Will expanded fresh and frozen food selection drive Target’s pickup business?

Discussion
Photo: Target
Jun 25, 2020
George Anderson

Target has felt my pain and it wants me back!

Okay, the retailing giant hasn’t decided that it’s worth changing its business model for this lone “guest” (Target for customer), but its recently announced plan to expand its selection of fresh and frozen grocery items for its Drive Up curbside pickup program may be the solution I’ve been waiting for since well before becoming familiar with the term COVID-19.

One of the challenging aspects of being a Target customer during the pandemic has been figuring out how to get the products you need. It’s not that the chain doesn’t offer plenty of options. There’s same-day delivery with Shipt, standard shipping to your home, in-store pickup, Drive Up pickup and actual in-store shopping. When ordering online however, it’s not uncommon to find some items available for same-day delivery, some only for standard delivery, others for curbside pickup and yet others only available by going into the store. If you’re like me, you’ve found yourself since March prone to abandoning Target carts and placing online orders elsewhere where you can complete them with one click and receive them via a single mode, at your home or curbside pickup.

Target’s new plan adds 750 fresh, frozen and refrigerated grocery items, including bakery, dairy, meat and produce. The retailer plans to initially roll out the expanded selection at more than 400 stores across the Midwest before expanding to more than 1,500 locations “in time for the holidays.” It tested the program with expanded SKUS in the Twin Cities area and the Kansas City market before deciding to broaden its reach.

“By adding fresh grocery to the pickup services our guests already love, we’re giving them even more reasons to shop at Target,” said John Mulligan, Target’s chief operating officer, in a media statement. “During a time when even more people are looking for different ways to get the items they need, we’ll continue to invest in making Target the easiest and safest place to shop.”

Moody’s retail analyst Charlie O’Shea sees the move as a positive for Target on a number of fronts.

“Curbside pickup will increase sales and shopping frequency, the combination of which will likely minimize the negative impact on margin,” he said Moody’s in an email to the media outlets.

“This move, which has been in the works pre-COVID, will result in the attraction of new food shoppers, and also broaden Target’s customer base, which will potentially result in increased sales of its higher margin private and exclusive merchandise,” he added.

The retailer has experienced a dramatic jump in online sales since states began issuing state-at-home directives back in March. Target has also seen its customers cut back on purchases in categories such as apparel while increasing in grocery. The chain, which had faced in-stock and fresh food handling challenges prior to the pandemic, has been tested even more with the pandemic’s advent.

DISCUSSION QUESTIONS: What will an expanded selection of fresh, refrigerated and frozen foods mean for Target’s Drive Up business and its grocery operations overall? What do you see as the challenges facing Target in rolling this program out on a nationwide basis?

Please practice The RetailWire Golden Rule when submitting your comments.
Braintrust
"Adding fresh food will help grow Target’s online grocery business, but they are far behind what Walmart is doing in terms of assortment."
"Target is hip to the fact that panicked consumers stock up on frozen goods and agile enough to respond right before the “second wave” of coronavirus cases. Very, very smart."
"In order for this to be more than simply a convenience play, they HAVE to rethink the experience or shoppers will only use this as a “while I am here” method of buying..."

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22 Comments on "Will expanded fresh and frozen food selection drive Target’s pickup business?"


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Mark Ryski
BrainTrust

Adding fresh, refrigerated and frozen food will materially add to Target’s drive up business. As noted, the logistics to deliver fresh/frozen foods is extremely challenging to execute consistently, given all the options. Target’s primary challenge will be to execute fresh/frozen consistently, and at scale. Given Target’s successful track record, I expect that this initiative will be successful once they work out all the logistical issues.

Neil Saunders
BrainTrust

Drive up, and indeed omnichannel in general, has been a real success story for Target. However the absence of a credible grocery collection service puts it at a disadvantage, especially during the current period when online food is seeing enormous growth. This move remedies the issue and will, no doubt, help Target to drive more sales. However there are a few notes of caution. Grocery fulfillment is more complex and time-consuming than for other categories and Target is going to have to manage this, including the pressure on margins. I also think Target has a lot more work to do on improving its grocery offer in general. The launch of the Good & Gather brand was a great start, but the proposition still needs some work.

Richard Hernandez
BrainTrust

It definitely has to be better than the original execution at the Super Target format where fresh was first implemented – lots of out-of-stocks, fresh product with expired dates on the shelf, etc.

Now that fresh is in more stores, execution and relevance are of the utmost importance to the success of adding more fresh to the food side. Do most people thing of fresh food (or food in general) when shopping at Target? Probably not as much as you think right now, so how do you turn that around? I think that question has been on the table for sometime now. How do you emphasize that offering?

Stephen Rector
BrainTrust

Adding fresh food will help grow Target’s online grocery business, but they are far behind what Walmart is doing in terms of assortment. If they are pushing this as an initiative, being in-stock on those fresh key items is critical.

