Target Ready to Make Statement in Food

Discussion
Apr 30, 2007

By George Anderson

A new report from J.P. Morgan suggests Tesco and Target may be ready to shake up the U.S. grocery business, according to Reuters.

While there have been plenty of reports about Tesco’s planned entry into the U.S., the suggestion that Target may finally be ready to deliver something on the food side akin to its success in soft and hard goods merits attention.

J.P. Morgan projects Target along with Tesco will eat into the market share of supermarket chains possibly leading to further consolidation within the grocery channel.

Target has increased its emphasis on food over the past couple of years, including expansion of grocery space in its discount stores. It has also sought to differentiate with store brands including launching Archer Farms USDA certified organic products and a line of super premium pet foods under the LIFElong brand.


Discussion Question: Is Target finally putting itself in a position to become a significant force in the U.S. grocery business?

Please practice The RetailWire Golden Rule when submitting your comments.

Join the Discussion!

21 Comments on "Target Ready to Make Statement in Food"


Sort by:   newest | oldest | most voted
Joel Rubinson
Guest
15 years 21 days ago

Target is about affordable indulgence for everyday people (my outsider’s view of them, anyway). How would that play in a food space? I think it puts them into a “Food Emporium” rather than a Trader Joe’s space, so they can offer an interesting, explorative format, but still offer national brands that everyday people prefer so they can capture the big pantry loader trips.

David Livingston
Guest
15 years 21 days ago
Target still has a very long way to go before they get taken seriously in food. Target is getting better all the time and seems to have made the largest strides in the Twin Cities. Having the home court advantage has helped in this area. Still, looking at the results, the very best SuperTargets would only be considered an average Wal-Mart in terms of food sales. Our recent studies show SuperTarget is up to about a 7% market share in the Twin Cities and remains ahead of Wal-Mart Supercenter. In most other metro areas they still linger around 2% or 3% but are always slowly increasing. So far we have only seen SuperTarget in larger metro areas. They don’t have–and probably never will have–the small town network that Wal-Mart enjoys. My clients are always concerned about what Wal-Mart is up to along with the other major supermarket chains. So far though, none of my clients have ever expressed any concern over SuperTarget except perhaps in the Twin Cities.
Joel Mincey
Guest
Joel Mincey
15 years 21 days ago

Target excels in retail marketing and merchandising; grocery will be no different. Up to now the grocery business has been almost an afterthought. Once Target focuses on this business and brings their considerable expertise to bear, they will undoubtedly be a major player.

The convenience of being able to shop at one store for nearly everything is very appealing to consumers, in particular for mothers of small children (you can only make so many stops before the “meltdown” occurs).

Stephan Kouzomis
Guest
Stephan Kouzomis
15 years 21 days ago

Target has been successful in marketing its ‘regular’ store side, if you will. But, as others have said, the means to grocery and foods/meals success involves more than just merchandising and price.

Target has the culture to bring “outside-of-the box thinking”, innovation and marketing expertise. We will wait and see…Hmmmmmmmmmmmmmmmmmm!

Phillip T. Straniero
Guest
Phillip T. Straniero
15 years 21 days ago
Based on a recent visit to the Target website, they currently operate about 1500 stores in the U.S. with only 175 stores featuring a full-line grocery operation. If one were to go back in time, it did not take Wal-Mart very long to expand its Supercenter format to a significant number of outlets and become a major factor in the food industry. Depending on Target’s long-term strategy, I can see this happening very quickly if they choose to go this route. At this time I see them taking a more focused approach to food using the current approach to expanding their square footage to accommodate a more robust food offering without having to abandon their real estate locations. I think this approach allows them to protect their overall gross margin while participating in the food business in a more “targeted” fashion. The new Tesco model will revolutionize the food industry but I wonder if this will be a West Coast model that might be difficult to implement across the country…on the other hand Starbucks was… Read more »
Dr. Stephen Needel
Guest
15 years 21 days ago

Anyone with enough real estate can challenge grocery stores for shares. The question is, what will make Target unique? Is it selection? Is it prices? I would expect more limited selections because that’s what Target does in many of its HBA categories. The food prices at our Target superstores here in Atlanta are nothing special relative to Kroger–but their selection sometimes expands the offering because they bring in brands not normally found in Atlanta. This is not much of a draw–I’m not going out of my way to shop there.

