August 13, 2007
Target: Ratcheting up Competitive Pressures…Again?
By Faye Brookman, special to GMDC
Target likes to debut new stores in large blocks and often the units sport fresh looks and even fresher merchandising concepts for the ever-evolving mass merchant.
That’s exactly what took place in a 42-store opening blitz at the end of July covering markets from central New Jersey to St. Paul, MN. And the fresh new merchandising concepts are focused on categories that are the core of supermarket and drug store offerings: beauty, food, pet and seasonal.
The expanded merchandising in these categories is likely to ratchet up competitive pressures for all retailers engaged in these product areas.
One of the new stores, located in South Brunswick, N.J., illustrates a new focus on beauty. The department has been moved closer to the entrance than in older layouts. The exclusive Sonia Kashuk label continues to get A-Plus footage in Target, but the chain is also giving a big boost to British import Boots.
One SKU, Boots No7 Restore & Renew, has just been fully restocked in Target after selling through so quickly the company couldn’t produce enough inventory. The item received a flurry of press after a BBC documentary found it to be one of the best skin care items available on the market.
Personal care is the next category after cosmetics, and Target uses categories such as hair care and hair color as segues into toiletries. The pharmacy is located at the rear of the over-the-counter area. Target heavily promotes its unique color-coded bottle system launched last year where family members can have different colors to identify their prescriptions.
The next major focal point is food, and this department is fully stocked with refrigerated products such as dairy and soda. There are also snacks, cookies and a great number of packaged food items. There is no grocery store in this particular location and Target makes use of that to offer its expanded grocery set.
Pet is another department Target moves around a great deal, and in the South Brunswick unit, it is near the front. The homegrown Boots & Barkley brand is the main focus and – in true Target fashion – even dog beds and bowls have a fashion twist.
It was back-to-school season for the opening and blackboard signs helped direct shoppers to the rear of the store where there were mountains of school supplies and attractive graphics of kids.
Target continues to improve the decor of its stores, which is coming closer to the hipness of its advertising and merchandise. Advertisements sent to area homes featured clever lift tabs to reveal mostly Target house brands. For example, one tab said “hello gorgeous” and lifting it uncovered a Sonia Kashuk lip palette. There was also a $5.00 coupon good for the grand opening period of the store.
Target’s formula is clicking with consumers. Target Corporation announced that four-week sales ended August 4, 2007 increased 10.8 percent. That’s a good definition of competitive pressure.
Discussion Questions: Drug stores in particular have
done well recently in developing shopping trips and building transactions through
an emphasis on health & wellness. What does Target’s new initiative in core
drug and supermarket categories mean for chain drug stores and grocery stores?
How should they respond, particularly in the area of beauty and personal care?
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More and more of Target’s assortment is private label or exclusive label. And Target’s private label emphasizes creativity not knockoff. So the margins can be higher, and the customer loyalty improves. Any chain drug store or supermarket needs to carefully consider the “creative private label” strategy that Target and Trader Joe’s uses. That doesn’t mean ending the knockoff private label items. But it does require a higher level of merchandising vision. And you don’t need to be a billion dollar retailer to do this. Trader Joe’s started out small. In HBA and grocery, there are thousands of eager modest-sized suppliers who don’t insist upon 8-figure supply agreements.
Private label doesn’t have to look like private label. Target has made it a brand all its own. Those consumers who want brand names will find more choices at the competition, but Target provides a great value to many consumers and benefits from their loyalty.
Target has done a great job in introducing the Boots product line into their stores. What is interesting with this execution is the fact that it is a semi-exclusive arrangement, one in which they share the exclusive US distribution with CVS. However Target took the approach of allowing Boots staffers to work in some of their stores, while CVS did not. Target continues to focus on how they can please their “guests” and this might in fact cause them to make non-traditional decisions when compared to other retailers. Their unwavering focus on the customer is what makes Target stand out, even if it makes them unpopular with some manufacturers.
Target is a very savvy retailer. While the company recognizes that food is a magnet for shoppers (and revenue), it also recognizes the gross margin dollars are elsewhere. Seasonal, beauty, and home goods, especially of the private label variety have much higher margins than food. So I expect we’ll see Target with a mixture of both.
I also believe there’s a lot of science behind Target’s art. Not well publicized perhaps, but assortment, price and replenishment operations are obviously computer-assisted.
Target still has lots of up-side potential. One also wonders if its formula will play outside of North America.
If the Super Target in our community is typical, their food efforts are not meeting what one would consider normal sales targets.
