Hmmmmmmmmmmmmmm
David was absolutely correct when he stated that the sales volumes in the food-ops departments at many SuperTargets are quite lacking. One needs only to take a look at several markets in Florida to examine the situation: Jacksonville, Orlando, and Tampa/St. Pete.
In Jacksonville, neither SuperTarget performs as well as it should. The two are located just 3 miles from each other in mid-density areas. In fact, one is located right next to the naval air station which has a full base exchange, where everything is tax free!!
However, when discussing the SuperTargets in the Orlando and Tampa markets, the level of success varies by location. Some of the chains most successful locations include the Waterford Lakes store, consistently with the top 15 in the chain, located in East Orlando, and the Clermont location. Both are high volume AAA stores. On the other hand, the West Colonial store, located in a lower middle class area, struggles consistently and does little better than the two Jacksonville superstores.