Friday, September 24, 2010

Target to Have 'P-fresh' Fresh Food & Grocery Markets in 850 Stores By 2011 End; First Smaller Urban Store Set For Seattle in 2012

Target, the second-largest U.S. discount chain (after Walmart Stores, Inc.) hit a bulls-eye today with its "On Target," "All Target," media event, which it held at a location dear to the company's, and Minnesota Twins fans' hearts, in Minneapolis, Minnesota. Target is headquartered in the city.

The location: First up, the event was held at Target Field, the Minneapolis ballpark named after the retail chain and home to the Minnesota Twins baseball team. That's a pretty good start when it comes to branding an event. [Target Field has a high definition Web Cam, which allows you to view the ballpark. You can check it out here.]

Little details: Next, drinks and snacks at the event were from a nearby Target store or two. That's pretty good branding reinforcement.

See, "All Target," and "On Target" so far.

The bulls-eye: But most importantly, the retailer was on target - and even hit a bulls-eye because there was actual news announced (some was confirmation), along with a lot of good information offered, at the event. You can't say that about many, or even most, corporate media events.

Target's senior executive team was present today, nearly to a man and women. Presentations were given by CEO and chairman Gregg Steinhafel, CFO Doug Scovanner, John Griffith, executive vice president of property management, and a host of corporate merchandising executives, who talked in detail about merchandising and marketing plans, upcoming holiday promotions, a new advertising campaign, and more.

We're going to focus (below) on the two major announcements, and one minor, made today that most pertain to the food and grocery retailing aspects of Target's business and U.S. food and grocery retailing in general.

Target's Smaller-Format Urban Stores

Target confirmed and publicly announced today it's created a new urban prototype store format. The format ranges in size from 60,000-100,000 square-feet, with an average size of about 80,000 square-feet, according to John Griffith, Target's executive vice president of property management.

The average size of Target's discount format stores, which is the most prevalent of the chain's two current U.S. formats (the other being its combination grocery and general merchandise Super Target), ranges from 120,000-180,000 square-feet, according to Griffith. Target has about 1,500 discount stores in the U.S. and about 243 Super Target units, which are similar to a Walmart supercenter and offer a full selection of food and grocery products, along with everything Target sells in its discount stores.

Griffith said the first urban format Target store, which will be about 90,000 square-feet, will open in 2012, in Seattle, Washington. Initial plans, subject to change, are to have the smaller, urban stores in 10 U.S. cities to start. The cities include San Francisco, Los Angeles, New York, Chicago, Boston, Miami, and Baltimore. The urban format puts a premium on offering more essential types of products.

Target says it currently has about 150 full-sized discount stores located in numerous U.S. cities, including in a few big cities like Chicago and New York City, that have populations of over 100,000. Most of its stores are in suburban areas though.

That's where the smaller, urban store format comes in. The smaller stores will be used when size is limited, which is the case, for example, in most all of Manhattan, as well as in other dense urban cities like San Francisco and Seattle, and in urban places like downtown Los Angeles and many parts of Chicago, along with many other places in the U.S.

Like Walmart, which has now decided to "go smaller and go urban," in addition to being big, brawny and mostly suburban - See: July 6, 2010: Walmart Looking for Store Sites in Northern California For 20,000 Sq-Ft Neighborhood Market by Walmart Prototype Store - Target has come around to realizing it's been missing a huge opportunity, and the added sales that come with it, by not having stores in most of America's most populated urban regions and cities. That's due largely to Target's (and Walmart's) strategy to date - instead of having multiple store sizes and formats, designed to fit various regions, it's relied on a one-store-size-fits-all approach, which has resulted in being locked out, for the most part, of these highly populated but space-limited cities. Target's Griffith said today the retailer now plans to make the store fit the site rather than making the site fit the store.

Target, like Walmart, is now hungry for those urban shoppers' dollars.

In July of this year, Target submitted a proposal to the city for its first store in San Francisco. That store, which would be a full-sized Target discount store, is planned to go into two vacant big box buildings, a former Mervyn's department (before that a Sears) store and a former Good Guys electronics store in a shopping center at Masonic Avenue and Geary Boulevard in the city's Richmond District, near the Laurel Heights neighborhood. The center is also near the University of San Francisco's main campus. Target would renovate the stores, which are next to each other, completely, creating one big store.

Target is already making plans for a second store in San Francisco. That store, which would be one of the new, smaller format stores, would be in the popular Metreon Shopping Center, in the city's South of Market neighborhood. The Metreon is a 350,000-plus square-foot, four-level combination shopping, technology and entertainment center. See here.