Ken Morris
BrainTrust

This is a winning strategy for Target. I happened to be shopping there yesterday and was surprised at the quality, the selection (they actually had bleach) and the price. There is clearly a move to BOPAC which won’t be toggling back after this pandemic. In a recent survey by Cambridge Retail Advisors 56 percent of C-level executives feel that it is likely or very likely that consumers will move exclusively to BOPIS or BOPAC. The challenge will be to integrate pickup within the footprint as the walk-around fulfillment model of folks like Instacart is broken, causing too much congestion and extended shopping time due to picker/customer interaction. Micro-fulfillment is one answer to this problem in a dark or semi-dark (hybrid) store environment.

Brandon Rael
BrainTrust

By driving their fresh, refrigerated, and frozen foods breadth and depth of assortments, Target is strategically pivoting to meet evolving consumer demands. While Target has been one of the leaders in digital-first, omnichannel-always strategies, they now have an opportunity to capitalize on their increased market share with higher quality fresh and organic offerings.

The company has won quite a bit of market share in the grocery space, and by offering more localized, higher-quality fresh grocery products, Target will reap the benefits from higher-margin, high turning businesses. However the number one challenge for a company the size of Target is the ability to scale fresh and perishables, and provide a consistent customer experience across their stores. Target has never avoided taking strategic risks, and this is a unique opportunity for the firm.

storewanderer
Guest
3 months 12 hours ago

I see few to no efforts of what you are describing happening with adding more localized products. They don’t even try. I recall it was announced many months ago Target was going to start carrying Boar’s Head items (prepackaged). I thought this was great news. I don’t know where those are — not at any Target I’ve visited this year in CA or NV.

Brandon Rael
BrainTrust

As I stated in my initial comments, it will all come down to execution at the local store level, and the ability to scale localization at a lower cost to serve. While it may not be elected in the Targets you have visited, the smaller scale cosmopolitan stores already reflect this.

Localization is an imperative that has been socialized for well over a decade now.

Dave Nixon
BrainTrust

Of course, this will “drive up” additional business for their drive-up business (see what I did there?) — but they HAVE to solve for the increase in traffic and friction associated with physical stores that were not designed, and are not operationally efficient enough, to handle additional drive up traffic. The current experience is terrible because they are forcing two models together – traditional shopping and curbside using the same old store design.

In order for this to be more than simply a convenience play, they HAVE to rethink the experience or shoppers will only use this as a “while I am here” method of buying when it could be so much more.

Jeff Weidauer
BrainTrust

Expanding the perishable selection at Target will probably help sales in that category, but overall Target needs to think about its long-term brand strategy. Does it really want to be in the food business and compete with standalone grocers, and how does that impact its other initiatives? The more Target tries to expand its appeal the more it dilutes its brand.

George Anderson
Staff

While I will admit I’d be hard-pressed to give Target a grade higher than a C- for its grocery execution to date, it’s also important to note that without grocery, its stores would have been closed to walk-in businesses for months since it would have failed to qualify as an essential retailer in many places. Selfishly as a customer, I’m rooting for Target to get its grocery game together and dealing with its out-of-stock issues, in general. It does, however, have a long way to go IMHO.

storewanderer
Guest
3 months 12 hours ago
Target’s store remodel that they did near me last year does not include the P-Fresh and the grocery department of this store is about like a late 1990s Target in size (which is what this store is). There is no conventional grocer within 5 miles of this Target and there are thousands of houses. There is a very busy Walmart Supercenter within a mile. Based on what I am seeing, Target continues to send a lot of mixed messages about how committed they are to grocery. They are clearly keeping grocery on a far rope and at a distance and continue to be unwilling to go “all in.” Also enjoyed the article picture showing a nice produce department and bakery and deli that looks like a conventional store. I don’t know when or where that picture was taken, but it looks nothing like the Super Target I went to last year. Produce was spread thin (single layer across the fixtures) and poorly rotated. Deli had a tiny little closed looking service case for sliced lunchmeat… Read more »
Jeff Sward
BrainTrust

This is yet another market share plus for Target. Target devotees who were still making a separate trip to the grocery store will now have the opportunity to eliminate a trip and make Target more of a one-stop shop than ever before. Are banking, dry cleaning and auto dealerships next?

Ricardo Belmar
BrainTrust

As someone who has experienced the same frustration as George has, this is a long-overdue enhancement to Target’s grocery experience. Too often while shopping online I have run into the realization that some items are eligible for drive-up pickup, some for Shipt delivery, some for “standard shipping” and others show variation between shopping on the web vs. through the Target app. While choices are great, and Target excels at providing choices, the execution must be consistent so customers will want to return.