Aisles are often empty, especially compared to a Wal-Mart food department or a conventional supermarket.
And when only 2 out of 32 checkstands are in operation during the day, it doesn’t seem to indicate high sales volume of any kind.
Target has long been defined and compared to other “discount” retailers with comments relating to their trend merchandising and marketing savvy as being the major points of difference.
I believe that Target is something altogether different and this new round of store openings reinforces their success at refining, not redefining, their offering.
Targets assortment tracks their customers demands very well and over time the space they devote to categories have shrunk or grown to accommodate their customers changing lifestyles, needs and aspirational opportunities.
They succeeded in building a very respectable and quality Home business. Their offerings are affordable yet remind one of something that they might see in a Crate & Barrel, Williams Sonoma or a Pottery Barn.
Their seasonal offerings, while often narrow, are always intriguing and different. They scale their hardware, sporting goods and automotive sections appropriate to their clientele and leave the rest to the category killers and Wal-Mart to mess with and maintain.
They cannot be classified as a discounter, though their pricing is very reasonable. Their store layouts, fixtures and customer service separate them from a traditional discount operation, while their assortments, private labels and fashion offerings remind one of a trip to a specialty or department store.
Target continues to refine itself in a unique way that resonates with their customers, this latest group of store openings highlights the latest in their efforts to expand this success.
You have to ask yourself if HBA is where Target ought to make its stand. Category attractiveness aside, it doesn’t seem like the right category, especially given their current approach in terms of selection. Also, Target may be moving into dangerous waters if it tries to become a “complete” store for everyone. The effect could easily be to reduce its impact in core areas like fashion and home furnishing.
While drug and grocery stores need to take note of what Target is doing, they should NOT be responding to what Target does. They should be responding to what the consumers at THEIR stores want.
Target appears to be focusing on gaining share in “unglamorous” commodity categories like food, HBA and pet care. If they succeed in product differentiation as they have done so well throughout the store, they gain two key benefits. First, they gain share from the drug chains and other discounters (Wal-Mart) who are slower to move on trend and product development. Second, they have an opportunity to build higher margins into what are traditionally the lowest-margin categories in the store.
I would take a different view from Mark–I think Target’s [relatively] limited assortments provides the opportunity for other chains to have a more extensive assortment of brand names as their point of differentiation.
Additional Comment: Stephen and Richard (above) are correct. Target appears to be doing anything BUT differentiating itself in the area of HBA. The assortment carried seems to be the same, if not less, than what most of the mass markets already carries at EDLP and promotion prices every day of the year. I would love to see Target take an approach to HBA, the same way it does in fashion and trends throughout the rest of the store but at present, from what I have experienced and seen, this is anything but the case.
As we discussed in a recent consultative “coffee talk” group, Target’s approach to health and beauty care needs to be completely understood by the manufacturer before delving in because the window of opportunity is exceptionally short once the item makes its way to the shelves. Target will put in an HBC specialty item then pull it within just a few weeks. Whereas, I would like to see Target give items a longer and better chance to build up awareness, that tends not to be the case, so manufactures should not put new and different items, or specialty items in Target until the items have established themselves well in most of the rest of the mass markets.
Target has always had a “general store” format and it has adjusted the store format–micro marketing–to the neighborhood.
Being a very meaningful consumer marketer, Target continues to engage the target audience and what they want. Then, Target creates some memorable marketing and merchandising tactics for specific departments to secure the ‘fancy’ of the consumers’ minds.
Great way to keep competition on its toes and venture into other product categories. Hmmmmmmmm
Target is doing a great job of redefining themselves. They are also doing a helluva job with private label. Private label generally has a higher margin and thus this is a great move for Target.
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More and more of Target’s assortment is private label or exclusive label. And Target’s private label emphasizes creativity not knockoff. So the margins can be higher, and the customer loyalty improves. Any chain drug store or supermarket needs to carefully consider the “creative private label” strategy that Target and Trader Joe’s uses. That doesn’t mean ending the knockoff private label items. But it does require a higher level of merchandising vision. And you don’t need to be a billion dollar retailer to do this. Trader Joe’s started out small. In HBA and grocery, there are thousands of eager modest-sized suppliers who don’t insist upon 8-figure supply agreements.
Private label doesn’t have to look like private label. Target has made it a brand all its own. Those consumers who want brand names will find more choices at the competition, but Target provides a great value to many consumers and benefits from their loyalty.
