Target Corp. To Expand Its Grocery Offerings

MINNEAPOLIS (AP) — Minneapolis-based Target Corp. plans to remodel about 400 of its general merchandise stores across the nation in 2011, building upon the discounter’s latest strategy to bulk up its grocery offerings.

That’s on top of the 350 general merchandise stores in the nation that Target remodeled last year in rolling out its “P Fresh” concept, which typically increased its grocery offerings by 40 percent.

At the same time, Target, which has about 1,750 stores in the nation, has scaled back new-store construction. The company was to open about a dozen new stores last year and anticipates opening 21 new stores in 2011, including one SuperTarget.

Target has about 50 stores in the Twin Cities area, including 23 SuperTargets and 27 general merchandise stores. The company remodeled most of its Twin Cities-area general merchandise stores in 2010, bringing to an end a two-year process in carrying out the work in this market, Target spokeswoman Amy Reilly.

Minneapolis-based Ryan Cos., whose business ties with Target go back 60 years, has headed up a significant number of the store-remodeling projects. In 2010, Ryan was the general contractor on 31 Target remodeling projects across the nation, including eight in the Twin Cities, according to a Ryan representative.

This year, Ryan Cos. expects to oversee remodeling of 29 Target general merchandise stores, including three in Minnesota (one each in Virginia, Brainerd and Moorhead).

A key challenge for Ryan Cos. is to do the work with as little disruption to shoppers as possible, because Target keeps its stores open during the renovation. A Ryan official said company construction crews undertake the noisy work during late night hours and the lighter, quieter work during the main shopping hours.

The cost to remodel each Target store averages from $2 million to $4 million and takes about 15 weeks to complete.

Industry observers have said that Target’s focusing of its capital spending mostly on grocery expansion makes sense because it can remodel several general merchandise stores for the same price as building a SuperTarget.

In earmarking about $2 billion on capital renovation for the store remodeling over two years, Target is hoping for increased customer traffic, more frequent shopper visits and bigger basket purchases per visit, Reilly said.

So far, early results are encouraging: Target’s same-store sales in stores with the expanded food offerings are up 6 percent to 10 percent, Reilly said. That range includes the boost Target is getting from a new reward program the company launched this past fall, she said. The reward program gives Target debit and credit card holders a 5 percent discount on purchases.

“Specifically, the 5 percent program is expected to add about one percentage point to same-store sales in Q4 and between 1 and 2 percent to same-store sales in 2011,” according to a recent Value Expectations report from the Chicago-based Applied Finance Group.

Meanwhile, Target is also gaining a bigger piece of the Twin Cities’ grocery pie. With its P Fresh initiative and several SuperTarget stores, which have full-scale grocery departments, the company now commands more than 10 percent of the market and is probably No. 2 behind leader Cub Foods, said David Livingston, a grocery analyst in Waukesha, Wis. (Livingston estimates Cub has about 22 percent of the Twin Cities’ grocery market, with Target’s ranking probably second now only to market leader Cub Foods.)

By expanding its array of groceries to about 34 sides of the aisles from the previous eight to 12, Target has strengthened its standing as a “one-stop shop” for consumers, Reilly said.

John Dean, a Twin Cities grocery analyst, said Target’s P Fresh conversions now give the retailer the space of about a 30,000-square-foot grocery store within the confines of its typical general merchandise store, which is about 126,000 square feet.

“It (the P Fresh program) makes it more convenient,” Reilly said, adding that shoppers can now get most of their groceries at a regular Target store.

Livingston said Target’s P Fresh initiative has raised its profile with shoppers as a go-to place for groceries. P Fresh includes fresh produce, meats, deli, dairy, frozen foods and dry staples at its general merchandise stores.

“They (Target) are getting stronger on price reputation,” Livingston said. “They are closer to being on par with Wal-Mart with pricing,” he added, noting that Target’s credit and debit card reward program has made the price of its groceries more competitive.