Target is quickly becoming the best one-stop destination, let’s call it the modern department store, and this will definitely help. The challenge for Target is getting that consistency in execution across all of these pickup and delivery options. When they are fulfilling over 80 percent of their orders from the store, the store layout and the process of picking and packing will work against them from a cost perspective so Target may need to rethink how it uses its space in its stores to better balance between in-store shopping and store fulfillment capabilities.

Cynthia Holcomb
BrainTrust
Ever notice how grocery stores have associates consistently refreshing the produce department a number of times a day? For example, Trader Joe’s is always restocking and arranging their produce and all food products throughout the day. As a loyal Target shopper, I have taken a glance over the years at the Target grocery offerings and passed. The produce and fresh products always seem to be one day from their expiration date. As a Target shopper, fresh and refrigerated foods feel like an afterthought in comparison to true grocery stores. Target food feels like the food found in convenience stores, yet shopping Target is not an in-and-out shopping experience. It is one thing to begin as a grocer and add soft lines and hardlines. The reverse seems to be more challenging. For example, imagine Kohl’s adding grocery to its product offerings. Grocery done well requires subject matter expertise which involves a completely different mindset than soft and hardlines. Grocery done well requires consistent and constant attention by associates dedicated to grocery, who know how to work… Read more »
Jasmine Glasheen
BrainTrust

This is a particularly strategic move during The COVID outbreak. For Target, it’s impossible to debate the essential nature of its offerings, which is both preventative and well-advised.

Target is hip to the fact that panicked consumers stock up on frozen goods and agile enough to respond right before the “second wave” of coronavirus cases. Very, very smart.

Craig Sundstrom
Guest

Target’s out-of-stock problem continues unabated … in fact it’s gotten worse. How do I know? Simple: They (3 stores actually) were out of something I wanted this time.

My anecdote aside, as always this will be very much an issue of execution. Granted, supply chain issues are extreme and commonplace at the moment, but they’ve been commonplace at Target for a long time … and you can’t sell what you don’t (actually) carry.

James Tenser
BrainTrust

At least in stores I have visited, Target has not made a statement as a destination for fresh and frozen food. While only a “convenience” assortment has been on display in those departments, I’ve assumed management believes discretion is the better part of valor.

With this move my question for Target would be: “Are you fully prepared to make the necessary commitment to succeed in grocery?” That will include space, fixtures, assortment ordering and replenishment, store labor, and shrink.

Done right, Target could transform itself into a first-choice for grocery shopping. Are they ready to tackle the intricacy that implies?

storewanderer
Guest
3 months 12 hours ago
Let’s not forget to highlight the article: “Target’s new plan adds 750 fresh, frozen and refrigerated grocery items, including bakery, dairy, meat and produce.” 750 SKUs TOTAL across all of those categories? Go count the number of SKUs in the refrigerated yogurt category at any conventional grocery store and you’ll already be a good chunk of the way to 750. My point is the limitation of SKUs will make it so customers are unable to get the variety they need. Target already has a limited variety in grocery (especially perishable; some of their dry grocery categories actually have excellent variety such as coffee). Limiting it to 750 SKUs in this program is not the answer. They need to allow whatever SKUs a given store carries to be orderable in this manner. The same exact problem of people getting halfway through an order then hitting the dead end of “item I need not available” that is happening now, will continue to happen. I set up my pickup order and I can get the common cherry yogurt… Read more »
Brian Numainville
BrainTrust

Good move, yes, but Target has long been short on selection and variety, and currently it is not easy to shop online with them given all of the various ways you might (or might not) be able to get your products. The other day, I filled up a basket and processed it only to find out that several chocolate bars were “ship” items and it had also tacked on a delivery fee that cost the same as the bars. Needless to say, I cancelled that part of the order.

Target gets good foot traffic out of having grocery and it did allow them to stay open as an essential retailer, which I appreciated, but a deep assessment of variety offered across all departments could be useful with an eye to the future and increased online ordering activity.

Mel Kleiman
BrainTrust
3 months 11 hours ago

Let me describe Target’s Grocery operation in one word: boring. Yes, it is clean and organized, but walking through the grocery side of Target is just boring.

Kai Clarke
BrainTrust

This will increase Target’s pickup business, their customer satisfaction (from more SKUs) and their competitive position in the marketplace. Most importantly, it will increase their reach into other categories and thus their sales overall will benefit from this.

wpDiscuz
Braintrust
"Adding fresh food will help grow Target’s online grocery business, but they are far behind what Walmart is doing in terms of assortment."
"Target is hip to the fact that panicked consumers stock up on frozen goods and agile enough to respond right before the “second wave” of coronavirus cases. Very, very smart."
"In order for this to be more than simply a convenience play, they HAVE to rethink the experience or shoppers will only use this as a “while I am here” method of buying..."

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