Merchandising Features / Trend Features

On Target

April 11, 2012
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Target At A Glance

Company:
Target Corp.

Headquarters:
Minneapolis, Minn.

Stores:
1,765

PFresh Locations:
About 900

PFresh Forecast:
Approximately 1,100 stores by the end of 2012

Key PFresh Brands:
Archer Farms, Market Pantry, Sutton & Dodge

The move by major mass-merchandisers to market fresh foods is becoming increasingly prominent.

While the world’s largest retailer, Bentonville, Ark.-based Wal-Mart Stores Inc., is forging perhaps the most formidable perishables presence by operating more than 3,000 U.S. Supercenter outlets with full grocery sections, it is not alone in creating enhanced competition for supermarkets.

Minneapolis-based Target Corp., which operates 1,765 stores across the U.S., is making stronger inroads into the perishables sector.

Target stated in March that by the end of the month it expected to have completed remodels of more than 100 general merchandise stores, which would then offer full selections of fresh foods.

The stores, which include outlets in Spokane, Wash., Oshkosh, Wis., and Chattanooga, Tenn., will have approximately 10,000 square feet dedicated to limited assortments of fresh produce (including bananas, seasonal fruit, berries, baby carrots and bagged lettuce), fresh packaged meats and pre-packaged baked goods (including dinner rolls and pies).

About 900 Target stores already have the expanded fresh food layout, known as PFresh, and the company reports that it expects to incorporate the layout in another 230 stores this year.

Jamie Bastian, a Target spokesperson, says the fresh food layout was created in response to research and requests from shoppers to have more fresh selections in Target.

In addition to national brands, the outlets also merchandise private-label foods.

The primary store brands are Archer Farms, a premium offering that includes more than 1,600 products; Market Pantry, a value-oriented brand that Target says offers the quality of national food brands at a price that is 10- to 30-percent lower; and Sutton & Dodge USDA Choice beef.

The company notes that it also offers more than 700 organic selections.

Ben Ball, senior vice president of Dechert-Hampe Co., a Northbrook, Ill.-based sales and marketing consultancy, says Target is positioning fresh foods as an important lure for getting more consumers to visit entire outlets.

He notes that supermarkets average more than one household visit a week, while mass-merchandise outlets only generate about a dozen visits a year.

“The challenge is trying to get people to shop the rest of the store because they need food more often than they need dry goods,” Ball states. “There will be a lot of food-only customers. But Target still is increasing the opportunity for them to wander over the line.”

Selling foods, however, can be a risky venture for mass-merchandisers.

Operators have to make large investments in fresh selections and refrigeration; they frequently lack expertise in food merchandising and food supply chains; and the stores must market items that typically have much lower margins than dry goods.

Spoilage also is a major threat for outlets that have fewer shopper visits.

“For fresh foods to turn, you need consumers in the store multiple times a week,” says W. Frank Dell, president of Dellmart & Co., a Stamford, Conn.-based retail consultancy. “Carrying more perishables without that turnover doesn’t do you a lot of good.”

Gene Hoffman, president of Corporate Strategies International, a Wayzata, Minn.-based retail consulting firm and the former president of Kroger Co, agrees: “Fresh foods turn sour and wilted when they don’t turnover rapidly. That kills sales and a retailer’s reputation.”

Dell notes, however, that Target’s expansion of its food layouts indicates that the concept is proving successful.

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