With increased emphasis on areas such as the home department, the retailer’s new initiatives are designed to help build grocery sales.
By David Gill
Target has filled its plate in recent years with new formats and plans to expand internationally. With all of these developments, the home department stands very high on Target’s agenda of categories to broaden and use to build sales elsewhere, according to Stacia Andersen, senior vice president of merchandising for the Minneapolis-based retailer’s home area. She gave an exclusive interview to Home Furnishings News, a sister publication of Grocery Headquarters.
Seeking to gain a greater piece of the food business, it is becoming more apparent that Target officials want to use the chain’s well-developed general merchandise categories, including the home department, to encourage more purchases from its growing grocery business. “Target has realized that it can use its reputation as a well-rounded mass merchandiser to get consumers to shop for more grocery items,” says one industry observer. “This makes total sense, since its greatest competitor, Walmart, is using the same strategy to build store traffic and sales.”
Grocery has certainly taken on more importance at Target and the chain is definitely using such categories as baby care, pet care and housewares to bolster food sales at many of its stores.
Two years ago, Target debuted its PFresh format featuring an open-market grocery and a 50% to 200% increase in food merchandise over its long-standing SuperTarget format. In February, the company announced another new format called CityTarget, measuring 60,000 to 80,000 square feet and intended for urban areas. Target is also set on becoming a global retailer by opening stores in Canada and Puerto Rico over the next few years.
Regarding PFresh (which has since been opening in locations throughout the U.S.), Andersen says the remodels have had a direct impact on home because of the enlarged grocery’s adjacency to Target’s kitchen products area. “With added food products, we become more important in the kitchen,” she says. “If a guest is doing more food shopping with us, we want to provide the total kitchen solution. This will include blenders, gadgets and every other product that goes with food preparation.”
The CityTarget format will offer the opportunity for Target to tailor its whole home assortment to urban shoppers. “This guest tends to be fashion forward and live in a small space,” Andersen says. “She will see the products she sees in a regular Target in an edited assortment, with an emphasis on the products that will help her deal with her small space.” The first CityTarget is slated to open in Chicago, in the former Carson Pirie Scott building, in 2012.
Andersen says the company is talking to urban shoppers about what assortments will be appropriate in this format. “These are urban consumers, apartment dwellers and also those who work in the city and can shop in the store during lunch or after work,” she says.
She also notes that Target is sounding out consumers in both Canada and Puerto Rico as to the assortments that would be most appropriate for those stores. “Our approach is to customize the assortments so that it’s still Target but customized to those areas,” she says.
There are a lot of changes coming that will have a direct impact on Target’s home sector. However, many things will remain the same as the retailer thrusts into the future. One is its attitude toward its customers, who for years have been referred to as guests. This implies that shoppers are welcome in Target stores the way a family welcomes visitors to its home: with open arms and a dedication to meeting their every need.
Target’s home brands are segmented to the varying demographics of guests who regularly shop the store. “Our largest segment is moms, for whom we have the Target Home brand,” Anderson says. “It features muted palettes, durability and great quality in products. She has kids and is entertaining a lot.”
To meet the needs of moms, Target has developed the Circo brand for furniture, children’s room products and storage. There is also the Xhilaration brand for teens, which in home consists of products to help them decorate their rooms. Moving further up the age scale, for college students and young adults, there is the Room Essentials brand in bedding and bath.
Other key home brands are Smith & Hawken, acquired last year and encompassing outdoor furniture and décor, and Fieldcrest, its higher-end brand in bedding and bath textiles. Target also offers brands stemming from its partnerships with home celebrities such as Michael Graves in kitchen utensils, organization and cleaning products; Thomas O’Brien in lighting and soft home; and Giada De Laurentiis in cookware, gadgets and bakeware.
Another aspect of the business that will stay the same will be Target’s strategy on pricing. Target’s long-standing price tagline has been “Expect More. Pay Less.” “The way we think about pricing is that we try to provide a great value,” Andersen says. “The price needs to be approachable, but we want to deliver more for the dollar than the competition. Target is known for great style and great value, and we try to reflect this in the home area.”
The merchandising of the home department—indeed, in every area of the store—has become a major focus given criticisms of Target from financial analysts who cover the retail industry. Acknowledging that all retailers were hurt in the economic downturn, Greg Melich, senior managing director and retail hardlines analyst for New York-based International Strategy & Investment, says Target has underperformed some of its competition due in part to conservative merchandising. “Their merchandising and assortment has to be better,” he says.
Almost in answer to this, Andersen says the home department’s merchandising puts “more focus on creating worlds to mirror how the guest shops for home.” She cited the closeness of the kitchen product categories to the grocery department “to create a natural synergy. We have combined all of our kids’ categories—bedding, storage and furniture—to create a cohesive statement for mom.”
Still another factor of Target’s business that will not change—with new formats, expanded product areas and its new focus on becoming international—is Target’s determination to continue listening to its guests. Andersen says that this effort includes being guests of their guests and visiting them in their homes.
“We are solutions providers,” she says. “It means listening to the customer and learning how she lives. We spend time with guests in their homes and develop products based on those visits, from what kind of quality she expects, and what she expects in style and function.”