Mark Lilien
Guest
15 years 21 days ago

It does not matter whether Target is doing all it can in food today. Target’s culture is what counts for the future. The Target culture takes commodity categories and makes part of the assortment special, giving Target better margins than its competition. Target’s food assortment will be more innovative (like Trader Joe’s type of innovation). Equally important: Target’s formula includes dropping the categories that can’t make money for them.

Gene Hoffman
Guest
Gene Hoffman
15 years 21 days ago

A river is not a river that does not flow–and Target is a flowing, albeit patient, river. For the past few years observers have watched Target experiment with various food assortments, combinations and merchandising techniques. They are trying to become “something different” in grocery/food marketing. They want to create upscale contemporary and imaginative foods with higher margins under their stylish and proliferating Archer Farms label and let that be their highway to Target Uniqueness. If they can pull off that strategy, they will cause a rumble in grocery retailing.

Raymond D. Jones
Guest
Raymond D. Jones
15 years 21 days ago
It is not surprising that Target would want to capture more of the food dollar. They can see how successful Wal-Mart has been with their supercenters. It is, however, very ironic. For many years, supermarkets expanded their offerings to include non-foods such as HBC, OTC drugs, General Merchandise, and even TV sets. They justified this as convenience for the shopper but, in many instances, it was driven by the thirst for volume. Often, it seemed that they were interested in selling everything but food. Now, supermarkets face competition in food from Mass, C-stores, Drugstores, and Dollar stores. Everyone is trying to capture the shopper and sell them food. In effect, supermarkets lost their focus and invited competition. This also provides outfits like Whole Foods and Tesco an opportunity to carve out a position as “real” grocery stores. It is important for retailers to understand that their position in the market is not simply defined by the products they sell. Rather, it is defined by the consumers they serve, the type of trips or buying needs… Read more »
David Biernbaum
Guest
15 years 21 days ago

A new report from J.P. Morgan suggests Tesco and Target may be ready to shake up the U.S. grocery business, according to Reuters. My opinion is that Tesco and Target are really two different issues where grocery is concerned. Tesco is already a major player in the food industry and is probably in an able position to compete for market share in the U.S., but in particular, on the west coast. Target, in my view, has done an outstanding job creating and maintaining a certain image as the trendy discount leader and likely walks a fine line in the potential grocery arena. If Target keeps its trendy position into grocery it will fair quite well.

Matt Werhner
Guest
Matt Werhner
15 years 21 days ago

Target’s approach of slowly expanding their supercenter format on a large scale was a smart strategic decision. The company knew it could not compete head to head with Wal-Mart on price. Instead, Target learned from Wal-Mart and implemented some best practices into their format. I believe some of those to be lowered price point, extensive private label offerings, clean merchandising, and an in-store pharmacy location.

Our data shows that their highest grocery market share (8.4%) is in the Lawrence, Kansas CBSA; however, they only hold an average of about 2-3 percent share overall in their markets. I think their format appeals to middle income consumers, in contrast to Wal-Mart’s lower income consumers that are willing to deal with crowded stores to get a low price point.

Dick Seesel
Guest
15 years 21 days ago

One of the commentators used Trader Joe’s as a potential model for Target, and Whole Foods might be another. (In fact, a strategic alliance with a well-known “brand” in the specialty food business might be a smart idea for Target.) To be fully engaged in the grocery business, like Wal-Mart, probably requires a commitment of real estate and logistics that is somewhat outside the Target model. So keeping a more focused, upscale, margin-rich approach to the specialty food business makes more sense for Target, but may prevent it from becoming a major market-share player in the business.

Odonna Mathews
Guest
Odonna Mathews
15 years 21 days ago

Food at Target offers another convenience to shoppers who might want to pick up dinner or a necessary item that saves them a trip to a supermarket. Target is reaching consumers in many ways. I have been amazed at the expanding food selections in the Target where I shop.

It seems they are still looking for creative ways to put this all together for the consumer.

Richard Wakeham
Guest
Richard Wakeham
15 years 21 days ago

Target may have another issue to contend with. Primarily due to union pressure some major cities–San Diego just recently–have restricted Wal-Mart from expanding to Super size or building new stores based on food sales percentages per store. That situation could restrict Target expansion in some metropolitan areas.

