ON TARGET: Setting Its Sights on Home
Target has filled its plate recently with new formats and international expansion plans.
With all of these developments, the retailer's home department stands very high on the Target pole, according to Stacia Andersen, senior vice president of merchandising for the retailer's home area, who spoke to HFN in an exclusive interview.
Two years ago, Target debuted its PFresh format featuring an open-market grocery and a 40 percent increase in food merchandise over its long-standing SuperTarget format. In February, the company announced another new format--CityTarget, measuring 60,000 to 80,000 square feet intended for urban areas. Target is also set on becoming a global retailer by opening stores in Canada and Puerto Rico over the next few years.
Andersen said the PFresh remodels, which debuted two years ago and have since been opening in locations throughout the country, have had a direct impact on home because of the enlarged grocery's adjacency to Target's kitchen-products area. "With added food products, we become more important in the kitchen," she said. "If a guest is doing more food shopping with us, we want to provide the total kitchen solution. This will include blenders, gadgets and every other product that goes with food preparation."
Target stores with expanded food layouts feature 10,000 square feet of dedicated grocery space. The retailer expects to have 850 stores with expanded food sections by the end of the year.
The CityTarget format will offer the opportunity for Target to tailor its whole home assortment to urban shoppers. "This guest tends to be fashion forward and live in a small space," Andersen said. "She will see the products she sees in a regular Target in an edited assortment, with an emphasis on the products that will help her deal with her small space." The first CityTarget is slated to open in Chicago, in the former Carson Pirie Scott building, in 2012.
Andersen said the company is talking to urban shoppers about what assortments will be appropriate in this format. "These are urban consumers, apartment dwellers and also those who work in the city and can shop in the store during lunch or after work," she said.
Andersen also said Target is sounding out consumers in both Canada and Puerto Rico as to the assortments that would fit best in those stores. "Our approach is to customize the assortments so that it's still Target but customized to those areas," she said. She noted that many Canadians are already familiar with Target from crossing the border to shop in U.S. stores.
So a lot of changes are coming that will directly affect Target's home sector. However, there are many things that will remain the same as the retailer makes its thrusts into the future.
One is its attitude toward its customers, who for years Target has referred to as "guests"--implying that shoppers are welcome in Target stores the way a family welcomes visitors to its home: with open arms and a dedication to meeting their every need.
Target's home brands are segmented to the varying demographics of "guests" who regularly shop the store. Andersen said, "Our largest segment is moms, for whom we have the Target Target Home brand. It features muted palettes, durability and great quality in products. She has kids and is entertaining a lot."
For those kids, Target has developed the Circo brand in furniture, children's room products and storage. There is also the Xhilaration brand for teens, which in home consists of products to help them decorate their rooms. Moving further up the age scale, for college students and young adults, is the Room Essentials brand in bedding and bath.
Other key home brands are Smith & Hawken, acquired last year and encompassing outdoor furniture and decor; and Fieldcrest, its higher-end brand in bedding and bath textiles. Target also offers brands stemming from its partnerships with home celebrities such as Michael Graves in kitchen utensils, organization and cleaning products; Thomas O'Brien in lighting and soft home; and Giada De Laurentiis in cookware, gadgets and bakeware.
Another aspect of the business that will stay the same will be Target's strategy on pricing. Target's long-standing price tagline has been "Expect More. Pay Less." "The way we think about pricing is that we try to provide a great value," Andersen said. "The price needs to be approachable, but we want to deliver more for the dollar than the competition. Target is known for great style and great value, and we try to reflect this in the home area."
The merchandising of the home area--indeed, in every department of the store--has become a major focus given criticisms of Target from financial analysts who cover the retail industry. Acknowledging that all retailers were hurt in the economic downturn, Greg Melich, senior managing director and retail hardlines analyst for International Strategy & Investment, said Target had underperformed some of its competition due in part to "conservative merchandising. Their merchandising and assortment has to be better."
Andersen said the home department's merchandising puts "more focus on creating worlds to mirror how the guest shops for home." She cited the closeness of the kitchen product categories to the grocery department "to create a natural synergy. We have combined all of our kids' categories--bedding, storage and furniture--to create a cohesive statement for Mom."
Still another factor of Target's business that will not change--with new formats, expanded product areas and its new focus on becoming international--is Target's determination to continue listening to its guests. Andersen said this effort includes being guests of their guests--visiting them in their homes and developing products based on what these shoppers tell them.
"We are solutions providers," she said. "It means listening to the customer and learning how she lives. We spend time with guests in their homes and develop products based on those visits, from what kind of quality she expects, and what she expects in style and function."