Can anyone fix Target’s grocery business?


Back in April of last year, a RetailWire headline asked the question, “Will Target’s new grocery boss get the job done?” Unfortunately for Anne Dament, the person handpicked by Target CEO Brian Cornell to do the job, the answer appears to be “no” as the company announced she is leaving the company less than 18 months into her tenure.
Neither Target nor Ms. Dament, a former Safeway executive, has commented on the reason for her departure at this point, according to reports. She will leave the company on Nov. 18. Mark Tritton, Target’s chief merchandising officer, will assume her duties while a replacement is sought.
Target’s same-store sales in the last quarter were down 1.1 percent as traffic declined 2.2 percent. Weakness in the company’s grocery business has been cited as one of the factors in Target’s recent struggles and its decision to lower its future forecast.
“They’re just in a really tough spot,” Brian Yarbrough, an analyst with Edward Jones, told the Minneapolis Star Tribune. “They don’t have enough groceries to drive people to the store regularly. Groceries for Target never turned out to be a destination like they thought it would be.”
Ms. Dament’s departure is the latest episode in the ongoing shakeup of Target’s c-suite. Last month it was announced that Jason Goldberger, who was named Target’s chief digital officer in May and who served as president of Target.com since 2014, had left the company. Mr. Goldberger’s duties were split between Mike McNamara, Target’s chief information officer, and Mr. Tritton.
- Target’s grocery chief Anne Dament is leaving – Minneapolis Star Tribune
- Target’s leadership shakeup continues, grocery chief steps down – Reuters
- Target’s Grocery Chief to Leave – The Wall Street Journal (sub. required)
- Will c-suite shakeup lead to better digital results for Target? – RetailWire
- Will Target’s new grocery boss get the job done? – RetailWire
DISCUSSION QUESTIONS: What would it take to fix Target’s grocery business? Should the retailer scrap groceries altogether?
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22 Comments on "Can anyone fix Target’s grocery business?"
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President, Max Goldberg & Associates
Unlike Walmart, Target seems to treat groceries like an afterthought; something deserving limited space but not enough to drive consumers to the stores. The company needs to make a full commitment to grocery or quit groceries. Either strategy carries risks. Devoting more space to grocery will require additional resources (human and financial) and space. Quitting grocery will create a competitive disadvantage against Walmart.
Professor, International Business, Guizhou University of Finance & Economics and University of Sanya, China.
Target treats everything as an afterthought. One of these days they might just come up with a strategy that propels them forward, but they are always looking for the silver bullet.
Managing Partner, Advanced Simulations
They should probably scrap food and keep grocery items like household cleaners, laundry, etc. that are easily warehoused and have no expiration date. At least here in Atlanta, they never seemed committed to a wide assortment and had a heavy dose of private label.
Principal, Retailing In Focus LLC
It’s hard to judge Ms. Dament’s performance based on fewer than 18 months on the job and the possibly insurmountable challenge she faced. Maybe she underperformed, maybe it was a bad cultural fit or strategic clash — who knows? Anybody trying to turn this around quickly has not been dealt a winning hand.
Brian Cornell wrote off the Target Canada fiasco very quickly, but I’m not sure he can walk away from the grocery business so easily. The company spent billions on remodels and infrastructure to establish the business and it doesn’t appear to have a replacement strategy waiting in the wings.
But how does Target fix it? It’s not a “top of mind” business and doesn’t have the critical mass needed to draw weekly shoppers. Perhaps Target should hire somebody from a more disruptive grocer (think Aldi or Trader Joe’s) who can offer up a more innovative, curated approach to the category.
Target Channel Manager - Casestack
Trader Joe’s. Back in early 2015, a few grocery supply chain leaders at Target thought the Trader Joe’s model could be tweaked to fit the Target business model. Unfortunately, those same leaders were let go during the March 2015 staff layoffs.
It is not a secret that Target runs its grocery business upon their general merchandise strategies and systems. I would expect any traditional grocery model to struggle at Target, without a significant system overhaul. Looking at your idea from a fit perspective, a “disruptive grocer” model would have a better chance at aligning with Target’s core business model than a traditional grocer model. Your Target fix has support and merit!
Vice President, Strategic RelationsHamacher Resource Group
Getting it right at retail in any segment is an ever changing goal. And the grocery segment has been rapidly evolving (consolidation, Amazon Fresh, Aldi, Lidl, convenience channel expansion, etc.) during Ms. Dament’s watch.
That said, I don’t believe Target should give up on grocery. Why? Because the shoppers in the store have found benefit in the one-stop shopping environment. The challenge, in my opinion, is that the assortment is too broad in some categories, too narrow in others, and not organized for convenience. I’d prefer that Target make a decision to either be a full-line grocer (this is going to present the biggest challenge), a private brand destination (e.g., Aldi-esque), or a c-store (think “7-11 inside”). Once identity is determined, Target must rally around that focused business and return to its more effective marketing roots.
