Target Corp. is going back to emphasizing its Target-ness.
Wal-Mart Stores Inc.’s positioning as the country’s rock-bottom low-price leader has put it in an enviable position during the recession, which left Target frantically scurrying to change its perception as the “upscale” mass merchant with an emphasis on great design and the price premium it implied. Target shifted its advertising message from highlighting the “Expect More” part of its “Expect More, Pay Less” brand promise, to playing up the “Pay Less” aspect.
But virtues such as quality, sharp design and designer-driven fashion will continue to be the retailer’s raison d’être, Gregg Steinhafel, Target’s chairman and chief executive officer, told Wall Street analysts on Thursday, adding that “apparel and home have recovered.”
“Our research shows a [consumer] preference to save for the best item, rather than settle for a good option today,” Steinhafel said. “Consumers are carefully weighing fashion, quality and price. The ‘Expect More’ part of our brand promise is relevant today. Historically, our sales have correlated much more with consumers’ future outlook than with their current concerns.”
Target is not yet out of the recessionary woods. While stating that today’s environment is clearly more stable than it was a year ago, Steinhafel admitted: “Consumers are still buying cautiously.”
Changing price perception “is a marathon, not a sprint, and we’re moving in the right direction,” said Kathee Tesija, executive vice president of merchandising.
Steinhafel said there’s still ample opportunity for new store expansion in the suburban trade areas of major metropolitan markets throughout the U.S. In addition, Target will open stores in dense urban markets. “We also believe there’s a compelling opportunity to open stores in a smaller concept of 60,0000 square feet to 100,000 square feet with an edited assortment focusing on the highest-volume categories based on the needs of urban guests,” he said.
Target is testing the smaller assortments, with 50 percent fewer stockkeeping units, in three existing locations “to understand how to maximize smaller urban format.”
There’s also a retail format for stores outside the U.S., which Steinhafel sees as an inevitable development. “It’s more a question of when and not if,” he said, putting the time frame at three to five years. “It will make sense to initially move just across our borders to Canada and Latin America,” he said. “We’ll open a block of stores in those markets.”
Target hopes its PFresh grocery format is the answer to increasing store traffic. PFresh will be added to 340 new and existing stores this year at a cost of $1 billion. Steinhafel said stores with PFresh have logged 6 percent sales increases, with some as high as 10 percent. “We’ve had healthy lifts in health and beauty. This will reliably convert guests into shopping the entire store.”
Other key departments are being reinvented. The first units to contain all the upgrades will be unveiled in April.
Destination Beauty, a new concept, has been successfully tested and will be rolled out to 350 units. “Sales in beauty have grown at double the rate of Target’s other sales. We [can] take significant sales from department stores with our enhanced assortment of higher-end brands,” Tesija said. “We know we’re going to gain [market] share [in beauty].”
The assortments and in-store experience of home departments is being improved, Tesija said, and shoe departments will also benefit from have greater sight lines, in-stock visibility and more mirrors.
“I’m very excited about Jean Paul Gaultier,” Tesija said. “He has the ability to transform a woman into an icon.” Gaultier’s 50-piece collection, priced from $18 to $200, will launch in 400 stores and on target.com in March. A 300-product Liberty of London collection for men, women and baby will bow in March. Arriving in April are collections from Zac Posen, Cynthia Vincent’s footwear and Eugenia Kim’s hat collection.