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One of the first discounters to advocate design for the masses, Target is now dabbling in the no-frills warehouse club concept.
This story first appeared in the January 5, 2010 issue of WWD. Subscribe Today.
The Great Save, a shopping event now through Feb. 21, features low prices on bulk-packaged items and designer brands in a warehouse-club-like setting, but without club membership fees or ID cards. The event is being held in the seasonal departments of all 1,740 Target stores.
The strategy could be aimed at countering the consumer perception that Target is more expensive that its rival Wal-Mart, whose parent company operates its own warehouse club division, Sam’s Club. Wal-Mart Stores Inc. has consistently outperformed Target Corp. over the last year in comparable-store sales gains.
A Target spokesman declined to speculate as to whether The Great Save is a harbinger of the retailer rolling out its own warehouse club format.
Last devoted to Christmas trees, trims, ornaments and the like, the 3,000-square-foot seasonal areas of Target stores have been converted to a no-frills environment with shelving of different heights, bins containing multiple pairs of socks, and bold graphic signs in red, orange and yellow declaring: “Deals, Deals, Deals,” “Save Big, Big Big” and “Incredible Savings.” Other signs call out prices, such as $3.59 for a 35-pack of Market Pantry water, a 40 percent savings.
Other categories included in The Great Save are food, health and beauty products, such as Cover Girl Lash Blast Lux Duo Mascara two-pack, home goods, apparel and electronics, like the Nintendo Wii console with Wii Play and bonus remote bundle, $249.99. Socks, shoes and sterling silver and gold jewelry are also included.
Target has captured another element of the warehouse club experience: the unexpected find. Target aptly calls this category “the treasure hunt,” and it features designer brands not usually sold in the store, similar to warehouse clubs like Costco and Sam’s Club, which often get such products via closeouts, diverters and occasionally through the brands themselves. Examples include Ralph Lauren polos, priced under $25; Samsonite luggage, priced under $100, and discounted Ed Hardy merchandise, $34.99 to $64.99. Other treasure hunt products are a selection of Via Spiga handbags, priced from $39.99 to $149.60; sunglasses by Polo Sport, $69.70, Calvin Klein, $60 and Tommy Hilfiger, $34.99; Acqua di Gio by Giorgio Armani eau de toilette, $20.80, and a Wenger Swiss Army calendar watch, $135. Treasure hunt merchandise is available in only 1,000 stores, and the selection varies.
The Great Save event is a replacement for Target’s home goods and home decor promotion previously held at this time of year. “Target has hosted a themed shopping event immediately following the holidays to excite consumers,” said Target spokesman Joshua Thomas. “Historically, we’ve held Global Bazaar from 2005 to 2008, and the Home Design Event in 2009. These events were more focussed on the discretionary categories. The idea with The Great Save is to respond to the guest who’s looking for ways to stretch their budget as we head into 2010. They can stock up on items they need, like paper towels and toilet paper, along with incorporating a unique Target twist.”
Asked if The Great Save is a test of the warehouse club concept, Thomas said, “If there are items that are particularly well received by our guests — for example, if the 35-pack of water really hits the bull’s-eye — we’d incorporate it into our assortment. I don’t want to speculate, given that it’s only Day Two of the program, but it’s something we might be able to talk about at a later time.”
There is some precedent for testing new retail concepts in existing stores. Wal-Mart tested a dollar-store concept in some of its units, but it never went any further with the format.
One retail analyst, who requested anonymity, said since the beginning of the recession, Target has been fighting the perception that its stores are clean and well-designed and, therefore, expensive. “Consumers would walk into the stores and they’d look so nice, they would think they can’t afford anything,” he said. Warehouse clubs, on the other hand, are perceived to provide value with their bulk packaging. “Warehouse clubs have gone mainstream and are stealing market share from supermarkets,” he said. “This counters Target’s perception issue. Besides, people love the treasure hunt.
“This sounds like it’s a test,” the analyst said. “They may be driving more frequency, dealing with the perception issue or getting more name brand apparel. At Costco they have Hugo Boss and Perry Ellis, nice stuff you might find at a Nordstrom.”
He said products in Target’s home events “started going above the $100 price point. Now everybody’s focusing on cheaping out.”