Justin Time
Guest
15 years 21 days ago

Target is definitely sending out strong signals to the retail food industry that it wants to be taken seriously. In recent weeks, it has begun a heavy on-air promotional campaign for its Archer Farms line.

But whether it wants to go big time and roll out hundreds of Super Targets and Greatlands in the coming few years is something that still is debatable.

Target needs to promote “fresh” and, so far, has not come to the plate like Tesco is revving up to do and A&P Fresh and Bloom have demonstrated in the past several years. Customers want “freshness” but are hard pressed to pay premium prices for it.

If Target is serious about food, it’s going to have to roll out a concept that keeps up with gourmet offerings from Food Emporium, continuous changing fresh food offerings from A&P Fresh Market and Bloom and expanded fresh supermarket offerings from Safeway Lifestyle, and beat them in price, variety and freshness.

Bill Bishop
Guest
Bill Bishop
15 years 21 days ago

Target may be trying to make a statement in food, but it doesn’t appear that they have put together everything needed to make it happen.

They certainly have enhanced their private label program and merchandise it very aggressively. But their food offering still lacks the differentiated impact to make it a primary destination for many food shoppers. Wal-Mart, by contrast, has done this, and Target still has to identify it’s unique identity in food if it’s going to have the impact called out by the J.P. Morgan report. By the way, is the J.P. Morgan independent, or do they have a “dog in the fight”?

Nikki Baird
Guest
Nikki Baird
15 years 21 days ago

I drive past 3 grocery stores, and go 10 miles, to do my grocery shopping at the nearest SuperTarget. So I’m definitely biased. Why do I do this? Because my grocery bill, amazingly enough, is 25% less than when I shop at Safeway or Kroger (after their club card discounts)–without feeling like I’m giving up any “must have” items on my list. And Target sends me coupons that are actually relevant to the things I buy! Plus, I can pick up that cute little picture frame or a sundress for my daughter, without having to make an extra trip.

Target’s never going to beat Wal-Mart at any business, let alone grocery–and they don’t even try. When looking at Target, I don’t look at market share as the indicator of their success–I look at their margin. Are they doing something in the grocery business that we’ve hardly seen in the last several years? I think so–I think they’re making money.

Joy V. Joseph
Guest
Joy V. Joseph
15 years 21 days ago

Financially, I would think the hurdle for Target to become profitable in Food is much lower than that for Tesco or any other new entrant in the sector. First of all, it has already gotten over the fixed cost in terms of real estate and distribution network. Secondly, it is much easier to cross-sell than to find buyers from scratch. Add to this Target’s focus on high margin categories and differentiated brands, this venture might be worthwhile for Target. That said, I do not think Target would be a major threat to mainstream Food chains. Target will probably end up with a smaller niche segment of the food consumer market (a profitable one nevertheless).

Mary Baum
Guest
Mary Baum
15 years 21 days ago

I’m very impressed by the Archer Farms line of frozen foods and occasionally go miles out of my way to stock up. The quality is terrific, the flavors imaginative . . . I’d put them up with the frozen stuff I routinely get from Trader Joe’s.

At a minimum, this extension of Target’s affordable-chic strategy into food is a logical next step for the company to grab some extra volume.

But if Target wants to take this strategy a lot farther, I think it can definitely carve out some share among local grocers – especially at the higher end, where it can offer a very similar experience at a slightly lower price point.

David Richardson
Guest
David Richardson
15 years 20 days ago

Target has not achieved ‘critical mass’ in terms of the number of locations featuring full grocery offerings. In time, if Target allocates the resources necessary to expand the number of Super Targets (and/or converts existing doors to “Super Targets”), they will become a competitive force in the grocery segment. Their positioning in the marketplace should make them a preferred destination, at least with their “target” demographic.

Barry Wise
Guest
Barry Wise
15 years 20 days ago

Target has proven how it is a force to be dealt with in retailing. They haven’t successfully competed with department store retailers, other discounters and even succeeded in making Wal-Mart change their focus in order to compete. IF Target chooses to seriously compete in the grocery business in the U.S. they will find a way to be successful.

wpDiscuz

Take Our Instant Poll

How strong a competitor is Target currently in the grocery business?

View Results

Loading ... Loading ...