Is Target set for a growth spurt?

Discussion
Feb 03, 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.

"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."

Is Target better positioned for growth in the U.S. today than it has been in recent years? Do you share Brian Cornell’s view that smaller store formats represent exciting growth opportunities for Target?

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15 Comments on "Is Target set for a growth spurt?"


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Dick Seesel
Guest
7 years 3 months ago

Target and other competitors recognize the potential of small-format and urban locations, given the coast-to-coast saturation of their traditional formats. But more importantly, the Canada and data breach debacles are now in the rear view mirror for the Target management team.

If Mr. Cornell can deliver on the promise of more compelling merchandise initiatives, and more “speed to market” (in keeping with the Target brand heritage), it will be a big win for the company regardless of the pace of store openings.

Max Goldberg
Guest
7 years 3 months ago

Target will benefit from the smaller-store format. Many urban areas cannot accommodate full-sized stores, so the CityTargets make sense. What I question is what the Target brand stands for. Is it cheap-chic? Is it low prices? Target has been without a core brand message for a few years and it has hurt the company. In order to accelerate growth, Target needs to explain to consumers why it is relevant.

Frank Riso
Guest
7 years 3 months ago

They are in a very good position. Without the stores in Canada the losses will end. Their merchandise will also improve. Target is back on track.

Mark Heckman
Guest
7 years 3 months ago

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.

  1. It provides an economical expansion vehicle in markets that are not likely to cannibalize existing sales from sister stores.
  2. 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.

Gene Detroyer
Guest
7 years 3 months ago

Am I the only one that bristles when Target calls their customer “guests” rather than customers?

Ed Rosenbaum
Guest
7 years 3 months ago

The smaller store concept can be a winner for Target. Now that Canada is in the background, the management can focus on building and branding in the U.S. There appears to be a mindset of “we screwed up, it’s over and lets move forward” within Target’s inner circle. This might provide the resurgence they need.

Gene Detroyer
Guest
7 years 3 months ago

And why would Target be better positioned for the growth in the U.S. today than it has been in recent years? Overall the U.S. retail market is saturated with no prospects to grow on average by more than 2 percent to 2.2 percent a year. So the question is who will be willing to lose business to Target? Target Express sounds very much like the new Duane Reade (Walgreen’s) stores here in the city. Are the drug chains going to give up their positions to Target? While smaller-format mass does give a market opening in urban areas, mass is still the most saturated channel.

When a business in a saturated marketplace forecasts growth beyond population growth, they have to ask “who is going to stand by and let me take business from them?” At least on the brick-and-mortar side, I don’t see any competitors standing on the sidelines for Target to be successful.

J. Kent Smith
Guest
7 years 3 months ago

15 stores? What percentage does this represent? No doubt they won’t have the Canadian operations to distract them, and indeed the loss of planned growth from it will force them into chasing it domestically. That being said, the complete failure in Canada might speak to bigger problems. So with Target I think it’s a wait-and-see.

Roger Saunders
Guest
7 years 3 months ago
Target has had its share of naysayers over the past 24 months. The credit card breach, changing of the guard of executive team members and the need to “stop doing” some strategies, and “sustain” others as new tactics were laid out, creating disruption that carried over to the consumer. Brian Cornell has leveled the ship and Target is positioned to move ahead smartly. The key is to regain consumers’ confidence for a broad line of merchandise items. Throughout 2014, Prosper’s Monthly Consumer Survey monitored a useful index of consumers behavior with a consumer expenditure app. Looking at a year-over-year preference for shopping Target MOST often for a variety of merchandise lines, Target was falling behind on women’s clothing (91.77 index), men’s clothing (90.52 index), and sporting goods (86.31 index). They held things level in the eyes of consumers for shoes (97.35 index), linens/bedding/draperies (99.14 index), and children’s clothes (99.89 index). Importantly for Target, they gained ground on prescription drugs, (102.85), HBA (108.77), and children’s toys (111.59). The Monthly Consumer Survey also pointed out that Target’s… Read more »
Lee Kent
Guest
7 years 3 months ago

Target will benefit from smaller format stores as long as they stay true to their brand. Reading about the Target Express above, they seem to be focused on food. Fresh produce at that. Come on now, is that Target’s forte?

If Target is going to succeed in this market they will need to bring back the tres chic, Tar-jay brand that everyone used to know and love.

At least for my 2 cents

RIchard Hernandez
Guest
7 years 3 months ago

Target is in trend in opening smaller format stores. I believe they will have to tailor the assortment to the neighborhood in order for them to work effectively. Definitely a chance to redeem themselves.

Liz Crawford
Guest
7 years 3 months ago

Target is poised to grow. They made the hard decision to jettison the Canadian business (cut bait), and have made it past the debit/credit card security crisis. They are ready to reap the rewards of their astute test-and-learn program with Target Express.

I love TargetExpress. It integrates digital and in-store so that Millennials intuitively grasp how to navigate the space with their mobile devices. While it is still in its nascent stages, I believe that this is the path toward the future…and Target is leading the way.

Craig Sundstrom
Guest
7 years 3 months ago

“Smaller formats like TargetExpress and CityTarget…are an admission that our big-box format is saturated and we’ll be inching forward…” before the microphone was pulled from…

Okay, that burst of candor didn’t really happen, and to be sure there will always be big-box growth opportunities in Sunbelt suburbs (that you’ve never heard of) which have grown to megalopolitan stature. But the fact that the CEO is “excite(d)” by a handful of glorified convenience stores says something, namely that (1) “once burned, twice shy” will be their approach to foreign expansion and (2) their approach to capturing the other 98.58% of America’s retail sales will be timid, at best.

Gordon Arnold
Guest
7 years 3 months ago

This is all great news for Target’s board of directors, investors and vendors I can hear the cheering now. Taking baby steps to recover billions of dollars in loses for the many corporate gigantic mistakes of the recent company history is just what the doctor ordered, Dr. Kevorkian that is. I sincerely hope this works well for them but like many others, I expected more.

vic gallese
Guest
7 years 3 months ago

Absolutely! Mr. Cornell is a savvy guy. Exiting Canada (even early) will allow Target to focus on all the US opportunities. My bet goes with Mr. Cornell to put the pep back in Target’s step!

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