The smaller-format urban stores will include Target's 'P-fresh' fresh food and grocery sections, which it's been aggressively putting in its discount stores, although the mini-markets could be scaled down on a store-by-store basis from the current 10,000-12,000 square-feet size, based on the smaller stores' overall square-footage.
'P-fresh' Food & Grocery Markets in 850 Stores By 2011 End

The second bit of news Target announced today is that it will have 'P-fresh' fresh food and grocery store-within-a-store markets (pictured above) in 850 of its Target discount stores by the end of 2011. The 'P-fresh' sections average 10,000-12,000 square-feet. Troy Risch, Target's executive vice president for stores, said 'P-fresh' will be in 450 discount stores by the end of this month, which means the retailer plans to add the fresh food and grocery sections to 400 stores between October 2010 and the end of 2011.

To put that number into perspective, Target started out in mid-2009 saying it planned to test the 'P-fresh' grocery sections in about 100 stores. At the end of 2009, saying it was pleased with the initial test, the retailer said it would add the mini-fresh food and grocery markets to 350 discount stores this year. The 850 number means by the end of next year, Target will be offering shoppers the fresh food and grocery option in over half of its current 1,500 discount stores.

Target has been aggressively installing the 'P-fresh' food markets in its discount stores since first announcing its plans to do so in mid-2009. In fact, Fresh & Easy Buzz is currently working on a research project in which we are identifying all of the 'P-fresh' sections added to Target stores in California, Nevada and Arizona - the three states where Tesco has its 168 small-format (about 10,000 square-feet) Fresh & Easy Neighborhood Market fresh food and grocery stores. Thus far into our research, the numbers are dramatic.

For example, see how many 'P-fresh' markets Target has added to its discount stores in San Jose, California over the last 12-15 months. It's mentioned in this story - September 22, 2010: California Dreamin': Fresh & Easy Neighborhood Market, Whole Foods Market Combined Open a Total of Four Stores Today in California - we published on Wednesday.

What's powerful about the 'P-fresh' units for Target, compared to say what Tesco is doing with Fresh & Easy - both are small-format and have numerous similarities of format - is that Target will have 850 units, and can ultimately have 1,500 - and more as it opens new discount format stores - 'P-fresh' in-store markets by the end of next year, without having had to construct one new store building or acquire one vacant building to house the fresh food and grocery markets in.

Take California, for example. Target has 245 discount stores in the Golden State at present, plus a handful of its Super Target combination supermarket/general merchandise stores.

Tesco has 107 of its 168 Fresh & Easy stores in California.

This means Target, if it chooses to put 'P-fresh' fresh food and grocery sections in all of its California stores by the end of 2011, would have double the number of stores as Tesco's Fresh & Easy has, assuming Tesco opens 20 stores in California next year, without having had to build a single new store.

This is powerful and cost effective in food and grocery retailing. The capital costs for Target are minimal by being able to put the 'P-fresh' units into existing stores. Plus the grocery sections draw shoppers who buy the other goods sold in the stores. Even if Tesco were to open 50 Fresh & Easy stores in California in 2011, from store-count and cost-effective perspectives, Target has a huge advantage.

More Grocery, Health & Beauty and Body Care SKUs

Target also said today it's been added more health and beauty and body care items, including private brand, in its stores, something which has been evident in the stores for a few months.

Target has also been increasing its packaged food and grocery, and perishable, SKU count over the last nine months in discount stores without 'P-fresh' sections.

We will be offering an analysis piece on Target's expanded food and grocery retailing efforts - its expansion of "P-fresh," along with how it fits with the retailer's new smaller store urban plans. Stay tuned.

Related Stories:

May 11, 2009: Target on Tap to Put Mini-Grocery and Fresh Foods Markets Into 100 Target Discount Stores This Year; Many More Likely to Come in 2010

November 19, 2009: Competitor News: Target Corp. Planning to Dramatically Expand Food and Grocery Offerings in All of its U.S. Target Discount Format Stores

July 9, 2008: Southern California Market Report: Five Supermarkets; A New Fresh & Easy, Wal-Mart and Super Target Will All Compete in Hesperia Food Retailing Rodeo

July 6, 2010: Walmart Looking for Store Sites in Northern California For 20,000 Sq-Ft Neighborhood Market by Walmart Prototype Store

September 23, 2010: Revisting 'marketside by Walmart': Format As We Know it On the Way Out But Some or All Of the Four Stores Could Be Converted

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