Target’s gains in grocery sales in the metro area are coming at a time when sales in that sector are flat but competition keeps on rising, said Dave Brennan, co-director of the Institute for Retailing Excellence at the University of St. Thomas in St. Paul.

Dean agrees. The gains made by Target and rival Wal-Mart, which also has been expanding grocery sections in its regular merchandise store, are coming at the expense of traditional and upscale grocers. Dollar stores also have joined the fray, with about 25 percent of their sales now coming from grocery products, Dean said.

Target initially tested P Fresh in a few stores in late 2008 and then implemented the program at 35 stores in the Philadelphia market in fall 2009 before rolling out the initiative across the nation this year.

Meanwhile, Target has used the P Fresh remodeling as a chance to update a few other departments, including beauty, home, electronics and shoes. Changes include the installation of LED lighting, as well as lowered shelves and widened aisles, Reilly said. For the most part, Target has improved design efficiency rather than downsized any departments, she said.

But whether any departments get downsized “varies from store to store” and market demands, Reilly said.

(© Copyright 2011 The Associated Press. All Rights Reserved. This material may not be published, broadcast, rewritten or redistributed.)

  • Dan

    Great! They are doing an awesome job of it, and the Archer Farms products are really good. The SLP location has some good stuff!

  • cavy

    I hate Target and will never shop there.

    • YouknowWho

      I worked there for 3 years, and I try not to go there as much as possible. I can’t stand the way they treat their employees. For a multi billion dollar company to pay their employees a little over minimum wage and hiring one person after another (so that the people that are “lifers” only get 12 hours a week, is b.s). They pile on the work load and you don’t get paid for it. They hire people right out of college that have no idea how to use any of the equipment and in general, have no idea what they are doing anyways. This company sucks.

      • cdrees

        They do treat their employees real bad I worked for Target for 23 years .And they fired me for stupid reasons.I gave them my whole adult life and new managment took away my job because they did not like me or the fact that I had more retail experience than they had..thanks alot cracker jack ETL team of store #950!

  • Phid

    YouknowWho, I am not making little of your situation, but the good thing about a free market economy is that if you do not like the pay at one company, you can bring your skills to another company that values them more by paying you more. Target is not a “bad” company for what it pays its employees. Obviously the pay is good enough for those people who want to work there. If service at Target declines because it is hiring lesser-skilled employees, then consumers will respond by shopping there less frequently.

  • chickie

    I’ve worked of Target for 22 years and have never been treated badly or unfair. I am proud to work for a company that gives back so much to local communities. Target does so much for so many. Most people have no clue! It really makes me sick that people make oveall assumptions of a compnay on little information.

  • Shane G

    I’ve been shopping at the Target downtown Minneapolis for the past several years. I’ve seen a lot of the same employee’s working there even today so it must not be that bad of a job. It sure gets busy sometimes so I admire everybody’s hard work. I hope they expand the grocery section downtown!! I know they did last year but I want more! They should somehow add another level to this Target and turn it into a Supertarget! That be awesome!

  • Terry

    Boy, some people sure are complainers……………………….I LOVE Target,my sister-in-law retired from there and she has not a bad word to say!!

  • Billy

    I shop at Walmart, they do have grocery’s and are cheaper.

  • Target-holic

    Never worked at Target, but sure love to go there. It’s always clean and the employees are always helpful. Thank you for screening your employees before hire.

  • Pate

    I love Target,but I wish the management was better at the Midway store.How come the Roseville store is better stocked?

  • Kurt Aron

    One of things Target should add to they’re shopping carts is a product called the Shopping Cart Caddy. It simply is snapped in place between handle and child seat and creates and instant win win for the customers and Target.
    Many other retailers are considering it and it would keep Target one step ahead of the others.
    I hope they add it soon, or at least my wife does.

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    […] In recent years Target has turned its eyes to beefing up its grocery offerings, dedicating $2 billion in capital funding to store renovations. The benefits of becoming a legitimate grocery option for consumers is twofold. The move allows it […]

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