Should food be an afterthought for Target?
Through a special arrangement, presented here for discussion is an excerpt of a current article from Frozen & Refrigerated Buyer magazine.
Target earns credit for its omnichannel excellence, private label prowess, in-store merchandising efforts and addictive Circle Rewards program, but the feeling by market observers is that the chain has traditionally done a much better job with non-foods than foods.
“Frozen and refrigerated departments are pretty standard,” Neil Saunders, managing director of retail at GlobalData, says, echoing what we heard from manufacturers in our profile on Target. (Actually, “plain vanilla” was used by more than one.)
The grocery shopping experience is definitely better, says Mr. Saunders, citing new shelving, lighting, signage and better, more prominent displays of produce. “But I would argue that there’s still more to do on grocery and that Target should be a lot more innovative and experiment with things like counters, fresh products and meal solutions.”
However, he continues, “My sense is that Target still hasn’t decided what it wants to do in grocery so there’s a reticence to invest in changing things up. At the moment, it seems to be caught between being a top-up shop and a full-line grocery store.”
Target has been one of the major market share winners during the pandemic. Comps grew 19.3 percent in 2020 and 22.9 percent in the first quarter, driven by its same-day services.
“Target really owns omnichannel excellence,” says Don Stuart, managing director of Cadent Consulting Group.
He adds, “Walmart is a behemoth in food, generating approximately 50 percent of its sales from edibles to Target’s 20 percent, and Amazon rules e-commerce. But Target is better at tying it all together with an integrated omnichannel experience.”
The opportunity for Target to capture a greater proportion of spend in food from shoppers is there, Mr. Saunders adds, but the chain doesn’t appear ready to take it.
Mr. Stuart agrees, “Target may be trying to figure out exactly what it wants to be in food and beverage versus other areas where it plays harder and better,” he says.
Or perhaps the chain recognizes that margins are lower in food and beverage compared to other categories it competes in but knows it still needs to play there because food drives trip frequency.
DISCUSSION QUESTIONS: Should Target be looking at the food category primarily as a traffic driver or as a much broader opportunity? Has Target’s omnichannel success coming out of the pandemic opened up more opportunities around food?