February 3, 2015
Having bailed on Canada, Target is set to focus on growing its business in the U.S. Yesterday, the chain announced plans to open 15 stores this year including eight TargetExpress locations, one CityTarget and six general merchandise stores. Is Target better positioned for growth in the U.S. today than it has been in recent years?
“Smaller formats like TargetExpress and CityTarget offer customized assortments and services to meet the needs of guests who are increasingly moving into urban centers,” said Tina Tyler, executive vice president and chief stores officer, Target.
“In our general merchandise stores, we’re embracing a test and learn philosophy, innovating with layouts and experiences and bringing digital and bricks and mortar together like never before.” The retailer opened its first TargetExpress, a 20,000-square-foot beta store in Minneapolis’s Dinkytown area near the University of Minnesota campus last summer. The store was tailored to meet the needs of students and local residents. The store features fresh produce, grab-and-go foods, snacks and beverages. The unit also includes a pharmacy, a beauty department with concierge as well as areas for electronics, home and seasonal items.
Target, which had already announced plans to open new Express locations in San Diego, San Francisco and St. Paul, will open stores in Chicago and Washington, D.C. The retailer is also looking at other sites in Los Angeles and Philadelphia.
Target also plans to open a new CityTarget, the chain’s mid-size format ranging in size from 80,000- to 160,000-square-feet, at a location near Fenway Park in Boston. Next year, the company will open another unit in Brooklyn, NY. The two locations will be the first CityTargets on the East Coast. There are currently eight CityTarget stores operating in Chicago, Los Angeles, Portland, San Francisco and Seattle.
On Target’s third quarter earnings call in November, CEO Brian Cornell told analysts (via SeekingAlpha), “We believe that smaller formats present an exciting opportunity for Target, because urban consumers have such a high affinity for our brand. If we can reach more of these guests with small flexible formats like CityTarget and TargetExpress we can offer urban consumers greater convenience, unique merchandise and an outstanding value with extended assortment available at target.com.”
Mark’s COMMENTARY: One thing we know about Brian Cornell is that he is committed to expanding Target’s digital and e-commerce presence in the marketplace. Expanding Target’s physical presence with smaller stores that are likely to be in position to work in concert with their digital strategy makes sense on several levels.
- It provides an economical expansion vehicle in markets that are not likely to cannibalize existing sales from sister stores.
- The smaller footprint allows Target to focus on new technology and how it relates to the in-store shopping experience, which would be more difficult and costly in their larger formats.
We are entering a phase of retail development where physical stores are going to shrink commensurate with the retailer’s ability to grow online sales as a means to compete for a techno-savvy shopper. While there will be bumps in the road, with this strategy, Target is at least on the right street.