Target has done a great job in introducing the Boots product line into their stores. What is interesting with this execution is the fact that it is a semi-exclusive arrangement, one in which they share the exclusive US distribution with CVS. However Target took the approach of allowing Boots staffers to work in some of their stores, while CVS did not. Target continues to focus on how they can please their “guests” and this might in fact cause them to make non-traditional decisions when compared to other retailers. Their unwavering focus on the customer is what makes Target stand out, even if it makes them unpopular with some manufacturers.
Target is a very savvy retailer. While the company recognizes that food is a magnet for shoppers (and revenue), it also recognizes the gross margin dollars are elsewhere. Seasonal, beauty, and home goods, especially of the private label variety have much higher margins than food. So I expect we’ll see Target with a mixture of both.
I also believe there’s a lot of science behind Target’s art. Not well publicized perhaps, but assortment, price and replenishment operations are obviously computer-assisted.
Target still has lots of up-side potential. One also wonders if its formula will play outside of North America.
If the Super Target in our community is typical, their food efforts are not meeting what one would consider normal sales targets.
Aisles are often empty, especially compared to a Wal-Mart food department or a conventional supermarket.
And when only 2 out of 32 checkstands are in operation during the day, it doesn’t seem to indicate high sales volume of any kind.
Target has long been defined and compared to other “discount” retailers with comments relating to their trend merchandising and marketing savvy as being the major points of difference.
I believe that Target is something altogether different and this new round of store openings reinforces their success at refining, not redefining, their offering.
Targets assortment tracks their customers demands very well and over time the space they devote to categories have shrunk or grown to accommodate their customers changing lifestyles, needs and aspirational opportunities.
They succeeded in building a very respectable and quality Home business. Their offerings are affordable yet remind one of something that they might see in a Crate & Barrel, Williams Sonoma or a Pottery Barn.
Their seasonal offerings, while often narrow, are always intriguing and different. They scale their hardware, sporting goods and automotive sections appropriate to their clientele and leave the rest to the category killers and Wal-Mart to mess with and maintain.
They cannot be classified as a discounter, though their pricing is very reasonable. Their store layouts, fixtures and customer service separate them from a traditional discount operation, while their assortments, private labels and fashion offerings remind one of a trip to a specialty or department store.
Target continues to refine itself in a unique way that resonates with their customers, this latest group of store openings highlights the latest in their efforts to expand this success.
You have to ask yourself if HBA is where Target ought to make its stand. Category attractiveness aside, it doesn’t seem like the right category, especially given their current approach in terms of selection. Also, Target may be moving into dangerous waters if it tries to become a “complete” store for everyone. The effect could easily be to reduce its impact in core areas like fashion and home furnishing.
While drug and grocery stores need to take note of what Target is doing, they should NOT be responding to what Target does. They should be responding to what the consumers at THEIR stores want.
Target appears to be focusing on gaining share in “unglamorous” commodity categories like food, HBA and pet care. If they succeed in product differentiation as they have done so well throughout the store, they gain two key benefits. First, they gain share from the drug chains and other discounters (Wal-Mart) who are slower to move on trend and product development. Second, they have an opportunity to build higher margins into what are traditionally the lowest-margin categories in the store.
I would take a different view from Mark–I think Target’s [relatively] limited assortments provides the opportunity for other chains to have a more extensive assortment of brand names as their point of differentiation.
Additional Comment: Stephen and Richard (above) are correct. Target appears to be doing anything BUT differentiating itself in the area of HBA. The assortment carried seems to be the same, if not less, than what most of the mass markets already carries at EDLP and promotion prices every day of the year. I would love to see Target take an approach to HBA, the same way it does in fashion and trends throughout the rest of the store but at present, from what I have experienced and seen, this is anything but the case.
As we discussed in a recent consultative “coffee talk” group, Target’s approach to health and beauty care needs to be completely understood by the manufacturer before delving in because the window of opportunity is exceptionally short once the item makes its way to the shelves. Target will put in an HBC specialty item then pull it within just a few weeks. Whereas, I would like to see Target give items a longer and better chance to build up awareness, that tends not to be the case, so manufactures should not put new and different items, or specialty items in Target until the items have established themselves well in most of the rest of the mass markets.
Target has always had a “general store” format and it has adjusted the store format–micro marketing–to the neighborhood.
Being a very meaningful consumer marketer, Target continues to engage the target audience and what they want. Then, Target creates some memorable marketing and merchandising tactics for specific departments to secure the ‘fancy’ of the consumers’ minds.
Great way to keep competition on its toes and venture into other product categories. Hmmmmmmmm
Target is doing a great job of redefining themselves. They are also doing a helluva job with private label. Private label generally has a higher margin and thus this is a great move for Target.