I’m sure many of my BrainTrust counterparts will recommend abandoning grocery altogether … I guess I’m the eternal optimist and would rather see this phoenix rise from its own ashes.
Advisor, MyAlerts
Target cannot scrap grocery any time soon because filling that floorspace with something more exciting and profitable would be a huge challenge. Today there is nothing distinctive about grocery. The shopping experience is much like the regional smaller-space grocers competing with the big guys in the market. That is, it is utilitarian, meaning the shopper feels like she can likely get everything she needs, but the experience is nothing unique. However, there is a very interesting Future of Food project underway at Target, and in the future we might start to see more Apple store-like experiences in Grocery at Target.
President and CEO, ProLogic Retail Services
It’s easy to say that Target should exit the grocery business, but grocery now accounts for 20 percent of Target’s revenue and the retailer is in no position to absorb a loss of this magnitude. Target needs to continue to explore how to apply its value proposition successfully to grocery. Exclusive brands at affordable prices has worked in the fashion category and a differentiated grocery model along these lines may succeed as well.
Principal, Cathy Hotka & Associates
No, no, no. Target entered the grocery business to recession-proof the company, but there’s nothing about Oreos and frozen fish that reinforces Target’s brand as the leader of chic and inexpensive trendiness. Grocery selections are thin and the margins are thinner. I’ll predict that this experiment will last only a few more years.
Managing Partner, Deeb MacDonald & Associates, L.L.C.
Target has been half pregnant in grocery for many years. They are trapped somewhere between a limited-assortment retailer and a conventional supermarket. In addition they hid their offering as far from the door as possible making it more difficult for shoppers to get in and out of the store. They further compounded this, in my opinion, with no or little cross-merchandising with higher-volume items near the higher-margin general merchandise area (i.e. Walmart’s power alley).
Target might be better served to carry only non-perishable household items and soda and snacks, etc. and devote more space to their strengths in higher-margin apparel, toys and other like categories.
Politically, Target made fatal mistakes. If I made a list of what wrong, there would be no room for the solutions. Best advice is to quit while your losses are sustainable, otherwise you will bury yourself.
Professor of Food Marketing, Haub School of Business, Saint Joseph's University
Having read the comments of other contributors one can understand the varying opinions. I think it would be a mistake to exit grocery. Everyone knew it was going to take a while to turn this aircraft carrier. I suggest that Target follows two of my rules of strategy (number seven and eight), namely, focus-focus-focus and concentrate your resources. Target needs to focus on grocery and figure out what the job is to be done in grocery relative to its customer base. Having done that, Target needs to concentrate its resources at the point of attack, namely the grocery section, to achieve the job to be done. If neither of these two actions take place, then grocery will continue to be a drag on Target’s performance.
CEO
CEO, Dabbl
Chairman
Target was really dumb to get into the grocery business. They used to have a neat electronics department which they downsized to make room for ice cream and milk. They have a poor selection of groceries and they are usually located near a good full-service grocery store. They should admit their mistake and remove the grocery section, and rebuild electronics and other departments they sacrificed.
EVP Thought Leadership, Marketing, WD Partners
Target should commit or get out of grocery for sure. And by committing, I mean making grocery a priority, like their competition does — better fresh, more space devoted to the category, warmer design (grocery customers don’t like “sterile,” just ask Whole Foods), feature grocery up front vs the dollar area, meals to go, devoted staff, BOPIS, on and on. Grocery just doesn’t feel like it matters in Target and customers can sense that.
Then there’s the whole issue of not doing it well for the past 30 years. Customers get that too.
So here’s my suggestion: take it all online. Do online grocery in select markets only and store it in the back of key locations for BOPIS and shipping. It’s just too big of an investment for front of house during this era of shrinking physical retail. Why bother when most likely you’ll be closing a lot of stores in the years coming up. You’re going to wind up competing with online grocers anyway, why not start now?
CFO, Weisner Steel
What, really, are there options? If they drop grocery then they’ll have large amount of space in their stores which will either be empty or devoted to items (presumably) even less profitable. They could try to lease it — as they did with pharm — but I have no illusion that there’s any (other) grocer who would be interested. So they own it. Live with it.
CEO, President- American Retail Consultants
Grocery is not Target’s strength, and it should be accepted that it cannot be with the limited selection and space Target has committed to this. Short of a new store design for all Target stores, Target should focus on its strength in hard goods and commit the resources to continually improving those categories it includes instead of shifting resources into a losing proposition like grocery.
Owner, Tony O's Supermarket and Catering
Chief Data Officer, CaringBridge
The challenge of the grocery business is the depth of the product assortment that is required by today’s upscale customer segment. Target has attempted to replicate European grocery stores in creating a higher-end store brand, but American consumers are more attached to their own brands and do not see the value in the store brand to create a premium price.
Target can be a small private label grocery provider or a larger branded grocery provider — there really are not any other choices.
President, Affluent Insights & The Home Trust International
The first rule is reinforce your DNA. The second is give those who are your best prospects and customers what they want.
So far, zero out of two.